FTC Settles with Google over ‘Scraping,’ Ad Restrictions, Patents, Closes Search-Bias Probe

The FTC voted unanimously to close the investigation of claims about search bias, though the agency would reopen the investigation if it had reason to, Leibowitz said. Google constructs its algorithm and interface “to improve the user experience,” not to harm competitors, he said: “The focus of our law is on protecting competition, not competitors,” and Google “doesn’t violate American antitrust laws.” Leibowitz said an investigation by the Justice Department is “not a serious possibility,” despite pressure from Google’s competitors, and he said the FTC would be unaffected by the outcome of an ongoing investigation into Google’s search practices by the European Commission. “We have great respect for the work they're doing, and I think they're making progress ... but we apply our own laws faithfully."

Those dissatisfied with the settlement hope to see more antitrust action against Google in different legal arenas. In a statement, FairSearch -- a group of Google’s competitors that includes Microsoft, Expedia and Nokia -- called the agreement “disappointing and premature.” The settlement “is by no means the last word in this case, leaving the FTC without a major role in the final resolution to the investigations of Google’s anti-competitive practices by state attorneys general and the European Commission,” the group said. Earlier this week, the group asked the FTC in a blog post to withhold making a settlement with Google until the European Commission resolves its antitrust investigation of Google’s search practices, which is reportedly set for later this month. “The FTC has every reason to consider Google’s proposal to the EC before deciding how to resolve the FTC’s own investigation to ensure that U.S. consumers and innovators get at least the benefit of the remedies that are implemented in Europe,” the group said.

No More Scraping, Multi-Homing Restrictions

Under the agreement, Google agreed to stop “scraping the content of its rivals for use in its own specialized search results,” without giving those competitors the ability to opt out, Leibowitz said. Previously, if a competing website wanted its “scraped” content removed from Google’s specialized search results -- such as under its “Shopping” tab -- those websites would be penalized in the organic search rankings, they claimed. Leibowitz cited Yelp, which claimed its reviews were being scraped; when it asked Google to stop placing its users’ reviews in Google’s specialized results, Google demoted it in organic search page ranking. “If the allegations are accurate, they describe conduct that is clearly problematic and potentially harmful to competition because it undermines incentives to innovate,” Leibowitz said. Under the agreement, Google will give websites the ability to opt out of being scraped without sacrificing their standing in Google’s organic search results. Google also agreed to lift its restrictions on “multi-homing,” or “the ability of advertisers to simultaneously advertise on Google and competing search engines,” according to the commission’s statement (http://xrl.us/bn83tw).

Leibowitz said he wasn’t concerned Google would breach the binding agreements or be more willing to risk experimenting with search practices aimed at harming competitors. “I don’t think that they'll feel like they're off the hook,” he said.

No remedy is needed, Commissioner Maureen Ohlhausen said in a separate statement (http://xrl.us/bn83wp). Ohlhausen voted to close the investigation but said she “would have done so without imposing a remedy, in any form” because Google’s advertising and scraping policies do not cause harm to consumers or competitors. “Some of the complainants in this matter demonstrated significant growth both during and after the alleged scraping took place,” and there is no “compelling evidence that advertisers are providing their business to Google rather than other search engines due to Google’s API policies,” she said. Ohlhausen applauded the Commission for voting to close the investigation into search bias claims, which “is evidence that this agency understands the need to tread carefully in the Internet space."

The scraping provision of the agreement could pose problems for copyright law, said Ed Black, CEO of the Computer and Communications Industry Association (CCIA). “Displaying ’snippets’ of information from other sources, whether they be newspapers or websites, is beneficial to consumers, widely accepted as appropriate, and protected under copyright law,” he said in a statement. Google should not be under any legal obligation to offer other websites “additional opt-outs for its specialized results pages,” he continued. Scraping “should be governed by other legal doctrine,” such as copyright law, said Eric Goldman, law professor and director of the High Tech Law Institute at Santa Clara University School of Law, who spoke during a CCIA press call. “I'm not sure I saw the competition” angle, he said. Glenn Manishin, a technology lawyer at Troutman Sander -- which represents Google, though he does not -- agreed: “Search engines need to display a snippet of content.” Manishin pointed to Google Images, which displays thumbnails of copyrighted images. “The question is how much is too much,” he said.

