FTC to Launch Antitrust Probe on Google’s Self Promotion

The U.S. Federal Trade Commission (FTC) is set to begin serving subpoenas as part of a “wide-ranging, formal investigation,” according to The Wall Street Journal. The newspaper said that the agency is investigating whether or not Google has been using its dominance in search to unfairly promote its own services outside search, discriminating against competitors in the process.

The issues are manyfold: To start with, Google is absolutely dominant in search in the U.S., as well as most of the Internet-using world. “Dominant,” however, does not necessarily equal “monopoly,” though it could equal “monopoly power,” as was the case of Microsoft with its Windows operating system in 1990s.

In the U.S., however, having a monopoly is not illegal. Abusing a monopoly, or even monopoly power, is. Back to Big Redmond, Microsoft was convicted of abusing its monopoly power in the market for operating systems in the U.S. by leveraging that power to gain market share in other markets.

Back to Google, the search giant is also a giant in online advertising, especially advertising relating to its other stronghold, search. The Journal reported that Google had 73.6% of the search ad business in 2010. The aforementioned Microsoft had 6.9% with its Bing search engine and MSN Search, while AOL had 2.4%, Yahoo! 10.7%, and “Other” had 6.5%.

The company has similar levels of share in search, with some 2/3 of all searches taking place on the company’s site in the U.S. AOL, Ask.com, Microsoft, and Yahoo! split up the the rest, with Yahoo at #2 and Miocrosoft close behind at #3.

Do these shares equal monopoly in either industry? It would be hard to argue that 2/3 of a market equals a monopoly, especially with Microsoft’s share of search having grown in 2010, but it could be argued that it represents monopoly power. That will be for lawyers and regulators to argue.

Even if Google has monopoly power, though, is the company abusing that power by unfairly discriminating against the competition to gain share in another area? The Journal reported that competitors like Yelp, Expedia, Microsoft (which owns Expedia), and TripAdvisor, have all been complaining about just that.

The screenshot below may be an example of such a complaint. We performed a search for the House of Prime Rib, one of the best places to get prime rib in San Francisco. The top result is the restaurant’s actual site. The second result, which is highlighted, is the listing for House of Prime Rib in Google’s own Places service, which looesly competes with Yelp.

Notice that the addition of a Google Maps maps showing the restaurant’s location causes the Places result to be quite prominent.

The third result is the restaurant’s own mobile site, while the fourth result, also highlighted, is where Yelp comes up. Various other review and third party sites follow.

Google Screenshot

Screenshot of Google search results
(Click the image to see a larger, more readable version)

According to The Journal, this is the sort of thing that Yelp is claiming represents Google unfairly using their search power to channel people to its own services.

Microsoft might be compaining that a search for “Online Spreadsheet” returns Google’s own Google Docs as the first result (when we searched, Microsoft itself had bought the search ads for that term). A search for “Currency Conversion” offered similar results, with Google’s own converter perched atop the other search results.

Do these examples represent an abuse of mpnopoly power, or is it simply smart for the company to push its own services when people search for things? It’s no simple question, but antitrust investigations seldom are.

We should stress that subpoenas being served does not mean that charges have been filed. It’s merely an investigation at this point, and the FTC is looking for information from both Google and possibly its competitors relating to that investigation.