Accordingly  we have launched an interactive public docket (IPD), OIRA Watch,  aimed at demonstrating the need for OIRA to act on particular issues of interest.

The impact of any “Watch” site is heavily depending upon the credibility of its sponsor; please view CRE’s credentials, giving particular attention to the information contained in this link.

From: Huffington Post

by Nathan Newman, Founder, Tech-Progress.org

Facebook this past month agreed to twenty years of independent audits of its privacy practices, joining Google which agreed earlier this year to similar audits following its breaches of user privacy when it introduced its aborted Buzz social network.

As this piece outlines, the audits should be moderately extensive in examining how consumers’ personal information is being used internally at these companies — how it’s aggregated or repurposed — and when it’s being shared with third parties (such as advertisers). “Problems that come out in audits could be costly — $16,000 per violation per day, if the FTC decided to pursue the fines in court.”

So far all to the good, but the problem is in the “if” the Federal Trade Commission (FTC) decides to pursue the problems. Where will the public pressure be on the regulators to pursue problems? As we saw in the financial crisis, without pretty broad public scrutiny of the regulators themselves, you often don’t get the vigilant regulation needed to restrain corporate malfeasance.

The Audits Won’t be Fully Public: And here’s the big problem with these privacy audits. When they were first being discussed, consumer groups like the Electronic Privacy Information Center (EPIC) asked that any audits be made public. The response from the Federal Trade Commission was not encouraging. They told the groups the audits would not be published but “the public may have access to the submissions required pursuant to the order” using tools like the Freedom Of Information Act (FOIA). Having to jump through bureaucratic hoops to get the information is bad enough, but the real kicker is in the “may” in that sentence, since the FTC writes:

In some cases, these documents may contain trade secrets or other confidential commercial or financial information, or information about consumers or other third parties, that would be exempt from public disclosure. Accordingly, as provided by statute, companies may request confidential treatment for these documents or portions of these documents under Commission procedures. Upon receipt of such a request, the Commission conducts a review to determine whether confidential treatment is warranted.

So the company may be using innovative strategies to violate consumer privacy and will demand that the FTC hide those methods from the public by deeming them “trade secrets.” The joke here is that these companies are systematically violating consumer privacy but are demanding secrecy for the regulatory review of those violations.

I’m sure that companies would love to deem a lot of financial information required in Securities Exchange Commission (SEC) filings to be “trade secrets” but thank god the SEC disclosure laws were written before companies had mastered the art of suppressing government information they don’t want public.

Google’s Track Record of Evading Public Accountability: This suppression of information companies don’t want public, especially by tech companies like Google, has become all too common. A recent report by the Reporters Committee for Freedom of the Press, Uncivil Secrecy, detailed the rising problem of Google in particular getting information arising from litigation in the courts suppressed:

far from making its own legal documents “universally accessible,” Google routinely uses overly broad requests to seal court filings, according to critics, in apparent contravention of its commitment to the public interest in the free flow of information…Google’s use of sealing requests to suppress information contained in court documents it files is remarkable — both in the frequency with which the company makes such requests and the material underlying them.

The report cites multiple examples of the company trying to suppress evidence of alleged illegal practices revealed during court proceedings. Courts too often agree to companies like Google seeking to seal such court record. Paul Alan Levy, an attorney for Public Citizen which has regularly litigated to open up such corporate information to the public, argues, “The effect is the removal of an important check on the accountability of courts and lack of understanding about why courts make the decisions they do.”

Allowing the FTC to leave potentially large portions of any privacy audits of Google and Facebook secret will similarly remove accountability not just for those companies but for the regulatory agencies themselves, since the public will not know whether lack of action is due to the agency finding no real privacy problems or because the agencies are too cozy with the companies they are regulating.

Ever Expanding Corporate Surveillance Requires Openness of Those Company’s Privacy Policies: The need for publicly available audits of companies’ privacy actions is becoming all the more important as those companies know almost everything about consumer activities. Just last week, Google announced it will soon start offering one-day shipping for merchants it works with on online commerce.

Taking control of a large portion of e-commerce delivery will allow Google to harvest a massive new amount of data about consumers to feed Google’s datamining efforts and behavioral profiling of consumers. Google will be able to track consumers from initial search for an item to finding a merchant to deciding to purchase the item to where the item is delivered, how it is paid for and track an aggregation of all sales going through its system. Google will have data about the whole consumer cycle of consumerism — the holy grail of the advertisers from which the company makes its money.

