Says Action Necessary To Restore Faith in Agency As Effective Antitrust Enforcer

Consumer Watchdog today called on the Federal Trade Commission to release the 100-page staff report on the 19-month Google investigation as the only way to “restore a modicum of public trust in the Commission’s ability to serve as an effective antitrust enforcer.”

“I call on you to release the FTC staff report to help make clear what was behind the Commission’s otherwise unfathomable action,” wrote John M. Simpson, Consumer Watchdog’s Privacy Project director in a letter to Commission Chairman Jon Leibowitz and Commissioners Julie Brill, Edith Ramirez, Maureen Ohlhausen and Joshua Wright.

“Media reports suggest that the Commission’s tap on the Internet giant’s wrist was the result of a ‘calculated and expensive charm offensive,’ ” Simpson wrote.

Read Consumer Watchdog’s letter here.

“Put another way, by all appearances, the Internet giant played an insiders’ game and bought its way out of trouble,” Simpson wrote. “Perhaps, the Commission managed to ignore the charm offensive and decide the case on the merits.  Sadly, we cannot know the true situation because we don’t have the details of the 19-month staff investigation.”

Consumer Watchdog’s letter quotes articles in Politico and The New York Times about the Internet giant’s $25 million lobbying campaign and its efforts to cozy up to the Obama Administration and other Washington insiders. “It was a multiyear campaign focused on this very moment, knowing as the company grew these issues were going to come up,” Alan Davidson, Google’s former top lobbyist, told Politico.

Read the Politico article here.

Read The New York Times article here.

The best course of action, Consumer Watchdog said, would have been to file an antitrust suit and bring the case to trial. All the evidence would have been part of the public record.  In a November letter to the FTC Consumer Watchdog warned that a negotiated settlement would inevitably invite cynicism about the results.

Consumer Watchdog’s letter to the Commission today continued:

“Opting to avoid a trial and filing a formal consent agreement would at least have required a complaint, spelling out the violation. Instead you have settled for promises from a company that has a demonstrated record of repeatedly breaking its word.  And it’s not even clear what they did wrong.

“Your only chance of re-establishing the FTC’s credibility on its handling of the Google investigation is to release the 100-page staff report about the inquiry. Releasing the report would put the Commission’s decision in context.

“Moreover, the public has the right to know what the staff recommended and to understand the reasoning of the professionals who conducted the lengthy investigation and the quality of their work.  It could be possible that the staff botched the investigation and you were left with no other choice.  If the report contains Google trade secrets, they could be redacted.”

Department of Justice, State Attorneys General Must Press To End Search Bias

The Federal Trade Commission’s settlement with Google fails to end its most anticompetitive practice, Consumer Watchdog said today and the public interest group called on the Department of Justice and state attorneys general to press forward to end the Internet giant’s monopolistic behavior in search results.

“Google clearly skews search results to favor its own products and services while portraying the results as unbiased. That undermines competition and hurts consumers,” said John M. Simpson, director of the group’s Privacy Project. “The FTC rolled over for Google.  They’ve accepted Google executives’ promises that they will change two practices without even requiring a consent agreement, but Google has a track record of broken promises.  Don’t forget, this fall the FTC fined Google $22.5 million for violating its most recent consent agreement. Why would the FTC take Google at its word?”

The new Assistant Attorney General for the Department of Justice Antitrust Division, William J. Baer, should make Google’s abuse of search a top priority, Consumer Watchdog said.

The FTC’s settlement does require a consent agreement regarding so-called Standards Essential Patents held by Google’s Motorola subsidiary.  Google is now required to license these patents to any company on “fair, reasonable and non-discriminatory” terms – known as FRAND terms.

“This will help ensure competition in the manufacture of smartphones and tablets,” said Simpson, “but that was never the heart of the issue. Biased search and Google’s favoring its own properties do real consumer harm. Google is the gateway to the Internet for most people. When Google rigs the game, we all suffer. They need to be stopped.”

Consumer Watchdog expressed concern that FTC Chairman Jon Leibowitz, who is expected to step down from the commission soon, may have rushed to finish the investigation so it could be concluded under his chairmanship.

The nonpartisan, nonprofit public interest group noted that Google’s monopolistic business practices are under investigation by a number of state attorneys general including Texas, California, New York and Ohio. European Union competition officials are also investigating Google.

When you stare down a $220 billion corporation, it’s hard not to blink. But if the Federal Trade Commission doesn’t deliver on its ultimatum to Google that it settle its antitrust problems soon for real relief or face prosecution, then consumers will never get the open and unfettered online and mobile access to information they deserve.

