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Google Agrees to Change Its Business Practices to Resolve FTC Competition Concerns In the Markets for Devices Like Smart Phones,

  Google Agrees to Change Its Business Practices to Resolve FTC Competition
Concerns In the Markets for Devices Like Smart Phones, Games and Tablets, and
                               in Online Search

PR Newswire

WASHINGTON, Jan. 3, 2013

Landmark Agreements Will Give Competitors Access to Standard-Essential
Patents; Advertisers Will Get More Flexibility to Use Rival Search Engines

WASHINGTON, Jan. 3, 2013 /PRNewswire-USNewswire/ -- Google Inc. has agreed to
change some of its business practices to resolve Federal Trade Commission
concerns that those practices could stifle competition in the markets for
popular devices such as smart phones, tablets and gaming consoles, as well as
the market for online search advertising.

Under a settlement reached with the FTC, Google will meet its prior
commitments to allow competitors access – on fair, reasonable, and
non-discriminatory terms – to patents on critical standardized technologies
needed to make popular devices such as smart phones, laptop and tablet
computers, and gaming consoles. In a separate letter of commitment to the
Commission, Google has agreed to give online advertisers more flexibility to
simultaneously manage ad campaigns on Google's AdWords platform and on rival
ad platforms; and to refrain from misappropriating online content from
so-called "vertical" websites that focus on specific categories such as
shopping or travel for use in its own vertical offerings.

"The changes Google has agreed to make will ensure that consumers continue to
reap the benefits of competition in the online marketplace and in the market
for innovative wireless devices they enjoy," said FTC Chairman Jon
Leibowitz."This was an incredibly thorough and careful investigation by the
Commission, and the outcome is a strong and enforceable set of agreements."

"We are especially glad to see that Google will live up to its commitments to
license its standard-essential patents, which will ensure that companies
willing to license these patents can compete in the market for wireless
devices," Leibowitz added. "This decision strengthens the standard-setting
process that is at the heart of innovation in today's technology markets."

Google is a global technology company with more than 32,000 employees and
annual revenues of nearly $38 billion. The FTC also conducted an extensive
investigation into allegations that Google biased its search results to
disadvantage certain vertical websites; and that Google entered into
anticompetitive exclusive agreements for the distribution of Google Search on
both desktop and in the mobile arena. The agency decided not to take action
in connection with these allegations.

"The evidence the FTC uncovered through this intensive investigation prompted
us to require significant changes in Google's business practices. However,
regarding the specific allegations that the company biased its search results
to hurt competition, the evidence collected to date did not justify legal
action by the Commission," said Beth Wilkinson, outside counsel to the
Commission. "Undoubtedly, Google took aggressive actions to gain advantage
over rival search providers. However, the FTC's mission is to protect
competition, and not individual competitors. The evidence did not demonstrate
that Google's actions in this area stifled competition in violation of U.S.
law."

In response to the agency's concerns about several of its business practices,
Google has agreed to take the following steps:

Google will not seek injunctions to block rivals from using patents essential
to key technologies

In 2012, Google paid about $12.5 billion to acquire Motorola Mobility (MMI),
including MMI's patent portfolio of over 24,000 patents and patent
applications. These patents have been a significant source of revenue for at
least a decade, and hundreds of MMI's patents are essential to industry
standards used to provide wireless connectivity and for internet-related
technologies. These standards are essential for smartphones, tablets, gaming
systems, operating systems, and the increasing number of devices offering
wireless connectivity or high definition video.

Development and use of these types of standards is a cornerstone for many
high-tech markets, and encourages innovation and investment in high-tech
products, according to the FTC's complaint. By agreeing to standards,
companies can ensure that the numerous components of a device or a technology
network can work together seamlessly, often called "interoperability."

Setting a standard, however, can have the effect of giving market power to the
owner of a patent that is deemed essential to the standard, according to the
agency. That patent – even if it is only on a small component of a much
larger and more complex device – can be used to "hold up" a licensee for an
excessive royalty. To avoid this problem, technology companies involved in
setting a standard commit to license standard-essential patents on "fair,
reasonable and non-discriminatory" terms – known as FRAND terms.

The Commission's complaint alleges that Google reneged on its FRAND
commitments and pursued – or threatened to pursue – injunctions against
companies that need to use MMI's standard-essential patents in their devices
and were willing to license them on FRAND terms. Specifically the company
pursued injunctions in federal district court and at the United States
International Trade Commission (ITC) to block competing technology companies
from using MMI standard-essential patents.

The FTC alleged that this type of patent hold-up is what the standard setting
organizations sought to prevent by instituting FRAND licensing requirements.
According to the FTC, if left unchecked, this type of patent hold-up can lead
to higher prices, as companies may pay higher royalties for the use of
Google's patents because of the threat of an injunction, and then pass those
higher prices on to consumers. This may cause companies in technology
industries to abandon the standard-setting process and limit or forgo
investment in new technologies, according to the agency.

To remedy this concern, Google has agreed to a Consent Order that prohibits it
from seeking injunctions against a willing licensee, either in federal court
or at the ITC, to block the use of any standard-essential patents that the
company has previously committed to license on FRAND terms.