Whether consumers will ultimately benefit from such a move is an open question — especially if it just reinforces Google’s monopoly dominance in more sectors and undermines e-commerce innovation — but the only way the public will have any clue whether company profits are just coming at the expense of their privacy is if the privacy audits of the company’s actions are public available.

If Google wants to have the role of trustee of more information about more people than any other company and even more information in many areas than government has, then it should accept in turn public scrutiny of its actions as well.

Google and Facebook have both promoted the idea that society benefits from more openness and sharing. Sharing the full results of their privacy audits is a good way to practice what they preach about openness. More broadly, as the FTC and DOJ move forward on a range of privacy and antitrust investigations, we should expect far more public disclosure of their decision-making and what those investigations are revealing about consumer rights in the age of ever increasing corporate surveillance.

Editor’s Note:  The complaint discussed below appears, based on the article, to be an attempt at rent-seeking.  The Economist describes rent-seeking as “Cutting yourself a bigger slice of the cake rather than making the cake bigger. Trying to make more money without producing more for customers. Classic examples of rent-seeking, a phrase coined by an economist, Gordon Tullock, include: … lobbying the GOVERNMENT for tax, spending or regulatory policies that benefit the lobbyists at the expense of taxpayers or consumers or some other rivals. Whether legal or illegal, as they do not create any value, rent-seeking activities can impose large costs on an economy.” [Emphasis added]

From: WebProNews

ShopCity the latest to call Google anticompetitive

ShopCity.com, a network of local shopping sites, has filed an antitrust complaint with the Federal Trade Commission against Google. The company shared a copy of the complaint with us. It says:

For most of its existence, ShopCity’s growth has been thwarted by unjustified Google penalties and anticompetitive Google prefacing. These matters were realized in writing with the Commission staff months ago, but the staff has not followed up in any respect.

It goes on to talk about how Google has been engaging in anticompetitive tactics since 2006, and that a number of injured vertical competitors have complained, but none have “received a CID or any other compulsory process necessary for a serious investigation.”

It then goes on to talk about Google penalizing Foundem and JC Penney in different ways, with Foundem getting worse treatment because of being a vertical competitor. More on the Foundem and JC Penney stories here and here respectively.

“The yawning chasm between the reality of Google’s penalty conduct and the pretense of Google’s public proclamations of no manual intervention demanded some further explanation and Google tendered an explanation of sorts shortly thereafter,” the complaint reads. “Matt Cutts, head of Google’s web spam team, acknowledged that the company had a program for imposing manual penalties and conceded that Google also released such penalties manually. Most manual penalties expire in thirty days, Cutts asserted. Google also imposed algorithmic penalties, Cutts said, which the company would not release manually. Cutts gave no explanation as to why Penney suffered a penalty of only a few weeks for blatantly cheating in a way that hurt consumers, while Google’s competitors like Foundem languished in the ‘penalty box’ for years for no transgression other than competing against Google.”

It goes on to talk about Google launching Universal Search, pulling in results from its various verticals into the main results, the famous Yelp complaints, and things of this nature.

All of this appears to be aimed at establishing Google’s alleged history of anticompetitiveness, something that has also been a topic of discussion in the Senate.

At its core, the main direct complaint appears to be that Google places its own results above ShopCity’s. “Based on relevance and quality, a ShopCity listing (for, say, a plumber in Midland) might rank near the top of search results (Because of Google’s preferencing, ShopCity could place no higher than the slot behind all of Google’s preferences listings.),” the complaint says. “But Google then took the extraordinary step of dropping all of ShopCity’s listings, generally to the fifth page of search results or beyond, relevance notwithstanding, where few users would ever find them.

Interestingly, when I perform a search for “plumber in midland” I don’t see any Google results whatsoever. Here’s what I see:

The same search on Bing actually does place Bing’s own local results above all else, despite the complaint saying, “Contrary to recent bleating by Google apologists who claim that other horizontal search providers also preference their own vertical offerings, Microsoft and Yahoo rarely placed their own captive local search results at the top of the page ahead of a ShopCity listing.

It’s a similar story with Yahoo:

To be fair, this is only one example (I’m sure there are indeed instances where Google puts its own results above ShopCity’s).