While the government’s battle with Microsoft in the 1990s was about whether the dominant software company could bundle software and an Internet browser, the antitrust case against Google is about whether one company should have so much control over online information that it can steer us any where it chooses for its own profit.

This is the power to make or break businesses, control online discourse, and steer consumers to the Internet giant’s own websites and affiliated businesses, all based on tweaking an unseen algorithm and holding a network of key online and mobile gateways and properties.

Google’s 70% control of online searches and 90% control of mobile searches, along with its dominant Android mobile operating system, patents, and vast content acquisitions make it the Standard Oil of our time.

The allegations against Google are that it restrains online trade with biased search results that drive consumers to the content it owns (Google Travel, Products, YouTube, Maps, Google+, etc.) or content it chooses, as opposed to that favored organically by the public.

Restraint of trade may be different today than in 1911 when the U.S. Supreme Court ordered John Rockefeller’s Standard Oil broken into parts under the Sherman Antitrust Act. Nonetheless the antitrust principle of preventing dominant players from playing unfairly and hurting consumers by driving out legitimate competition is very real for Google’s 2012 business model.

The principle at stake in the FTC case is critical: If you want to do business online, should you be forced to do business with Google?

Companies like Foundem, Nextag, AsktheBuilder.com and Kayak have been threatened with closing because they have fallen on the wrong side of the assumptions in Google’s Search algorithm. The evidence shows that Google increasingly steers consumers to what it determines to be “quality” web sites – aka those that use Google services and support its business model. If you are not on Page One of a Google Search, your business is not alive, even though you may be the business that consumers prefer in the market, just not Google’s “type” of business.

Counterfeit industries and black markets for prescription drugs, predatory loans and entertainment have also profited because Google has turned a blind eye to the source of its massive advertising dollars and, as a result, companies that play by the rules have been hurt. Example: Google paid the US $500 million last year for illegal pharmacy advertising. Copyright and other intellectual property rights held by authors, artists, musicians, journalists and Hollywood are also increasingly thrown to the wind because of Google’s dominance, bias against respecting them and the money to be made from “free” content and pirated products.

Can such a dominant search and content Goliath really provide open access that isn’t biased toward its ownership interests?

Google founders Larry Page and Sergey Brin didn’t think so when they went to Stanford.

“We expect that advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers,” they wrote in Appendix A of their research paper explaining their search technique. “Since it is very difficult even for experts to evaluate search engines, search engine bias is particularly insidious.”

Consumers often don’t know that they are being steered or why, so it takes an engineer to show them. Recently engineers from Twitter, MySpace and Facebook showed that Google’s new social search feature steers users to less relevant and less popular spots, like Google+, to promote Google services, rather than Twitter and other spots with unquestionably more traffic. Google increasingly wants our world to be its world.

The young Google founders argued in their Stanford research paper that launched Google that overt bias won’t be tolerated, but covert steering would be acceptable. “For example, a search engine could add a small factor to search results from friendly companies, and subtract a factor from results from competitors,” they wrote. ” This type of bias is very difficult to detect but could still have a significant effect on the market.”

And this is the most dangerous type of bias in the hands of company as big and controlling as Google.

The European Commission is demanding the Internet giant change its ways or face a formal complaint. The Federal Trade Commission, rumored to be backing away from a staff recommendation in favor of legal action, owes the public a prosecution of Google in order to reveal the evidence it has collected. Help us keep the FTC off the fence – send an email to the Commission today to tell them to file the antitrust lawsuit today!

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Originally posted on November 30th, 2012 on the Hill. Posted by Jamie Court, author of The Progressive’s Guide to Raising Hell and President of Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

Should one company be able to control how you use the Internet and what you see?

Google — with 70% of online search and 90% of mobile search markets — is increasingly doing this.  Evidence before the Federal Trade Commission (FTC) shows that Google skews its results towards its own services and commercial priorities, when consumers believe they are getting the most “popular” organic result.

After a year’s probe the FTC’s staff has recommended antitrust prosecution, but politics may be stopping the suit. Please send an email today asking the Commission to approve that antitrust suit.

Consumer Watchdog cheered when the FTC took up its antitrust investigation, which we began calling for more than two years ago. Recently there have been reports that the Commissioners are wavering and may not act against the Internet giant.  You can help us make sure the five commissioners don’t cave.

Google uses its monopoly on the Internet and in the mobile space to bias searches in favor of its own products and services, harming consumers and competitors alike.  The time for action is now.  Ask the Commission to adopt its staff’s recommendation and approve an an antitrust suit against Google.

