Google Probe Said to Be Focus of Calls to Companies by FTC

The U.S. Federal Trade Commission is preparing an investigation of Google Inc. (GOOG)’s dominance of the Internet search industry by alerting high-tech companies to gather information for the probe, three people familiar with the matter said.

The agency told the companies that it plans to issue so- called civil investigative demands for the information, said the people, who requested anonymity because the FTC hasn’t made the matter public. The demands are similar to subpoenas.

The FTC, which has been considering a broad investigation, waited until the Justice Department concluded its own review of Mountain View, California-based Google’s acquisition of ITA Software Inc., two people familiar with the matter said earlier this month. The Justice Department on April 9 approved Google’s $700 million purchase of ITA on the condition it makes travel data available to search-engine rivals and lets the government review complaints that it’s acting unfairly.

An FTC investigation “has the potential to be very significant,” Eleanor Fox, a law professor at New York University, said in an interview. “It could be ‘Google as the next Microsoft’,” Fox said, referring to the Justice Department probe and lawsuit settlement involving the Redmond, Washington- based software maker.

The final judgment in the Microsoft case expires next month.

A Google spokesman, Adam Kovacevich, declined to comment. Cecelia Prewett, an FTC spokeswoman, also declined to comment, saying that she doesn’t confirm investigations.

Google is facing growing scrutiny from regulators as it bolsters its search business. Officials in Texas and the European Commission have started investigations into Google’s search dominance, while Ohio Attorney General Mike DeWine is considering such a probe.

Difficult Case

It may be difficult for the FTC to build a case against Google’s search business, said James Grimmelmann, an associate professor of law at New York Law School who specializes in Internet law.

Google has taken the market share it has “because their search results are better,” he said in an interview.

Still, federal investigators may find violations in how Google has tried to use its clout to gain an upper hand in new markets, he said.

“They’re doing stuff to try to take control of markets” that may be fodder for an FTC antitrust lawsuit, he said.

Cell Phone Location

Grimmelmann pointed to a lawsuit in Massachusetts state court by Boston-based Skyhook Wireless that alleges Google pressured Motorola Inc. and other Skyhook customers not to use the company’s software for pinpointing a cell phone’s location.

Google makes a product that competes with Skyhook’s.

The FTC in February hired Timothy Wu, an information industries scholar, who said in an interview last week that dominant Internet companies should be barred from monopolizing more than one market.

The FTC also recently tapped Edward Felten, known for cracking the music industry’s digital-copyright protection code, to be the agency’s technology chief.

Thomas Rosch, a Republican who is one of five FTC commissioners, said in an interview last month he supported a probe of the dominant players in the Internet-search industry, without specifying which companies.

Rosch is the only commissioner to say publicly that such an investigation is in order.

Antitrust Subcommittee

U.S. Senator Herb Kohl, the Wisconsin Democrat who heads a Judiciary antitrust subcommittee, has said he will examine Google’s business practices. Senator Mike Lee of Utah, the panel’s senior Republican, has called for hearings.

Microsoft Corp. (MSFT), Kayak.com, Expedia Inc. (EXPE) and other Google competitors banded together as FairSearch.org to oppose the acquisition of ITA, which makes software that provides data for online travel sites such as Orbitz Worldwide Inc. (OWW) They said the deal would reduce competition and called on the Justice Department to impose conditions for the transaction.

An FTC investigation of Google “is long overdue,” said John Simpson, consumer advocate at Santa Monica, California- based Consumer Watchdog.

“Google is the Standard Oil Company of this century,” said Simpson, who’s called for Google’s breakup, in an e-mailed statement.

The EU probe is examining whether Google discriminated against other services in search results and stopped websites from accepting rival ads. A complaint from Microsoft last month may expand the investigation to online video and mobile phones.

To contact the reporters on this story: Sara Forden in Washington at sforden@bloomberg.net; Jeff Bliss in Washington at jbliss@bloomberg.net.

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Mark Silva at msilva34@bloomberg.net.

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