Bloomberg shares a quote from Google about ShopCity. A spokesman is quoted as saying, “This company was violating Google’s guidelines against duplicate and auto-generated content — which our users tell us they don’t like. We twice offered the company advice on how to improve their websites.”

Clearly, ShopCity doesn’t feel it’s getting the RESPECT it deserves from Google.

More specifically we are of the view  that:  whether a two-sided market behaves like a monopolistic market, a competitive one, or something altogether  different depends in large part on the homing properties of its users; we are of the view that symmetric single homing markets exhibit monopolistic properties and  asymmetric  multi-homing markets come across very competitive.

If we are correct, then it is imperative that the FTC examine the unique properties of two -sided markets prior to initiating enforcement action in these markets. Failure to do so will bring about the dire consequences predicted by Professors Evans and  Schmalenesse:

Antitrust analysis, tools, and techniques require modification when two-sided platforms account for a significant portion of supply. Failure to account for the consequences of interlinked demand between the two sides can lead antitrust analysis into serious error.

For these reasons we believe it imperative that the FTC conduct an open forum on two-sided markets to allow the public and stakeholders to express their views on this important  matter.

The public is also encouraged to express their views in the space provided below.

Source: Center for Regulatory Effectiveness

              Washington,DC.

In the end, reviewing the report is frustrating. There are serious industry-wide issues about how consumers interact with search engines. There are also serious concerns about what rights publishers should have in regards search engines. These, among others, deserve serious attention. These are also rarely Google-specific issues.

CRE agrees these issues are not unique to Google, thus the need for the FTC to adopt the CRE petition asking  for establishment of the standards for reviewing the matter.

Oct 11, 2011 at 9:36pm ET by Danny Sullivan

FairSearch, a group of search companies including Microsoft which lobbies that Google is too dominant, has sent a white paper outlining its anti-trust concerns about Google to the 50 state attorneys general in the US. Below, a review and some fact checking of the paper.

You’ll find the paper here, if you wish to read it directly. I’ve had a run through today (it’s long, 44 pages) and some email exchanges with FairSearch spokespeson Ben Hammer. Here’s my take so far.

Google & The Monopoly Question

The first 10 pages are generally devoted to saying that search is important and that Google has either monopoly power or is dominant in the area. Google would disagree with neither of these conclusions.

In the US Senate hearings, even Google chairman Eric Schmidt agreed that Google had such dominance as to be deemed having monopoly power, which means it it has to exercise special care not to be seen as abusive, a limitation its competitors don’t have to worry about.

For example, much of of the wrong-doing Google gets accused of, such as how it positions its vertical search results, it done identically by its rivals Yahoo and Microsoft. But because of Google’s large market share, conceivably these identical things could be ruled as abusive.

For the record, Google has said that it doesn’t view that it has done anything abusive, and that while it recognizes special care is one of its responsibilities, it feels it has been taking that care.

No One Can Scale To Beat Google?

FairSearch sees things differently, of course. But it’s not until around page 14 that it really starts getting into the detailed accusations, I’d say. It starts out with this:

The inability of Ask.com to survive in the search market underscores the role of scale as a barrier to entry in search. IAC/InterActiveCorp (IAC) paid $1.85 billion to acquire the company in 2005, and thereafter invested heavily to transform Ask.com into an algorithmic search engine competing in the same market as Google. Yet Ask.com was never able to obtain the necessary scale to challenge Google, handling only about 4% of searches in the United States. 

As Doug Leeds, President of Ask.com explained when Ask.com ended its search operation in November 2009, the company “did a great job of holding our market share but it wasn‟t enough to grow the way IAC had hoped we would grow when it bought us.”

Well, Blekko would beg to disagree. Blekko launched last year to compete against Google. OK, it hasn’t won any significant market share to speak up, but clearly competitors can enter the space.

One of the member companies of FairSearch would also disagree, that of Microsoft. The whole point of the Microsoft-Yahoo deal, as it was pitched to investors over and over again, was that it would provide the scale to compete with Google.

Keep in mind that when Google launched, Microsoft and Yahoo both had far more scale than Google did. Somehow, Google managed to grow. Maybe the scale argument isn’t as strong a barrier as it’s made out, something that Google’s said about that in the past.

Vertical Search Engines Depend On Google?

