Google Pushed Hard Behind the Scenes to Convince Regulators

originally appeared in The New York Times:


For 19 months, Google pressed its case with antitrust regulators investigating the company. Working relentlessly behind the scenes, executives made frequent flights to Washington, laying out their legal arguments and shrewdly applying lessons learned from Microsoft’s bruising antitrust battle in the 1990s.

After regulators had pored over nine million documents, listened to complaints from disgruntled competitors and took sworn testimony from Google executives, the government concluded that the law was on Google’s side. At the end of the day, they said, consumers had been largely unharmed.


That is why one of the biggest antitrust investigations of an American company in years ended with a slap on the wrist Thursday, when the Federal Trade Commission closed its investigation of Google’s search practices without bringing a complaint. Google voluntarily made two minor concessions.

The way they managed to escape it is through a barrage of not only political officials but also academics aligned against doing very much in this particular case, according to a professor of antitrust law at the University of Iowa who has worked as a paid adviser to Google in the past. The first sign of a bad antitrust case is lack of consumer harm, and there just was not any consumer harm emerging in this very long investigation.

The F.T.C. had put serious effort into its investigation of Google. The agency’s chairman, has long advocated for the commission to flex its muscle as an enforcer of antitrust laws, and the commission had hired high-powered consultants, including an experienced litigator, and a well-known economist.

Still, the litigator said during a news conference announcing the result of the inquiry, the evidence showed that Google doesn’t violate American antitrust laws.

The conclusion is clear: Google’s services are good for users and good for competition, Google’s chief legal officer, wrote in a company blog post.

The main thrust of the investigation was into how Google’s search results had changed since it expanded into new search verticals, like local business listings and comparison shopping. A search for pizza or jeans, for instance, now shows results with photos and maps from Google’s own local business service and its shopping product more prominently than links to other Web sites, which has enraged competing sites.

But while the F.T.C. said that Google’s actions might have hurt individual competitors, over all it found that the search engine helped consumers, as evidenced by Google users’ clicking on the products that Google highlighted and competing search engines’ adopting similar approaches.

Google outlined these kinds of arguments to regulators in many meetings over the last two years, as it has intensified its courtship of Washington, with Google executives at the highest levels, as well as lawyers, lobbyists and engineers appearing in the capital.

One of the arguments they made, according to people briefed on the discussions, was that technology is such a fast-moving industry that regulatory burdens would hinder its evolution. Google makes about 500 changes to its search algorithm each year, so results look different now than they did even six months ago.

The definition of competition in the tech industry is also different and constantly changing, Google argued.

For instance, just recently Amazon and Apple, which used to be in different businesses than Google, have become its competitors. Google’s share of the search market has stayed at about two-thirds even though competing search engines are “just a click away,” as the company repeatedly argued. That would become the company’s mantra to demonstrate that it was not abusing its market power.

To underline these arguments, Google spent $13.1 million on lobbying in the first three quarters in 2012, up from $5.9 million in the same period in 2011. And Google’s lobbyist in chief, Eric E. Schmidt, the company’s executive chairman and former chief executive, has made himself a Washington insider as a close adviser to President Obama.

Then there were the lessons of the Microsoft case.

Google had the Microsoft case as a template, according to an associate professor at the Wharton School at the University of Pennsylvania. Google just had to convince the regulators it was sufficiently different from Microsoft.

One lesson for Google executives was to play nicely with the regulators. Microsoft’s executives were known for their uncooperative demeanors during their tangle with the government. But even Mr. Schmidt, known for speaking candidly, was on his best behavior.

Google, and its lawyers and hired experts, also argued forcefully that this case was different than the one against Microsoft. For one, they pointed out again, the technology world is so different. At the time of the Microsoft inquiry, its software was the main on-ramp to the Internet.

Search today is not a bottleneck monopoly for anything, according to an economics professor at Stanford who studies competition in computing and has worked as a paid expert for Google recently and for Microsoft in the past.

That’s not the same as everyone who wants to do mass market computing has to go through Google, like back then everyone who wanted to do mass market computing had to go through Microsoft, he added.

Microsoft, leading a chorus of unsatisfied Google competitors, said Thursday that it was disappointed in the F.T.C.’s decision.

In a blog post published Thursday night, a Microsoft vice president and deputy general counsel, called the decision a missed opportunity. The F.T.C.’s overall resolution of this matter is weak and — frankly — unusual, he wrote. We are concerned that the F.T.C. may not have obtained adequate relief even on the few subjects that Google has agreed to address.

The VP/General Counsel added that Microsoft remained hopeful that other antitrust agencies, including those in Europe, would take more forceful action against Google.

Harsh criticism of the decision also came from an experienced Silicon Valley antitrust lawyer who represents a collection of Internet companies that complained to the F.T.C. about Google’s behavior.

I’ve been doing this almost 40 years, been involved in scores of antitrust investigations, he said. I’ve never seen anything so incomplete and lacking and even incompetent as what happened here.

The director of the F.T.C.’s bureau of competition, dismissed the lawyer’s comment as silly.

This was a very thorough, very professional investigation performed by very diligent and dedicated staff, he said.

Regulators had anticipated criticism from Google’s rivals and tried to answer the complaints in their news conference.

Some believe the commission should have done more in this case, perhaps because they are locked in a hand in hand combat with Google around the world, according to their attorney. But, he said, We really do follow the facts where they lead. He added, The focus of our law is on protecting competition, not competitors.

A law professor at Columbia who was a senior adviser to the F.T.C. until last summer, said the outcome of the Google case reflected a change in thinking about antitrust enforcement. It used to be like the way we dealt with the mob, he said, who was involved in the agency’s Google inquiry but who emphasized that he was not speaking for the F.T.C.

I don’t believe it’s the position of antitrust agencies to invent competition where there isn’t any, he said. People like Google better than Bing. Microsoft is trying to do everything it can to change that, but people still seem to prefer Google.

Still, some veterans of the technology industry said that even though the agency did not find an antitrust violation, it still was sending a message to Google that it was not off the hook for good.

There’s a long track record of government never really going away, according to a professor of computer science at Carnegie Mellon University and a former chief technology for the Federal Communications Commission who testified as a government witness in the Microsoft case. They will come back.