Accidentally Revealed FTC Document Details Some Questionable Google Practices, But Not The Ones Most People Focused On

from the fascinating-stuff dept

Last week, the Wall Street Journal published an article detailing how one part of the FTC, the competition bureau, wanted to go after Google for antitrust violations, claiming it was eventually "overruled" by the FTC's commissioners who sided with the economic bureau that felt there was no real antitrust violations in Google's practices. The WSJ got its hands on part of the internal report by accident -- saying that the FTC inadvertently handed it over as a response to a different FOIA request, but that it was only part of the internal report. Late yesterday, the WSJ released the document it received (which you can see here in PDF form). Somewhat bizarrely, it's every other page of the report, suggesting some sort of weird screwup inside the FTC.

I recommend reading through the whole thing (the final third is all footnotes, but they're also super interesting). It details a variety of background tidbits about the search industry, some of which have never been revealed before. If you want an annotated version, I highly recommend reading Danny Sullivan's live tweets as he read through the report and the footnotes.

However, now that we get to read all the details, it seems like the Wall Street Journal oversold the story. It doesn't really show a huge conflict within the FTC at all. Basically, the competition bureau discussed three practices that it found problematic and potentially worthy of prosecution. And, yes, the FTC eventually decided not to prosecute. But -- and this is the important part that most of the coverage seems to ignore -- the final agreement between the FTC and Google involve Google agreeing to cease two of the three questionable practices (and, frankly, the third "questionable" practice doesn't seem that questionable).

And, on top of that, the one practice that got most of the attention (both early on in the antitrust complaints against Google and in the coverage about this leaked report) -- the demoting of vertical search engine results in Google's search -- was the part that even the competition bureau found likely did not violate any antitrust laws, and was actually for the benefit of Google's users.

Specifically, most of the focus on Google's potential "anti-trust" activists has been on its impact on "competing" search engines, specifically "vertical" search engines for things like "local," "travel," and "shopping." And the report disclosed pretty clear evidence that Google purposely pushed down some of those results to promote its own results -- but there were good reasons for this, and as such, it appears that pretty much everyone at the FTC -- including those who wanted to punish Google for other things, agreed that there was no antitrust violation here. That's mostly because those efforts actually benefited consumers. And it's not difficult to see how: when you do a search on Google you want to get to results. You don't want to be sent off to another vertical search engine with another set of results. While the FTC agrees that this may harm vertical search competitors, that doesn't mean it harmed consumers. The FTC recognizes that in an effort to provide a better experience to consumers, that might harm other search engines, but that's not an antitrust violation:

Indeed, the evidence paints a complex portrait of a company working toward an overall goal of maintaining its market share by providing the best user experience, while simultaneously engaging in tactics that resulted in harm to many vertical competitors, and likely helped to entrench Google's monopoly power over search and search advertising. The determination that Google's conduct is anticompetitive, and deserving of condemnation, would require an extensive balancing of these factors, a task that courts have been unwilling- in similar circumstances - to perform under Section 2. Thus, although it is a close question, Staff does not recommend that the Commission move forward on this cause of action.

However, the report does highlight those other areas where Google's actions were a bit more questionable. The key one is in scraping the sites of vertical competitors and using their data in its own vertical offerings -- and then threatening to remove those vertical offerings from the general search if they wanted to have that data not used for vertical search activities. As the report noted, this was an internal policy choice by Google, rather than one of technical necessity:

Indeed, Google almost simultaneously launched a new reviews-collection product -- Hotpot -- to (again) try to solicit original user reviews, this time seeding it with eviews from third-party websites with no attribution. Yelp, TripAdvisor, and CitySearch all complained to Google. All of these parties sought removal of their user review content from Google Placcs/Hotpot, as well as the removal of their reviews from Google's aggregated review count on the main SERP. This time, however, Google told each company that if Yelp, TripAdvisor, and CityScarch wanted to have their content removed from Google Places/Hotpot, they would have to exclude their websites from being crawled by Google altogether, which meant complete exclusion from Google's SERP. This was not technically necessary -- it was just a policy decision by Google.

