Watchdog Seeks Antitrust Rule For Web-Based Cos.

From: Law360

By Erin Fuchs

Law360, New York (September 6, 2011) — The Center for Regulatory Effectiveness asked federal regulators Tuesday to enact a regulation to ensure that Web-based companies such as Twitter Inc., Facebook Inc. and Google Inc. do not engage in unfair competition or deceive consumers.

The Washington-based advocacy group asked the U.S. Federal Trade Commission to establish a rule that would define unfair or deceptive trade practices, in a move the CRE said would make U.S. businesses more competitive worldwide.

The petition comes after news reports that the FTC is already investigating Google and Twitter, and after another watchdog asked the agency to probe Facebook, CRE pointed out.

“It is premature for the FTC to proceed into any investigation of Web-based services until the petitioned-for rules are developed through a notice and comment process,” the petition stated.

Web-based companies such as Google, Facebook and Twitter operate in “two-sided markets,” as they serve both consumers and advertisers, the CRE said.

“The trade regulation developed by the Commission should take into account that Web-service companies need to appeal to, and bring together, two distinct groups of clients,” the petition stated.

The White House already has moved to regulate so-called emerging technologies, outlining principles for policing them in a March 11 memo to the heads of executive departments and agencies, the CRE pointed out. Those principles included focusing on international cooperation and flexibility, and on relying on the best available scientific evidence when overseeing emerging technologies.

These principles should apply to companies like Google, Facebook and Twitter, the CRE said.

“The advanced algorithms which determine everything from how online advertising is targeted at specific users to how search results are displayed are unquestionably an emerging technology,” CRE petition stated.

Google revealed in June that the FTC had initiated a formal review of its business, which the search engine giant attributed in part to its own success. After announcing the probe, Google also took pains to reiterate its commitment to transparency, unbiased search results, clearly labeled advertisements and customer control over private data.

“Search helps you go anywhere and discover anything, on an open Internet,” the company said in a blog post. “Using Google is a choice — and there are lots of other choices available to you for getting information,” including other search engines, direct links to websites, mobile apps and social networks.

Meanwhile, Consumer Watchdog filed a complaint with the FTC in June asking it to investigate and enjoin alleged anti-competitive business practices by Facebook Inc. in the market for virtual goods purchased in social games.

Representatives for Facebook, Twitter and Google did not immediately respond to requests for comment on Tuesday.

–Additional reporting by Zach Winnick. Editing by John Quinn.

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