The paper goes on to the important role that Google plays in supporting vertical search engines — or suppressing them — or both:

No vertical site, standing alone, presents a challenge to Google‟s general search dominance. Indeed, vertical sites largely depend upon Google for traffic. Most users don‟t navigate directly to vertical sites; instead, they get to the sites via Google‟s search engine…. 

Taken together, vertical search and other specialized information sites have the potential to attract significant search traffic– and thus advertising revenue–away from Google. They are also a source of innovative services and functionality that consumers find attractive. And, one or more vertical search sites could develop over time into a more significant platform to challenge Google‟s general search dominance.

Here, I can do nothing more than sigh. I have huge amounts of sympathy for a search engine like Yelp. Its CEO Jeremy Stoppelman came across as the most likable, and most hard-done-by person speaking at the Google hearings, on his worries about what Google might do to his company.

But let’s get this straight. These vertical search engines are so great, but yet they depend on Google for their traffic? It’s like saying that Comedy Central is upset that NBC is running promos for its Saturday Night Live comedy show on NBC and not Comedy Central’s own The Daily Show.

Sound absurd? It gets worse. Really, it’s more like Comedy Central complaining that NBC isn’t running enough free ads for The Daily Show on its network, even though NBC already runs so many free ads that the majority of people who tune into The Daily Show do so after NBC tells them to change channels and watch The Daily Show.

Stoppelman testified that Yelp gets 75% of its traffic from Google. 75%! For free, by the way. How on earth does anyone argue that Google has been and currently is harming a vertical search engine like Yelp when it sends that much traffic? I know plenty of sites that wish Google would “harm” them in the same fashion.

By the way, in the same hearing, NexTag — a shopping search engine — argued that it was successful as “one of the biggest companies no one has heard of” because it was good at having “perfected the Google platform.”

Crazy, right? They argue they have no brand, but also that they have a brand that’s being harmed by Google, despite them having perfected getting Google to send them traffic. It all makes no sense.

Google Went All Vertical!

Next, we get this statement:

Google has not been blind to the threat of vertical search engines. In fact, to address the MapQuests, Yelps, and Amazons of the world, Google has changed its entire business approach. Back in the early 2000s, Google was a general search engine that sought to direct users to the sites that were most likely to answer their queries. And because Google’s business was dedicated to search, it had no incentive to skew its results based on an ulterior economic interest. Take a look at Google in 2001:

That screenshot, by the way, FairSearch told me came from the special Google 2001 simulator that Google ran for its 10 year birthday. It didn’t. It actually came from our article about the simulator, which featured a screenshot of how Google actually looked back then, as drawn from my personal files. No, we weren’t credited. That’s ironic for a report that repeatedly attacks Google over allegedly using content without permission.

Google Didn’t Start The Vertical Fire

Now, I have a big perspective piece that I’m trying to finish, with a working title of something like “How Google Shot Itself In The Foot With Universal Search.” The point is that somehow over the last few years, the idea that Google having suddenly launched vertical search has been positioned as some type of new thing, something that a search engine shouldn’t do and that somehow Google either launched or was unusual in doing.

It’s not. It’s not even a Google thing. We had vertical search offered by general purpose search engines since, well, how about AltaVista in 1998:

Oh dear. Look at that. AltaVista offering people search, maps, stock quotes, entertainment search, job search. And it was so big! How could a little search engine like Google ever emerge to challenge it, especially when all the vertical entry points were already locked up.

Here’s Lycos, circa 2002, suggesting that people try its News and Shopping search through tabs:

Here’s Yahoo shoving in links to its Shopping and Auctions areas at the top of the page, in 2002:

It was common for general purpose search engines to have vertical search engines before Google was on the scene. All Google has done is follow what the industry leaders before it did. Those leaders include Microsoft, which has operated a search engine since 1997 and at times one with more share than Google.

For more about this industry-wide evolution to blend vertical search results into general search results — and why it’s something consumers needed — I’d really encourage you to read this past piece from me:

• Search 3.0: The Blended & Vertical Search Revolution

Let’s Talk Disclosure

Next, we get this about whether Google is doing disclosure properly. I’m going to bold a key point:

Google‟s first big shift in incentives came when it introduced search advertising. Once Google entered the search advertising market, it had an incentive to steer people to “paid” links in which Google has an economic interest. But even with this new incentive, two forces held Google in check. First, search engine competition restrained Google from degrading the user experience by leading users to paid links. If Google returned poor search results, users would have used another search engine, like Altavista or Yahoo!. Second, consumer protection concerns forced Google to disclose its economic interests in those links, which led to the separation of and notice of “sponsored” or “paid” advertising links on the search page. 

