FTC finds little as Google investigation concludes

Free market conservatives and civil libertarians have been nervously circling the Federal Trade Commission for years, wondering how far its power over the Internet might extend.

One of the common fears is that old-fashioned legal principles, forged in an era of telephone monopolies and three-network broadcast TV, will be grafted onto the vast digital frontier. Such grafting is likely to be done with long nails and a very large hammer.

The FTC???s adventures in applying anti-trust law to the Internet are such an area of concern. Google has been investigated for unfair competition by both the FTC and the European Union. As 2012 draws to a close, the FTC investigations are looking less likely to result in charges, and Google executives have expressed confidence they can work things out without going to court. Their hopes were brightened when a noted critic of these FTC anti-trust actions, Professor Joshua Wright of George Mason University, was tapped to serve on the commission. Wright, however, has said he would recuse himself from the Google cases, because the company has some indirect funding connections to his research.

At issue is the question of ???search engine neutrality.??? Google is a domineering presence among the all-important Internet search engines. Its CEO, Eric Schmidt, has described the company as part of a ???gang of four??? titans who exert an outsized influence upon consumer technology, with the other three being, Apple, and Facebook. (Sorry, Microsoft, you didn???t make the cut.) And it???s a fairly cozy gang of four, since Schmidt used to sit on the Apple board of directors. He resigned from Apple in 2009, in part because Google and Apple were entering more direct competition in certain markets, such as smart phones.

Google???s great influence

Even though the Internet is vast, and the cost of entering online markets is relatively low, it???s extremely difficult to approach the kind of influence Google has. Its name has become virtually synonymous with the practice of searching the Internet. Google even has a popular web browser, called Chrome, that tightly integrates with its search engine. It sells a line of notebook computers called Chromebooks that essentially do nothing but run Chrome and its applications.

What caught the eye of would-be anti-trust regulators is that Google has a long-standing practice of selling preferential search engine treatment, making its paying customers more likely to appear at the top of the list when searches are performed. It is very advantageous to be among the first few results that appear when consumers search for product information.

Preferential treatment?

There???s nothing inherently dishonest or deceptive about any of this, but Google???s dominating position among search engines led the FTC to contemplate the notion that it was ???unfairly??? injuring those who didn???t pay for preferential treatment. But there are plenty of other search engines, and not even Google???s Chrome browser interferes with their use. It is very difficult to make the case that Google???s influence is a result of anything other than its success.

Without specifically referencing the case against Google, Sen. Jim DeMint (R-S.C.) wrote a letter to the FTC expressing concern that ???when a federal agency uses creative theories to expand its activities, entrepreneurs may be deterred from innovating and growing, lest they be targeted by government action.??? He encouraged the commission to ???act with humility and restrain itself to activities for which it has clear legal authority.???

The FTC has considerable room for creativity, because the laws governing its ability to accuse a company of unfair or deceptive practices are unfortunately vague. The rapidly evolving nature of Internet technology has not been helpful in clarifying them. Sometimes the discussion drifts from the realm of lawyers and courtrooms, and onto the highly technical turf of software engineers, who are hard-pressed to keep up with all the details of their own innovations. There are suspicions that smaller competitors want to use government regulatory power as a weapon against large and highly successful opponents. And some critics maintain the FTC shouldn???t be going anywhere near anti-trust law at all.

Before he was nominated to serve on the FTC, Professor Wright published a paper entitled, ???If Search Neutrality Is the Answer, What???s the Question???? He found any diagnosis of unfair competition highly debatable, and thought the ???cures??? would cause far more economic harm than the ???disease.??? That might be a fair warning to keep in mind when contemplating all efforts to impose antique legislation on an Internet that grows and changes daily.