As the competition bureau noted, this move -- threatening to remove those sites from overall search results if they didn't allow the use of the data to prop up its own (underperforming) vertical sites -- was clearly problematic:

Google's threat (and willingness) to degrade its own web search product- by banishing high-quality vertical websites from its web search results altogether- suggests that Google's motive in scraping high-quality content from its vertical competitors was not procompetitive.

Indeed, it seems like Google could have easily agreed to remove that content from its vertical products without removing it from the general search results -- and, in fact, that was one of the things Google agreed to stop doing in its agreement with the FTC:

Google also has promised to provide all websites the option to keep their content out of Google’s vertical search offerings, while still having them appear in Google’s general, or “organic,” web search results. The FTC investigated allegations that Google misappropriated content, such as user reviews and star ratings, from competing websites in order to improve its own vertical offerings, such as Google Local and Google Shopping.

The other sketchy behavior was the way Google's Adwords API proactively blocked companies from building tools that would work with competing search ad providers (mainly Microsoft's AdCenter). Here, it appears that there was actually support within Google to do away with such restrictions, as many realized that it would be better for the overall market to allow companies to create cross-platform tools. However, Larry Page himself stepped in and blocked this plan:

In December 2008, Holden, senior vice-president of ad products Susan Wojcicki, and others met to discuss the issue. Of the meeting, Holden wrote:

[O]ne debate we are having is whether we should eliminate our API T&Cs requirement that AW [AdWords] features not be co-mingled with competitor network features in SEM cross-network tools like DART Search. We are advocating that we eliminate this requirement and that we build a much more streamlined and efficient DART Search offering and let SEM tool provider competitors do the same. There was some debate about this, but we concluded that it is better for customers and the industry as a whole to make things more efficient and we will maximize our opportunity by moving quickly and providing the most robust offering.

In February 2009, Holden wrote the executive summary for a DART Search product review, in which he advocated that Google "alter the AdWords Ts&Cs to be less restrictive and produce the leading cross-network toolset that increases advertiser/agency efficiency." Such a move, he wrote, would "[r]educe friction in the search ads sales and management process and grow the industry faster." In April 2009, in light of evident disapproval from Larry Page about the idea of removing the co-mingling restriction, Holden wrote: "We've heard that and we will focus on building the product to be industry-leading and will evaluate it with him when it is done and then discuss co-mingling and enabling all to do it."

It's good to see that within Google they wanted to remove these restrictions, and recognized that a more open, less-restrictive API would have resulted in a better overall experience. It's unfortunate that Larry Page stepped in to block that, and actually this was a part of the final FTC settlement, where the FTC agreed not to prosecute the company. It didn't get much attention at the time, but Google "agreed to give online advertisers more flexibility to simultaneously manage ad campaigns on Google’s AdWords platform and on rival ad platforms."

Frankly, it seems like these two issues -- both of which it agreed to stop doing -- were clearly bad decisions on Google's part, and it's a good thing that the company is no longer doing either. Both appear to go against the basic principles that Google often sets out for itself publicly, in terms of promoting openness and improving the overall ecosystem.

As for the third "bad" practice -- that one seems a bit more bizarre and it's no wonder that the FTC eventually decided not to do anything. The competition bureau argued that Google used exclusive deals to prevent partners from also working with Microsoft, and this may have cost Microsoft some business. However, there wasn't much evidence to support this in reality, and the report notes that most of the various partners don't even seem particularly bothered by this setup. They could negotiate different deals and weren't too worried about negotiating exclusive deals. It's not all that surprising that the FTC eventually just let that issue drop.

In the end, the document is really interesting and worth reading (even if you're only reading every other page). It certainly highlights a few questionable activities on Google's part that we're glad it agreed to stop doing. It seems like if Google just continued to focus on providing the best overall offering and promoting a more open internet, it never would have gotten into that mess in the first place -- and hopefully that's a lesson that Google will remember going forward.

Either way, as some have been pointing out, it seems like the FTC made the right decision in not prosecuting, as the competitors that the FTC was worried about have been growing pretty rapidly since then, while Google's market position has been declining. Such is the nature of the rapidly changing internet...

Filed Under: advertising, antitrust, competition, ftc, search choices, vertical search
Companies: google