Where it once sought to direct users to web pages as quickly and efficiently as possible, Google now seeks to steer users to its own websites and to prevent users from going to competing websites. And where it once pointed users in the direction of the information they wanted, Google now attempts to provide that information directly to its users – even sometimes when that information was developed by others and does not belong to Google.

The FTC introduced those “consumer protection concerns” about how paid ads should be labelled back in 2002. Google wasn’t “forced” to do any changes because of them. Actually, FTC representatives praised Google, as I wrote then:

In talking with the principal staff members who authored the recommendations, FTC attorneysBeverly Thomas and Dean Forbes, they were extremely reluctant to say which search engines they think have the format for paid placement “right.” 

Indeed, as we shall see, the FTC is explicitly trying not to impose a “one size fits all” solution on the search engines, because they all have their own unique ways of presenting information.

Nevertheless, both indicated that personally — not speaking with an official commission viewpoint — they especially like the way Google has handled the situation with paid placement. Google’s paid results are placed in visually distinct colored boxes, separate from the main editorial results. Moreover, they are listed in close proximity to the labels “Sponsored Link” or “Sponsored Links.”

Let’s Talk Recirculation

As for the charge of not sending people away from Google, with all that color-coding, look at this:

What am I missing that Google is doing that Bing is not? At best, you can argue that Bing is showing two additional “free” listings “above the fold” because Google has an extra ad above and that those ads are larger in nature. Of course, trust me, Bing wishes it had more ads to show. So does Yahoo.

Then again, the blue “Google News” items that FairSearch colors to make you think are somehow driving people back into Google don’t actually do that. Each of the links under the “News for casinos” heading drives people away from Google, to news sites themselves.

Over at Bing, the “Listings for Casinos” section that’s shown in blue does the opposite, drives people back into Bing, rather than to the actual places that are listed.

Bottom line. If FairSearch-backer Microsoft is doing the things that FairSearch is upset with Google about, all that seems to demonstrate that Google is following industry practices.

NexTag, Paid Inclusion Disclosure & Irony

Google also gets called out by FairSearch for just saying “ads” rather than “sponsored links.” That’s exactly what Bing does.

Beyond labeling ads, the FTC guidelines from way back also had a specific requirement for disclosure of paid inclusion. I’ve written about this in relation to Google in the past:

• Google Experiments With Paid Inclusion & Does “Promoted” Meet FTC Guidelines?
• Google Blurs The Line Between Paid & Unpaid Results Again

Google has denied, in the past, that there’s any paid inclusion disclosure issue happening or that it does paid inclusion at all. In fact, it was because of Google’s strong stance against paid inclusion that the entire industry dropped the practice, at least the big search engines.

What was paid inclusion? Let’s go to those FTC guidelines:

Paid inclusion can take many forms. Examples of paid inclusion include programs where the only sites listed are those that have paid; where paid sites are intermingled among non-paid sites; and where companies pay to have their Web sites or URLs reviewed more quickly, or for more frequent spidering of their Web sites or URLs, or for the review or inclusion of deeper levels of their Web sites, than is the case with non-paid sites…. 

In short, through the use of clear and conspicuous disclosures, consumers should be able to easily locate a search engine’s explanation of any paid inclusion program, and discern the impact of paid inclusion on search results lists. In this way, consumers will be in a better position to determine whether the practice of paid inclusion is important to them in their choice of the search engines they use.

This leads me to NexTag. It’s not a FairSearch member, but it was called to testify at the US Senate hearing, and what it testified broadly matches the themes that FairSearch pushes about Google somehow hurting vertical search engines.

Listing 1000s Of Merchants For Free Is Wrong?

NexTag argues that Google directs people to its own product search service, rather than to NexTag, and therefore NexTag is harmed from traffic is apparently is entitled to. In fact, NexTag said that if it tried to launch today, it would get so little traffic as to not be viable.

This matches up to what FairSearch argues. In particular, FairSearch is pushing in the report (and in this blog post) that Schmidt somehow mislead senators in the hearing by saying that Google Product Search doesn’t lead to merchants.

It was an argument Schmidt made to explain that product search doesn’t only benefit Google but also benefits thousands of merchants. Google argues that it refers searchers to its own product search, where they can search and exit Google to merchants across the web.