The settlement’s advertising compatibility and scraping provisions set “a dangerous precedent,” said Berin Szoka, president of TechFreedom, a think tank that has received funding from Google. “If these changes were required to address antitrust violations, the FTC could have, and should have, brought, and settled, a complaint in a truly enforceable consent decree,” he said in a statement. “Since the FTC concedes it could establish no violation of law, it is inappropriate for the agency to impose such conditions -- and unclear that they can actually enforce them."

Sen. Mike Lee, R-Utah, Senate Antitrust Subcommittee ranking member, applauded the agency’s decision. “Google’s commitment to allow advertisers to export ad campaign data to other platforms will enhance meaningful competition in the market for Internet advertising. And Google’s promise not to misappropriate content from other websites will help ensure the company does not abuse its dominant position to inhibit competition among vertical search sites,” he said in a statement. “Along with the FTC, our Subcommittee will seek to make certain that Google abides by these commonsense commitments."

Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., said the settlement did not go far enough. “I am disappointed ... that it relied on simple, voluntary commitments from Google to end certain practices that a majority of Commissioners found to have raised strong concerns about impeding innovation,” he said in a statement. “I understand that other antitrust authorities are continuing to examine related search practices, and I support the Commission’s decision to continue to monitor Google for conduct that may harm competition and consumers."

Standard Essential Patents

Under the consent order, Google must abandon its attempts to keep competitors from using its standard-essential patents (SEPs) (http://xrl.us/bn83rj). According to another commission statement (http://xrl.us/bn83q7), Google-owned Motorola Mobility made a commitment to standard-setting bodies to license its SEPs to competitors “on terms that are fair, reasonable and non-discriminatory” (FRAND) but later breached those commitments by seeking injunctions against the companies that sought to license the patents. Google inherited the patents -- along with the injunctions -- when it purchased Motorola last May. The order “requires Google to withdraw its claims for injunctive relief on FRAND-encumbered SEPs around the world,” including injunction requests with the International Trade Commission, Leibowitz said, “and to offer a FRAND license to any company that wants” it. Injunctions against companies seeking to use SEP technologies harm consumers by either preventing companies from bringing certain technologies to the marketplace or requiring those companies to pay “excessive royalties that may be passed along to the consumer in the form of higher prices,” the commission’s statement said. Leibowitz called these SEPs the “cornerstone of the system of interoperability standards” that allow devices to “talk to one another.” These patents ensure “that competition continues to work for the benefit of American consumers in these important markets,” he said.

Google and Motorola are not using an unfair method of competition by seeking injunctions, Ohlhausen wrote in her dissenting statement (http://xrl.us/bn83q5). By protecting technology companies from injunctions, the commission is “essentially treating sophisticated technology companies, rather than the end-users, as ‘consumers,'” which “makes the FTC into a general overseer of all business disputes simply on the conjecture that a dispute between two large businesses may affect consumer prices,” she said. Ohlhausen also criticized the commission for “offering ambiguous guidance to market participants” on what circumstances establish a FRAND commitment. In its statement, the commission justified its action regarding SEPs “under Section 5 [of the FTC Act] to prohibit unfair methods of competition, which both Congress and the Supreme Court have expressly deemed to extend beyond the Sherman Act."

The consent order on SEPs is “good news” for members of the high-tech industry, said Application Developers Alliance President Jon Potter. “Patent litigation slows innovation and inhibits growth in the apps ecosystem. The framework agreed to by Google and the FTC could help reduce patent litigation industry-wide if other companies voluntarily make the same commitments,” he said in a statement. The agreement is a step in the right direction, but just the first necessary step, CCIA’s Black said. “Given that SEP issues are minor compared to the major abuse that goes on elsewhere in the patent system, we hope that the FTC does not stop here,” he said in a statement.