The U.S. Federal Trade Commission is considering a broad antitrust investigation into Google Inc.’s dominance of the Internet-search industry, two people familiar with the matter said.
Before proceeding with any probe, the FTC is awaiting a decision by the Justice Department on whether it will challenge Google’s planned acquisition of ITA Software Inc. as a threat to competition in the travel-information search business, said the people, who spoke on condition of anonymity because the matter is still confidential.
An FTC investigation of Google, the world’s most popular search engine, “could be on par” with the scope of the Justice Department’s probe of Microsoft Corp. a decade ago, said Keith Hylton, an antitrust law professor at Boston University School of Law. Google “could fight the FTC, but that’s going to cost a lot of money and time.”
The FTC and Justice Department share responsibility for oversight of antitrust enforcement, and the outcome of the ITA deal may determine whether the two agencies will vie for control of a broader probe of Google, the people said. The two agencies sometimes negotiate which will handle major antitrust investigations, with the decision turning on their respective expertise.
The Justice Department may soon announce its decision on Google’s purchase of ITA, said the people familiar with the matter.
FTC Commissioner Thomas Rosch said in an interview last month he supported a probe of the dominant players in the Internet-search industry, without specifying which companies. Rosch, one of two Republicans on the five-member commission, is the only commissioner to say publicly that such an investigation is in order.
The people familiar with the matter said any investigation of the search industry should concentrate on Mountain View, California-based Google, owner of the world’s most popular search engine.
If consumers don’t like what the company is doing, they can switch to another search engine, said Adam Kovacevich, a Google spokesman.
“Since competition is one click away on the Internet, we work hard to put our users’ interests first and give them the best, most relevant answers to their queries,” he said in an e-mail. “We built Google for users, not websites.”
Google fell $18.59, or 3.2 percent, to $569.09 in Nasdaq Stock Market trading in New York.
Texas and Europe
Cecelia Prewett, a spokeswoman at the FTC, and Gina Talamona, a Justice Department spokeswoman, declined to comment.
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.
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.
The state of Wisconsin is weighing an examination of Google’s bid to buy Cambridge, Massachusetts-based ITA, which provides data for airline ticket fares to online travel sites, according to a person familiar with the matter.
Lawmakers including Senator Mike Lee, a Utah Republican, and Senator Richard Blumenthal, a Connecticut Democrat, have urged the Senate Judiciary subcommittee on antitrust to hold a hearing on Google’s dominance of Internet businesses.
Herb Kohl, the Wisconsin Democrat who heads the panel, has said he’s examining Google.
“An investigation is long overdue,” said Gary Reback, an antitrust lawyer with Carr & Ferrell LLP in Menlo Park, California, who represents companies that have complained about Google to regulators here and in Europe. “Every day there are companies who are being hurt by Google’s anticompetitive behavior and we still have arm-wrestling going on in Washington,” he said in an interview yesterday.
It isn’t known whether the Justice Department or the FTC would handle such an investigation because both agencies could claim experience in reviewing Google’s businesses, said Robert Lande, a law professor at the University of Baltimore.
The FTC gained knowledge of Google’s inner workings during its review of the company’s $750 million purchase of AdMob Inc., a mobile ad service. The agency approved that acquisition last year.
In 2007, the agency approved Google’s acquisition of DoubleClick Inc., an online advertising company.
The FTC has been bolstering its expertise in technology and the internet. Chairman Jonathan Leibowitz appointed Edward Felten, a Princeton professor known for cracking the music industry’s digital-copyright protection code, as the agency’s chief technologist in November.
Columbia Law School professor Timothy Wu, the author of “Master Switch,” a book about the consolidation of information industries, was appointed senior adviser in February to study consumer protection and competition issues that affect the Internet and mobile markets. Wu coined the term ‘net neutrality,’ which advocates no restrictions on content, sites, platforms or kinds of equipment.
Allegations of Deception
It’s possible the FTC, which handles consumer-protection issues, could begin a probe examining allegations of deception by Google, expanding it into a broader antitrust investigation, Lande said.
On March 30, Google agreed to settle FTC claims that it used deceptive tactics and violated its own privacy policies when it introduced the Buzz social-networking service last year.
Last month, Rosch said if the FTC opens an investigation into the search industry and decides to bring a case, it could rely on powers it used to reach a settlement with Intel Corp. last year.
In the Intel case, the FTC invoked Section 5 of the law that established the agency in 1914 to challenge “unfair or deceptive” practices, going beyond what is specifically banned by other federal antitrust statutes.
The use of Section 5 and FTC’s ability to handle its cases through its own administrative processes rather than necessarily going to court, as the Justice Department must, would make it easier for the FTC to pursue Google, said Herbert Hovenkamp, a professor at the University of Iowa College of Law.
The Justice Department also has experience in scrutinizing Google’s business practices.
Since July, the Justice Department has been reviewing Google’s planned acquisition of Cambridge, Massachusetts-based ITA.
As part of that review, the department may decide to impose restrictions on Google, approve the deal outright or challenge it in court, Lande said. The department also could decide to file a broader antitrust case, making an FTC probe unnecessary, although Lande said that was “very unlikely.”
The department in November 2008 threatened to sue Google over its planned alliance with Yahoo! Inc. Google scrapped an agreement to place ads on Yahoo.
“When Microsoft was really dominating the market, Google was complaining there was a violation of the antitrust law,” said Christopher Tang, a professor of business administration at the University of California at Los Angeles. “And now Google is becoming more dominant in the search space, and people are concerned Google is entering too many market places.”