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Originally published December 19, 2012 at 10:00 PM | Page modified December 20, 2012 at 12:31 PM

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FTC gets beaten up for giving Google just a slap on wrist

After nearly two years of a high-profile probe, Google recently reached a tentative settlement deal that many observers called a slap on the wrist.

The Washington Post

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WASHINGTON – Google once was seen as such a ripe target for investigation that the nation’s antitrust enforcers battled over the right to claim it as their own, as a potential high-tech pelt to be hung on the wall alongside Microsoft and AT&T.

Yet after nearly two years of a high-profile probe, Google recently reached a tentative settlement deal that many observers called a slap on the wrist. And the agency that claimed the case in 2011, the Federal Trade Commission (FTC), began facing such withering criticism that the agreement was showing signs of fraying Tuesday night, according to people following the case closely.

Some industry officials and longtime FTC observers say the agency could see weakened credibility as an antitrust enforcer and as the nation’s most ardent overseer of the multibillion-dollar technology industry whose products are an increasingly pervasive — some say intrusive — part of Americans’ lives.

“The agency raised huge expectations about this case. You get in trouble in the policy world when you set expectations in the stratosphere and you deliver something less,” said William Kovacic, a former FTC chairman who is now a George Washington University law professor. “The commission has painted itself into a bit of a corner.”

Recent news reports detailing the terms of the tentative agreement unleashed a torrent of opposition from companies that had complained, state attorneys general who felt cut out of negotiations, interested lawmakers and consumer advocates. Many have long said that Google was manipulating search results to hobble competitors and gain advantage for its own offerings in shopping, travel services and other lucrative businesses — and in doing so, limiting consumer choice.

The announcement of the agreement, once expected this week, has been pushed back at least to January, according to those following the case, bending a timeline publicly set by FTC Chairman Jon Leibowitz and raising the possibility that the terms of the deal may change. The agency is now keenly watching a parallel investigation to see what concessions European antitrust regulators manage to extract from Google.

The EU’s top antitrust official, Joaquín Almunia, met with the company’s executive chairman, Eric Schmidt, on Tuesday and issued a statement reiterating his concerns, saying Google should “come forward with a detailed commitment” next month. Among the issues listed by Almunia was alleged manipulation of search results, an issue once at the heart of the FTC’s investigation but one not addressed in the tentative deal Google reached with the agency.

One measure of the stakes in the current Google antitrust probe is that a vigorous postmortem debate has begun even before the FTC has announced its decision.

Those familiar with the case, speaking on the condition of anonymity to discuss matters not yet public, have said that the FTC’s tentative deal with Google includes several company concessions.

Among them are limits on using sections of restaurant reviews, hotel ratings and other snippets from rival websites. Google also would institute technical changes making it easier for marketers to move their advertisements to other online networks.

Google for weeks has declined to respond to questions about the negotiations with FTC officials, saying only that it is “happy to answer any questions they may have.”

Legal analysts are split on whether the way Google displays search results violates the law, with some saying the FTC would have been hard-pressed to win a case against Google under U.S. antitrust statutes. But there is wide agreement that the FTC’s failure to challenge the company on its core business practices has produced results far short of expectations. Some say it could embolden the search giant to push further into gray legal areas.

Those who have been pushing for aggressive action are particularly unhappy. “From the perspective of the Federal Trade Commission, I think it’s devastating for the whole enterprise,” said Silicon Valley lawyer Gary Reback, who represents several companies that say they have been hurt by Google’s practices. “It’s not like the problem goes away. It’s more likely that the Federal Trade Commission goes away.”

The FTC has its defenders, who argue that despite Google’s commanding position in the search market — nearly 70 percent of queries happen on its service — many of the changes that have enraged competitors have produced little harm to consumers using a free service.

Searching for airline flights on Google, for example, now produces a large box listing prices and destinations provided by airline websites, bypassing the online travel services that once claimed the most prominent links. That’s clearly bad for Expedia and Kayak, but offers what some consumers probably find to be a cleaner, more convenient search experience — even if it fails to yield the lowest possible price.

Some legal experts add that the FTC’s probe put Google on notice that it was being watched for possible monopolistic behavior. That alone, they say, may have discouraged abuses before they developed.

“For the FTC to have subjected Google to this scare and to end up with an agreement that holds Google’s feet to the fire seems like a pretty good outcome to me,” said Andrew McLaughlin, a Stanford University law fellow who was a former top Google policy official and White House technology adviser. “One of the best things the FTC can do is push companies toward the better angels of their natures.”

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