By Ryan Demotte
Last week Google acknowledged in an SEC filing that the Federal Trade Commission has launched a formal antitrust inquiry into the company’s search and advertising business practices, issuing a subpoena and notice of a civil investigative demand to the company. According to news reports, FTC lawyers have been informally gathering information for several months concerning the way Google orders search results and advertising. By taking this step, the FTC can compel Google to turn over a wide range of internal information concerning its business. Rivals argue that Google engages in anticompetitive conduct by using its dominance in the search market to favor its own services and reduce web traffic to competing services. Google already faces a similar investigation by European regulators.
In a response posted on its official blog, Google provided a preview of what may be its core defense to any antitrust allegations – that competition in the search engine market is “only one click away,” and that users are free to use any of a variety of alternatives to Google.
Using Google is a choice – and there are lots of other choices available to you for getting information: other general-interest search engines, specialized search engines, direct navigation to websites, mobile applications, social networks, and more.
According to this line of reasoning, since consumers, i.e. search engine users, can switch to alternative search engines at virtually no cost, Google does not have market power. Critics, on the other hand, point to Google’s high market share – over 66 percent in the U.S. and greater in Europe – as evidence that Google effectively controls traffic to web sites, and thus does have market power in search that can be leveraged anti-competitively in other businesses.
While Google has faced antitrust scrutiny on some of its acquisitions in the past, this investigation is the first to focus on its core business of search and advertising, and thus presents potentially serious legal risk for the company.