Let’s say Google changed things. Let’s say Google dropped its own shopping search engine entirely, allowing even more people than already find NexTag to get there. They’d do a search at NexTag and go to merchants that are listed in that search engine.

And how do merchants get listed in NexTag? You pay. You pay, or you don’t play.

NexTag doesn’t disclose this in an easy way for consumers to locate, as the FTC guidelines require. There’s nothing on the help page about it, unless you were a savvy enough consumer to go past the topics written explicitly for shoppers and instead read the seller information and figure this out.

In other words, NexTag thinks that Google is unfairly not sending even more people to its service than it already does, where it can find products from merchants who only appear if they agree to pay, rather than letting people search at Google using Google’s own product search, where merchants aren’t charged to be listed at all.

I haven’t gone through all the FairSearch partners to see if they’re doing paid inclusion disclosure properly. I can tell you that in the vertical search space, I’ve found it’s often the case that the required disclosure isn’t done. If FairSearch is going to be pushing on Google about disclosure, its partners better take a hard look to make sure they meet the already existing requirements out there. Those requirements are for all search engines, not just the big search engines.

Some Sympathy On Local

Of all areas where Google has come under fire, it has been about local listings where I’ve felt the most sympathy for vertical search engines who feel Google’s harming them. You can understand why with this section from the FairSearch report:

Google understands that users are drawn to the search results in the top-left hand corner. Consequently, Google displays many of its own pages at the top or in the middle of the results page as if they were natural search results, without clearly identifying them as Google results. Consider a search on Google for “New York Hotels”:  

As the screenshot shows, not a single organic search result appears in the area above the fold. Instead, Google ensures that links to its own sites and other sponsored links are placed at the top-left– even when rival verticals are more relevant to users‟ queries. As a result, competing sites lose a significant amount of traffic and revenue because independent organic results are not shown to users.

There’s a lot of space devoted to Google Places, which in turn — until recently — compiled much information from other review sites and suggested that it was all or nothing. If Google couldn’t summarize their reviews, they couldn’t be included in Google at all.

That’s wrong, in my books. Each vertical search engine that Google runs should have its own blocking mechanism. If you want to be in Google Web Search, but not in Google News or Shopping or Places, you should be able to be selective.

Google appears to be cleaning up its act here, and that’s good. But also, let’s look at that search again from FairSearch above, this time side-by-side with Bing:

What I’ve done is highlight anything that leads back into either search engine with yellow, anything that’s an ad in red and anything that leads outbound in green.

This is exactly the same search that FairSearch did. The only difference is that I’ve illustrated, as they did not, that many of those links in the Google Places section don’t actually flow all back to Google.

And Even More Allegations

There’s even more to the report, including:

Google said to be hard-coding shortcuts to its shopping search engines, even though these OneBox units — as any good SEO knows — actually float around in various positions on the page. Sometimes, they don’t show at all.

Google is said to be including reviews from local sites like TripAdvisor or Yelp without permission, with proof of this being older screenshots that don’t reflecting the changes that were made in June, which drops content from these sits.

Google does deals to secure being the default provide in browser and phones (Bing and Yahoo do the same)

Google prevents Google Search from being removed from Android phones through its Android compatibility program. The exact quote:

Google protects this dominant position by making it very difficult for mobile operators to remove Google search from Android phones. The principal way that Google has closed and controls the Android platform is via its “compatibility program,” a set of technical requirements imposed by Google.

There are some serious allegations about Google preventing the Skyhook location service from being used, with a compatibility excuse. But I have never, ever heard of an issue being related to Google Search. I’ve personally used devices that were stripped of Google to use either Yahoo or Bing, such as the Samsung Fascinate.

Allegations Are Exhausting

In the end, reviewing the report is frustrating. There are serious industry-wide issues about how consumers interact with search engines. There are also serious concerns about what rights publishers should have in regards search engines. These, among others, deserve serious attention. These are also rarely Google-specific issues.

But reports like these, which are full of exaggerations, half-truths and mistakes rob from that attention. This report, as well as FairSearch overall, seems designed solely to target Google no matter what it takes, no matter what tall tales need to be told.

I find that bizarre, that all this attention seems to be revolving around a tiny number of companies that feel Google is somehow being anti-competitive toward them, rather than around the literally millions of companies that rely on search engines of all shapes and sizes that deserve protection from the search engine industry as a whole.