For more information on our support for the FTC’s antitrust investigation read our letter to the Commission here.

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Posted by John M. Simpson. John is a leading voice on technological privacy and stem cell research issues. His investigations this year of Google’s online privacy practices and book publishing agreements triggered intense media scrutiny and federal interest in the online giant’s business practices. His critique of patents on human embryonic stem cells has been key to expanding the ability of American scientists to conduct stem cell research. He has ensured that California’s taxpayer-funded stem cell research will lead to broadly accessible and affordable medicine and not just government-subsidized profiteering. Prior to joining Consumer Watchdog in 2005, he was executive editor of Tribune Media Services International, a syndication company. Before that, he was deputy editor of USA Today and editor of its international edition. Simpson taught journalism a Dublin City University in Ireland, and consulted for The Irish Times and The Gleaner in Jamaica. He served as president of the World Editors Forum. He holds a B.A. in philosophy from Harpur College of SUNY Binghamton and was a Gannett Fellow at the Center for Asian and Pacific Studies at the University of Hawaii. He has an M.A. in Communication Management from USC’s Annenberg School for Communication.

A federal judge’s ruling late Friday in a key privacy case demonstrates the need to implement tough “Do Not Track” rules and to take decisive action on the antitrust front against Google.

Judge Susan Illston approved the Federal Trade Commission’s $22.5 million settlement with the Internet giant for hacking past privacy settings on Apple’s Safari browser in U.S. District Court in San Francisco, in a deal that Consumer Watchdog had argued was insufficient in light of Google’s wanton privacy violations.

“The Court also grants additional deference where the decree has been negotiated  by a governmental agency that is an expert in its field,” Judge Illston said in her decision.

I was disappointed with the ruling, but think we made important points that will affect how similar cases are dealt with in the future. Drawing the public’s attention to this case was tremendously important. I’m glad we did it.

Attorney Gary Reback of Carr & Ferrell represented us as an amicus curiae or friend of the court. Frankly, I expected an uphill battle with Google and the FTC aligned against us.  Together the government and Google defended the deal that had been negotiated in secret.

Judge Illston did not surprise when she began the hearing by saying her “preliminary view” was to approve the settlement. We opposed the deal for three basic reasons:

1. The settlement allows Google to deny that it did anything wrong.

2. The $22.5 million fine — a lot for you and me — is insufficient for a company like Google with revenue of $40 billion a year. Really it’s just chump change. Google makes $22.5 million in about five hours. Google was liable for fines totaling $16,0000 per day per violation. If you consider each wrongly placed cookie a violation — and you should — Google quickly reaches a liability in the billions. A fine of that magnitude would have caught Google executives’ attention.

3. The injunctive relief in the settlement is insufficient.  Google is allowed to keep the ill-gotten data it obtained by hacking around the Safari privacy settings, which is the browser used on iPhones and iPads.

Reback made the arguments in two excellent briefs before the hearing. Both are well worth reviewing. The first is particularly valuable for the way it lays out Google’s history of privacy invasions. Read the original amicus brief here and our response brief here.

As the hearing began Judge Illston said there was no need to require Google to admit it did anything wrong. She said she had no problem with the amount of the fine. She did, however, have questions questions about allowing the Internet giant to retain the wrongfully acquired data.

The government and Google’s attorneys tried to make the case that the Google wouldn’t use the information, so keeping it was irrelevant. I thought Reback effectively rebutted their position, but then, you’d expect me to think that.

By the end of the day, though, Judge Illston had ruled against us.  As Reback told The Associated Press’ Mike Liedtke, after the hearing, a consent decree ”is not a good way to police Google,”

What the decision does is allow Google executives  to buy their way out of trouble with what for them is pocket change and then deny doing anything wrong.  As our briefs made clear, Google has demonstrated an ability to out maneuver government regulators repeatedly and ride roughshod over the privacy rights of consumers.  Google continues to be disingenuous about its practices.

That’s why the decision makes two things clear: First, if consumers are to have any privacy at all and be able to control what data is gathered about them, tough Do Not Track rules must be implemented. Second, as we told the FTC last week, the Commission needs to file an antitrust suit against Google and take it to trial in U.S. District Court. The FTC should seek to force Google to divest its Motorola Mobility subsidiary, separate  search from advertising, and undergo the same sort of regulation as a public utility.

The Federal Trade Commission’s role in keeping Google’s abuses in check is essential. The Internet is too important to allow an unregulated monopolist to dominate it.

