Google Said to End FTC Probe With Letter Promising Change

Google Inc. (GOOG) is poised to make voluntary concessions that will end a 20-month U.S. antitrust probe of its business practices without any enforcement action, two people familiar with the matter said.

Google, which has been under investigation by the Federal Trade Commission, is preparing a letter promising not to copy content from rival websites without permission and to allow advertisers to compare Google’s ad-campaign data with performance on other Internet search engines, one of the people said yesterday. That will close the investigation without a lawsuit or settlement, said the people, who asked not to be identified because the matter isn’t public.

An end to the probe without any enforcement action would be a blow to Google’s competitors including Microsoft Corp. (MSFT), Yelp Inc. and Expedia Inc., which formed an alliance to press the agency to act. They claim Google’s dominance of Internet search, combined with favoring its own services in answers to queries, violates antitrust laws and impedes competition.

“The notion of voluntary commitments is close to worthless,” said William Kovacic, a former FTC commissioner and chairman and a professor of law at George Washington University. “They are feeble policy-making instruments and they will not in any way placate the complainants, who will correctly see them for what they are, which is an attempt to provide cover to walk away.”

Photographer: Andrew Harrer/Bloomberg

Google will resolve a 20-month antitrust probe by U.S. regulators tomorrow with a voluntary agreement and a consent decree. Close

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Photographer: Andrew Harrer/Bloomberg

Google will resolve a 20-month antitrust probe by U.S. regulators tomorrow with a voluntary agreement and a consent decree.

Adam Kovacevich, a Google spokesman, declined to comment on whether Google is preparing to announce concessions or any matters involving the FTC. Cecelia Prewett, a spokeswoman for the FTC, also declined to comment.

Commission Vote

“We continue to work cooperatively with the Federal Trade Commission and are happy to answer any questions they may have,” Kovacevich said in an e-mail.

In another investigation of Google, the FTC will probably announce a consent decree this week that would limit the company’s ability to seek injunctions against competitors’ products that rely on so-called standard-essential patents, said the people. The decree would stop short of a complete ban on Google’s ability to seek court orders barring competitors’ products where the company has agreed to license the technology on “fair and reasonable terms,” the people said.

A majority vote of the agency’s five commissioners is required both to close the investigation into Internet search and to accept a consent decree on standard-essential patents.

Settlement Talks

Google has been engaged in settlement talks with the FTC for about two weeks, people familiar with the talks have said. The Mountain View, California-based company has resisted the FTC’s efforts to reach a formal settlement agreement over allegations that it skews search results to favor its services, saying such an agreement may hurt its business prospects, said the people.

“Enforcement authorities should not allow Google to retain an unfair advantage in the market gained through years of anti- competitive behavior,” Fairsearch.org, the alliance that includes Microsoft, said in an e-mailed statement yesterday. “If the FTC fails to take meaningful action after a nearly two- year investigation, Google will only be emboldened to act in ways that are more harmful to consumers and innovators.”

Fairsearch.org claims that Google puts its own restaurant reviews, maps and shopping services at the top of the results page and that the first three answers to a query garner 88 percent of users’ clicks.

Favored Services

“At a minimum, if the government is going to concede that the practice isn’t unlawful, it should make it clear that Google is favoring its own services,” said Gary Reback, an antitrust lawyer in Menlo Park, California, who represents companies that have complained about Google’s practices.

Google’s position, made publicly by Executive Chairman Eric Schmidt during a Senate Judiciary antitrust hearing in September 2011, is that its rankings help consumers who seek the best direct answer to a query rather than links to other information sources.

“Our challenge is to return the most relevant answers first,” Schmidt said at the hearing. “This means that not every website can come on top.”

Reback criticized the FTC’s investigation, saying that many of his clients, which include NexTag Inc. and other shopping- comparison websites, received no follow-up questions, including about the anticompetitive effects of Google’s practices.

Under Pressure

The agency has been under pressure to extract concessions from Google after winning a battle with the Justice Department’s antitrust division over which regulator would probe the world’s most popular search engine.

“If there’s no antitrust case, the right thing to do is to walk away,” said Kovacic. “The agency set high expectations and gave signals they were going to do something bold. They painted themselves into a corner,” he said.

It’s unlikely the antitrust division of the Justice Department would take up the investigation after an FTC decision, he said.

Google also is in discussions with European Union officials to resolve their antitrust concerns. Those include Google ranking its services higher than rivals’ offerings in search results, copying competitors’ Web content, and making agreements with websites and developers that stifle competition in the advertising industry.

The attorneys general of some states, including Texas, California, New York and Ohio, have also been investigating Google’s practices in Internet search.

To contact the reporter on this story: Sara Forden in Washington at sforden@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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