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BREAKING NEWS AND ANALYSIS: Feds to Launch Probe of Google

Is this a coincidence or what? I just finished writing the article on Search & Destroy: Why You Can't Trust Google and the Wall Street Journal comes out with this story. Is Google in trouble? Read on and find out.

Thomas Catan and Amir Efrati reported in the Wall Street Journal on 6.24.2011 that Federal regulators are going to hit Google, Inc. with subpoenas and are launching a broad, formal investigation into whether Google has abused its dominance in Web-search advertising.

This civil probe, which has the potential to reshape how companies compete on the Internet, is the most serious legal threat yet to the 12 year old company. While Google has faced several antitrust probes in recent years, the US has limited its investigations largely to reviews of the company's mergers and acquisitions. The new investigation will examine fundamental issues relating to Google's core search-advertising business, its biggest money maker.

Many policy watchers think the Google probe ultimately could be as much of a watershed event for antitrust policy as the Justice Department's landmark lawsuit against Microsoft in the 1990s. Microsoft avoided being broken up, but industry and antitrust experts say the legal assault on the company - and its aftermath - helped check Microsoft's ability to exploit its dominance in personal-computer operating systems to control other technology sectors. The long-running case also distracted the company from its operations and tarnished its public images - risks that might also face Google.

The people familiar with the matter said issues in the FTC probe are expected to include whether Google searches unfairly steer users to the company's own growing network of services at the expense of rival providers. Oh please - how much do you pay to use Google? Nothing. So if Google wants to promote something you have to pay for it's a crime?

"Google engages in anticompetitive behavior ... that harms consumers by restricting the ability of other companies to compete to put the best products and services in front of Internet users, who should be allowed to pick winners and losers online, not Google." said Fairsearch.org, a group representing several Google critics, including Microsoft and travel services Expedia Inc., Kayak.com, and Sabre Holdings. These companies said that Google's anticompetitive practices include using other companies' content without their permission, deceptive display of search results, manipulation of search results to favor Google's products, and buying up competitive threats to its dominance.

Google which handles about two-thirds of all US Web search and more than 80% in many parts of Europe has denied doing any of these things. It argues that users can easily navigate to other choices on the Web. In statements, the company has said it "built Google for users, not websites, and our goal is to give users answers."

Two Google executives in a company blog posted after an official European probe was launched in November said, "Given our success and the disruptive nature of our business, it's entirely understandable that we've caused unease among other companies and caught the attention of regulators." Google has also suggested that many of the complaints about its behavior have been orchestrated by Microsoft, which in April filed its own antitrust complaint against Google with European authorities. Microsoft has said it isn't behind other companies' actions, but merely helping direct them to the proper authorities. Ever wonder that if Google and Microsoft were sumo wrestlers, who would win?

Google has faced pressure on privacy matters. In April, Google agreed to submit to independent privacy audits for the next 20 years as part of a legal settlement with the FTC of claims it violated users' privacy at its social network Buzz. The same month, Google agreed to allow the Justice Department to oversee a slice of its operations in exchange for approval of its $700 million purchase of travel-software provider ITA Software.

In 2008, the Justice Department blocked a Google advertising agreement with Yahoo Inc., saying it would have controlled more than 90% of the relevant market.

JERE'S ANALYSIS: Google isn't an easy target for prosecution. Under US antitrust law, it isn't illegal to be a monopoly - only to acquire one unlawfully or abuse it. And courts have significantly narrowed the scope of antitrust law in recent years, further raising the bar of the FTC, which is handling the probe, to bring a successful case. The FTC needs to communicate better with the DOJ. The Obama Administration is in very tight with many current and former Google executives. Unless the FTC and/or the DOJ can get a huge amount of money from Google, as they did from Microsoft in a settlement, this current probe isn't going anywhere.

Microsoft is going to make a lot of noise regarding this Google investigation and getting others to make noise as well. Microsoft has put Google on their "enemies list" right up there with Apple. So, Steve Ballmer of Microsoft will want Google to suffer the same fate they did with their antitrust investigation.

Google has much more political clout with this administration than Microsoft did. Therefore, at the end of the day, this investigation is going to go nowhere, waste a lot of time, and make a lot of attorneys very wealthy.