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Posted by John M. Simpson. John is a leading voice on technological privacy and stem cell research issues. His investigations this year of Google’s online privacy practices and book publishing agreements triggered intense media scrutiny and federal interest in the online giant’s business practices. His critique of patents on human embryonic stem cells has been key to expanding the ability of American scientists to conduct stem cell research. He has ensured that California’s taxpayer-funded stem cell research will lead to broadly accessible and affordable medicine and not just government-subsidized profiteering. Prior to joining Consumer Watchdog in 2005, he was executive editor of Tribune Media Services International, a syndication company. Before that, he was deputy editor of USA Today and editor of its international edition. Simpson taught journalism a Dublin City University in Ireland, and consulted for The Irish Times and The Gleaner in Jamaica. He served as president of the World Editors Forum. He holds a B.A. in philosophy from Harpur College of SUNY Binghamton and was a Gannett Fellow at the Center for Asian and Pacific Studies at the University of Hawaii. He has an M.A. in Communication Management from USC’s Annenberg School for Communication.

Federal Trade Commission Chairman Jon Leibowitz has given Google what Bloomberg News Service describes as an ultimatum to settle the agency’s antitrust investigation in the next few days or face a lawsuit.

Citing unidentified sources, Bloomberg reporter Sara Forden on Monday wrote:

“Google has been in discussions with the agency for about two weeks and hasn’t put any remedy proposals on the table, said the people, who declined to be identified because the negotiations are private.”

FTC staff have been investigating whether the Google has been abusing its dominance of the Internet for more than a year.  The staff has reportedly recommended issuing a complaint focused on Google’s search practices and also for misusing its patents to block rivals smartphones.

The FTC has told Google it won’t accept a resolution short of a consent decree, Bloomberg’s Forden wrote,  and is prepared to take action in the next week or two.

Google is continuing its usual happy-face spin. “We continue to work cooperatively with the Federal Trade Commission and are happy to answer any questions they may have,” Google Spokesman Adam Kovacevich told Bloomberg.

At first blush the idea that the FTC is holding out for a consent decree may sound reassuring.  For what it’s worth though, I’m a little concerned that a settlement  might not do enough.

Chairman Leibowitz is expected to step down from the agency soon.  There is speculation that in a nod toward his legacy, he might be willing to agree to a less than adequate settlement, just to be able to say the FTC got the Internet giant on his watch.

Franky, there is a similar concern among privacy advocates that there could be a willingness to accept a weak Do Not Track standard for the same reason.

If the Commission files a lawsuit, the FTC could proceed in its own administrative court or in federal court.  No decision has been made about the venue.

Meanwhile there was a development over the summer that might give Google pause.  The Commission has changed its policy and can now seek “disgorgement” — forcing a firm to surrounded profits as an antitrust penalty.  If the FTC goes that route, it might really concentrate the minds of the geeks in Mountain View.

And don’t forget the other side of the Atlantic.  The EU is pressing Google to resolve its antitrust concerns or face a formal complaint.  That, too, could come in a matter of weeks.

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John M. Simpson is a leading voice on technological privacy and stem cell research issues. His investigations this year of Google’s online privacy practices and book publishing agreements triggered intense media scrutiny and federal interest in the online giant’s business practices. His critique of patents on human embryonic stem cells has been key to expanding the ability of American scientists to conduct stem cell research. He has ensured that California’s taxpayer-funded stem cell research will lead to broadly accessible and affordable medicine and not just government-subsidized profiteering. Prior to joining Consumer Watchdog in 2005, he was executive editor of Tribune Media Services International, a syndication company. Before that, he was deputy editor of USA Today and editor of its international edition. Simpson taught journalism a Dublin City University in Ireland, and consulted for The Irish Times and The Gleaner in Jamaica. He served as president of the World Editors Forum. He holds a B.A. in philosophy from Harpur College of SUNY Binghamton and was a Gannett Fellow at the Center for Asian and Pacific Studies at the University of Hawaii. He has an M.A. in Communication Management from USC’s Annenberg School for Communication.

Google — facing the possibility of a penalty of around $4 billion — is trying to cut a deal with European antitrust regulators that would settle the regulators’ objections without having to pay a fine.

It’s not certain that an agreement can be reached, but if one is, it will have a direct impact on the United States.  Joaquin Almunia, EU competition commissioner, said that any concessions the Internet giant offers to resolve the EU’s antitrust concerns would be applied worldwide.

“We will look for worldwide solutions; it will not be very useful to get European-wide solutions,” he said.