Should any shopping search engine, that presents itself as a shopping search engine, include any merchant or only those who pay?

Should any local search engine, which ultimately depends on the businesses it lists, have an obligation to let those businesses opt-out of being review or have a guaranteed say on their pages, without concerns of being pressured to buy ads?

Should any search engine always dedicated a percentage of its page to unpaid listings that point outward?

These are all good questions that go beyond Google. These are good question that deserve being explored. Maybe they even will be.

Calls for enforcement actions are premature until which time regulatory agencies specify the norms to be used in judging unfair practices for web based firms, see the CRE petition to the same.

In addition as CRE sets forth in the aforementioned petition, antitrust enforcement actions taken in two-sided markets, which are the markets in which web based firms  such as Google, Facebook and Twitter operate, without a deliberate recognition of their unique properties will cause more problems than they solve.

The FairSearch report is of particular significance because it is the basis for a request that the State Attorney Generals become involved in the investigation of Google.

WebPronews

The FairSearch Coalition has sent a 44-pager paper, entitled, “Google’s Transformation From Gateway To Gatekeeper: How Google’s Exclusionary And Anticompetitive Conduct Restricts Innovation And Deceives Consumers,” to all 50 U.S. Attorneys General.

“The paper offers in the greatest detail yet the coalition’s concerns that Google’s business practices that threaten competition and the free markets, deceive consumers, and threaten further innovation and economic growth and new jobs from the technology sector,” a representative for the coalition tells WebProNews.

“The Attorneys General play an important role in the ongoing antitrust investigations of Google’s business, with Texas, California, Ohio and New York having opened full-scale investigations, and reports that Mississippi and Oklahoma are considering following suit,” he adds.

The U.S. Federal Trade Commission, Korean Fair Trade Commission, and European Commission also have open investigations of Google’s business.

A letter from Patrick Lynch, who is an advisor to FairSearch, and former president of the National Association of Attorneys General (and former AG of Rhode Island), introduces the paper. Here’s the full text of that letter:

Letter from Patrick Lynch to Attorneys General

In the last year, the U.S. Federal Trade Commission launched an antitrust investigation into serious allegations that Google is engaging in a pattern of business practices that deceive consumers and stifle competition and innovation in the Internet ecosystem, and it has been reported that the Attorneys General of Texas, California, Ohio, and New York are participating in the investigation as well. Additionally, the U.S. Department of Justice recently issued rare “second requests” for more information in its antitrust reviews of Google’s proposed acquisitions of AdMeld and Motorola Mobility.  The DOJ also recently settled a criminal investigation of what it called the “unsafe, unlawful, importation of prescription drugs by Canadian on-line pharmacies, with Google’s knowledge and assistance, into the United States, directly to U.S. consumers,” resulting in an unprecedented $500 million forfeiture by Google.  And on September 21st, a bipartisan panel of the U.S. Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights held a hearing entitled “The Power of Google: Serving Consumers or Threatening Competition?” led by Chairman Herb Kohl (D-WI) and Ranking Member Mike Lee (R-UT).

In other words, evidence is mounting that Google’s business practices deserve further investigation from law enforcement and antitrust officials and that the time to act to protect competition, innovation, and consumers is now.

I have briefed many of you personally, and many of you were present for the panels earlier this year at the NAAG and CWAG meetings which examined these issues.  In light of the high degree of interest from you and your colleagues, I have asked FairSearch.org, the coalition of Internet companies I represent, to prepare the attached white paper that lays out Google’s anticompetitive acts in great detail.  There are five specific areas of concern dealt with in this white paper:

-          Deceptive display: Steering users toward its own products by displaying them at the top or in the middle of the results page in ways that suggest to consumers that they are natural search results, rather than links to Google sites in which Google has a direct economic interest.

-          Search manipulation: Manipulating its search algorithm to exclude or penalize competing sites, effectively “disappearing” them from the Internet.

-          Unauthorized content scraping: Stealing content developed by other websites, such as user reviews, without permission and displaying that content on its own pages, sometimes even without attribution.

-          Unfair treatment of advertisers: Manipulating advertisers’ quality scores to inflate ad prices and placing restrictions on its “must buy” ad platform that inhibit customers from using competing platforms.