Google will remove restrictions hampering advertisers' management of their ad
campaigns across competing ad platforms

Under a separate commitment, Google has agreed to remove restrictions on the
use of its online search advertising platform, AdWords, that may make it more
difficult for advertisers to coordinate online advertising campaigns across
multiple platforms.

Advertisers who wish to use a search advertising platform spend considerable
time, effort, and resources preparing extensive bids, including keywords,
price information, and targeting information. Once an advertiser has entered
the information necessary to create a search advertising campaign, the
advertising platform sends critical data back to the advertisers that they
need to evaluate the effectiveness of, and to further manage, their campaign.
Advertising platforms use application programming interfaces, known as APIs,
to give advertisers direct access to these advertising platforms so they can
develop their own software programs to automatically manage and optimize their
advertising campaigns.

Some FTC Commissioners were concerned that Google's contractual conditions
governing the use of its API made it more difficult for an advertiser to
simultaneously manage a campaign on AdWords and on competing ad platforms, and
that these restrictions might impair competition in search advertising.

Google will give websites the ability to "opt out" of display on Google
vertical properties

Under the same commitment, Google also has promised to provide all websites
the option to keep their content out of Google's vertical search offerings,
while still having them appear in Google's general, or "organic," web search
results. The FTC investigated allegations that Google misappropriated
content, such as user reviews and star ratings, from competing websites in
order to improve its own vertical offerings, such as Google Local and Google
Shopping. Some FTC Commissioners were concerned that this conduct might chill
firms' incentives to innovate on the Internet.

FTC's investigation into allegations of search bias

The FTC conducted an extensive investigation into allegations that Google had
manipulated its search algorithms to harm vertical websites and unfairly
promote its own competing vertical properties, a practice commonly known as
"search bias." In particular, the FTC evaluated Google's introduction of
"Universal Search" – a product that prominently displays targeted Google
properties in response to specific categories of searches, such as shopping
and local – to determine whether Google used that product to reduce or
eliminate a nascent competitive threat. Similarly, the investigation focused
on the allegation that Google altered its search algorithms to demote certain
vertical websites in an effort to reduce or eliminate a nascent competitive
threat. According to the Commission statement, however, the FTC concluded
that the introduction of Universal Search, as well as additional changes made
to Google's search algorithms – even those that may have had the effect of
harming individual competitors – could be plausibly justified as innovations
that improved Google's product and the experience of its users. It therefore
has chosen to close the investigation.

The Commission would like to acknowledge the close cooperation in this matter
with the European Commission's Directorate-General for Competition, and with
the state Attorneys General of Texas, New York, Ohio, California, and
Oklahoma.

The Commission vote to accept the consent agreement package containing the
proposed consent order relating to standard-essential patents (SEPs) for
public comment was 4-1, with Commissioner Maureen Ohlhausen voting no. The
vote to issue the Commission statement in the SEP matter was 3-2.
Commissioner J. Thomas Rosch issued a concurring statement regarding the SEP
matter; Commissioner Ohlhausen issued a dissenting statement regarding the
SEP matter. The Commission vote to close the investigation related to
Google's search-related practices was 5-0. The vote to issue the Commission
statement relating to the search investigation was 4-0-1, with Commissioner
Rosch abstaining. Commissioner Rosch issued a statement concurring and
dissenting with regard to the search investigation; and Commissioner Ohlhausen
issued a concurring statement regarding the search investigation.

The FTC will publish a description of the consent agreement package in the
Federal Register shortly. The agreement will be subject to public comment for
30 days, beginning today and continuing through February 4, 2013, after which
the Commission will decide whether to make the proposed consent order final.
Interested parties can submit written comments electronically or in paper form
by following the instructions in the "Invitation To Comment" part of the
"Supplementary Information" section. Comments in paper form should be mailed
or delivered to: Federal Trade Commission, Office of the Secretary, Room
H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC
is requesting that any comment filed in paper form near the end of the public
comment period be sent by courier or overnight service, if possible, because
U.S. postal mail in the Washington area and at the Commission is subject to
delay due to heightened security precautions.

NOTE: The Commission issues an administrative complaint when it has "reason to
believe" that the law has been or is being violated, and it appears to the
Commission that a proceeding is in the public interest. The complaint is not
a finding or ruling that the respondent has actually violated the law. A
consent order is for settlement purposes only and does not constitute an
admission by the respondent that the law has been violated. When the
Commission issues a consent order on a final basis, it carries the force of
law with respect to future actions. Each violation of such an order may
result in a civil penalty of up to $16,000.

The FTC's Bureau of Competition works with the Bureau of Economics to
investigate alleged anticompetitive business practices and, when appropriate,
recommends that the Commission take law enforcement action. To inform the
Bureau about particular business practices, call 202-326-3300, send an e-mail
to antitrust{at}ftc{dot}gov, or write to the Office of Policy and
Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey
Ave., Room 7117, Washington, DC 20580. To learn more about the Bureau of
Competition, read Competition Counts. Like the FTC on Facebook, follow us on
Twitter, and subscribe to press releases for the latest FTC news and
resources.

SOURCE Federal Trade Commission

Website: http://www.ftc.gov
Contact: Peter Kaplan, Office of Public Affairs, +1-202-326-2180, Cecelia
Prewett, Office of Public Affairs, +1-202-326-2180, Richard Feinstein or Pete
Levitas, Bureau of Competition, +1-202-326-2555
 
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