One of the main complaints against Google is the way it unfairly favors its own properties ahead of competitors in search results.  We documented that two years ago in our study, Traffic Report: How Google is Squeezing out Competitors and Muscling Into New Markets.

In May the Commission said it was concerned that Google was favoring its own services in search, copying material from websites of competitors without permission, shutting out advertising competition and placing restrictions on the portability of online search advertising campaigns from its platform AdWords to the platforms of competitors. Almunia told the company to offer changes or face a formal statement of objections with the risk of fines in the billions of dollars. In Europe antitrust penalties can be imposed before a court proceeding.

At the time I predicted that Google would not offer meaningful remedies.  Despite my skepticism, the EU is saying that Google is apparently responding. The New York Times quoted Almunia from a news conference Wednesday:

“We were trying to clarify to them how these solutions should be established. They were exploring with us what kind of solutions we were asking for, and now we have enough clarifications so as to start the process of technical meetings.”

“They will try to solve it. And I have reasons to believe that they think it’s worth it.”

Funny how $4 billion concentrates the mind, isn’t it.

Reportedly, one of the things that moved the possibility of a settlement forward was that Google agreed that any concessions it makes on search will apply to all  platforms including computers and mobile devices.

I’m sure the EU is acting in good faith.  I have my doubts about Google. The real difficulty in accurately assessing the situation is the secrecy that surrounds the negotiations.  We simply don’t know what Google has proposed and what the EU wants.  When an antitrust case gets to this stage, it really all should be on the public record.

Here is what another critic said, as reported by The New York Times:

“For years, Google has said it deserves the benefit of the doubt,” said Jonathan Zuck, president of the Association for Competitive Technology, an industry group heavily financed by Microsoft. “Unfortunately, they’ve played us for fools every time.”

Mr. Zuck praised the commission’s “persistent work,” but said an “effective remedy” required an admission by Google of wrongdoing. “Without that understanding on the part of Google, it will never implement the kind of fundamental changes to its business practices that are necessary to curb these abuses,” he said.

I agree.

Besides the the European antitrust investigation, the Internet giant faces antitrust investigations by the U.S. Federal Trade Commission and several states. Antitrust officials in Korea, India and Brazil are also looking into Google’s business practices. A European deal could well serve as a blueprint for settlements with other authorities.  The FTC and the EU have been in close touch about their investigations.

One difference is that the FTC’s probe includes an investigation into whether Google has abused its dominance of the Android operating system. The EU is not looking into that, but Almunia held out the possibility that it might.

Interestingly, in the semi-boilerplate language found in Google’s just-filed Form 10-Q, is a clear indication that the Internet giant finally gets that it is under scrutiny:

We are subject to increased regulatory scrutiny that may negatively impact our business.

The growth of our company and our expansion into a variety of new fields implicate a variety of new regulatory issues, and we have experienced increased regulatory scrutiny as we have grown. In particular, we are cooperating with the regulatory authorities in the United States and abroad, including the U.S. Federal Trade Commission (FTC), the European Commission (EC), and several state attorneys general in investigations they are conducting with respect to our business and its impact on competition. Legislators and regulators, including those conducting investigations in the U.S. and Europe, may make legal and regulatory changes, or interpret and apply existing laws, in ways that make our products and services less useful to our users, require us to incur substantial costs, expose us to unanticipated civil or criminal liability, or cause us to change our business practices. These changes or increased costs could negatively impact our business and results of operations in material ways.

I hope the Europeans extract meaningful concessions, though  I remain skeptical that will happen. Google has a history of stonewalling and foot-dragging.  The best solution would be to break Google into different companies devoted to different lines of business.

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John M. Simpson is a leading voice on technological privacy and stem cell research issues. His investigations this year of Google’s online privacy practices and book publishing agreements triggered intense media scrutiny and federal interest in the online giant’s business practices. His critique of patents on human embryonic stem cells has been key to expanding the ability of American scientists to conduct stem cell research. He has ensured that California’s taxpayer-funded stem cell research will lead to broadly accessible and affordable medicine and not just government-subsidized profiteering. Prior to joining Consumer Watchdog in 2005, he was executive editor of Tribune Media Services International, a syndication company. Before that, he was deputy editor of USA Today and editor of its international edition. Simpson taught journalism a Dublin City University in Ireland, and consulted for The Irish Times and The Gleaner in Jamaica. He served as president of the World Editors Forum. He holds a B.A. in philosophy from Harpur College of SUNY Binghamton and was a Gannett Fellow at the Center for Asian and Pacific Studies at the University of Hawaii. He has an M.A. in Communication Management from USC’s Annenberg School for Communication.