-          Exclusionary conduct in mobile: Buying up companies in the mobile search area that present a nascent competitive threat, and imposing exclusivity restrictions in its Android licensing agreements to maintain and expand its dominance.

I believe that if you look at the evidence presented, you will come to the same conclusion that your colleagues and the federal competition authorities have.  The time to simply take Google at face value when it says “trust us” is long past.  State Attorneys General have a critical role to play in investigating Google’s conduct to prevent further harm to competition and consumers, and many of you are already deeply involved.  I encourage each of you to examine the attached white paper closely, speak with your colleagues who are actively investigating Google’s conduct, and consider standing with them in protecting consumers and competitive markets by opening your own investigation.

As always, I am available to speak with you further or to arrange a briefing from FairSearch.org if you or your staff have any questions. 

Please contact me with any questions.
 
Sincerely,

Patrick C. Lynch
Former Attorney General of Rhode Island
One Park Row, 5th Flr.
Providence, RI 02903

The lengthy paper can be found here in PDF format.

The company doesn’t make anything, and it’s not clear its tactics in the market hurt consumers

By Mathew Ingram

As Google’s federal antitrust case wends its way through the halls of justice in Washington, investigators for the Federal Trade Commission and the Justice Dept. will have to consider some fundamental questions about how to apply antitrust law to a company whose primary products are free—and whose monopoly was arguably gained not through coercive relationships but through the power of an algorithm. What does the word “monopoly” even mean when applied to a Web-based entity such as Google? Are network effects a barrier to entry, as some have argued, or are online monopolies inherently more fragile than their real-world cousins?

In the last major antitrust case involving a technology giant, Microsoft was accused of using its monopoly in computer operating systems to force PC providers to pay for its software even if they didn’t use it, and of other kinds of behavior that crushed competitors and distorted the market. The company eventually settled the case by agreeing to a number of concessions. But the case against Google is a very different one: The company doesn’t actually make anything in the classical sense, and the product it’s best known for—search—is provided to users free of charge and is paid for by advertising.

As I describe in a new research report for GigaOM Pro looking at the Google case (subscription required), the charges being leveled at the company are twofold. The first charge is that the company has a monopoly on search and on search-related advertising and that this gives it an unreasonable amount of control over how content is found online, as well as an ocean of cash generated by those ads. The second allegation is that Google uses the money from its advertising monopoly to develop or buy services that compete with those from other companies, then it uses its control over search to give those services preferential treatment in its search results.

FRACAS WITH YELP

So in the case of Yelp—whose founder and chief executive, Jeremy Stoppelman, testified in a recent Senate hearing regarding Google’s behavior, which wasn’t part of the official FTC investigation but raised many of the same issues—the claim is that when Google couldn’t acquire the company for its local recommendations, it first tried to steal Yelp’s content and use it without asking, then threatened to remove Yelp from Google’s search results altogether, and finally bought a competing service called Zagat.

This incorporates almost all the different aspects of the case against Google: the use of its giant cash reserves to try to take over Yelp; the “scraping” of Yelp’s content for use in Google’s own local service, Google Places; the pressure to play by Google’s rules or face deletion from its all-powerful index; and finally, the acquisition of a competitor, to which Google is allegedly giving preferential treatment in its search results. Expedia made similar allegations about Google following its purchase of ITA, which provides travel-related information used by Expedia and other services (a deal that was reviewed by the FTC).

As I tried to explain in a recent post, antitrust law in the U.S. doesn’t make having a monopoly in a particular market illegal. What the Sherman Act is designed to fight are monopolies that have been achieved through illegal means (i.e., collusion or restraint of trade) and/or monopolies that are being used to harm a particular sector. But it’s even more complex than that. Unfortunately for Yelp and Google’s other critics, it’s not enough just to show that a company with a dominant market position is being unfair to its competitors. It has to be proven that being unfair has some tangible impact on the market, either by restricting choice, or raising prices, or both.

So Yelp might argue that Google is being unfair by: a) taking its content without asking; and b) giving its own Zagat results a higher ranking in search (assuming it can even be shown that Google is doing this). But does Google’s behavior have any impact apart from being unfair to Yelp? Does it restrict consumer choice when it comes to recommending services in any real way? And if it does, will consumers have to pay more for those services? Similar questions have to be asked about Google’s dominance in search itself or search-related advertising. Does that dominance affect consumers in a tangible way?