The FTC took steps today to address some of Google’s improper business practices. We find it troubling that the agency did not adhere to its own standard procedures that call for the agency to obtain industry input on proposed relief and secure it through an enforceable consent decree. The FTC’s overall resolution of this matter is weak and—frankly—unusual. We are concerned that the FTC may not have obtained adequate relief even on the few subjects that Google has agreed to address.
For years Google has publicly championed the virtues of “data portability”—the idea that customers ought to be able to use their own data in products from various companies. But in practice, Google effectively prohibited its primary paying customers (advertisers) from using data about their own advertising campaigns on any ad platform other than Google’s. That made it much more difficult and costly for advertisers (especially small advertisers) to run their ad campaigns on Bing and other ad platforms. We therefore welcome Google’s announcement today that it will eliminate at least some of the contractual restrictions that it imposed to prevent customers from efficiently porting their own data from Google’s ad platform to another. But we are puzzled and concerned that the FTC did not follow its standard practice in exercising due diligence by obtaining feedback from the industry on the specific terms of Google’s promise before accepting it as a suitable resolution of this matter.
Had the agency asked, we would have explained that Google’s promise on ad campaign portability falls short of the mark in various ways. For example, Google inexplicably has not promised to allow all advertisers to port their campaign data to other ad platforms—only those with a primary billing address in the United States. But many firms based outside the United States advertise in the United States. What basis is there for excluding them from the protection embodied in Google’s commitments? Nor is it clear that Google has even promised to eliminate all of the contractual restrictions that had the effect of blocking data portability. And Google’s promise does not include language standard in antitrust remedies that would prevent it from circumventing its promise by other means.
Standard Essential Patents
The FTC concluded today that Google has abused its standard essential patents. The abuse is this: Google has not lived up to its promises. Google promised the standards community that it would make its standard essential patents available to all firms on fair, reasonable and nondiscriminatory terms. But then Google sought exorbitant royalties from firms implementing industry standards—rates as high as a thousand times those charged by others with larger patent portfolios reading on the same standards. And even though Google promised to make a license available to all, it filed multiple legal proceedings, in the United States and overseas, seeking to block Microsoft and others from shipping Windows-based PCs and Xboxes that implement the relevant standards.
As Microsoft announced nearly a year ago, we believe that firms that promise to make their patents available on reasonable terms ought to live up to that promise. When the Department of Justice urged Microsoft and Apple to make such a commitment in order to secure approval of certain patent acquisitions, both firms did so. Our commitment is simple and straightforward:
1. Microsoft will always adhere to the promises it has made to standards organizations to make its standard essential patents available on fair, reasonable and nondiscriminatory terms.
2. This means that Microsoft will not seek an injunction or exclusion order against any firm on the basis of those essential patents.
Full stop. No exceptions.
Google refused to accept these terms, as the DOJ itself noted in 2012.
Neither Microsoft nor Apple ever filed injunction lawsuits against any firm for their use of standard essential patents subject to a FRAND licensing commitment. As the FTC recognizes today, Google did abuse its standard essential patents by seeking injunctions on the basis of them. Given this, we are disappointed that the FTC accepted less relief from Google than the DOJ obtained from Microsoft and Apple last year and the FTC obtained from Bosch in a separate case just a few weeks ago.
Microsoft’s commitment is two sentences. The FTC’s proposed consent decree on patents runs for 13 pages, most of which spell out exceptions—the various circumstances when Google can sue for an injunction on its standard essential patents. This stands in stark contrast to the commitments made by Microsoft, Apple and Bosch.
During patent licensing negotiations, Google can continue to threaten that it will sue for an injunction, knowing that many would-be licensees will not be in a position to engage in litigation or arbitration with Google and also meet all of the other procedural requirements set forth in the decree that are imposed on the licensee. Google can even continue to use its standard essential patents to fend off patent infringement actions against it: the proposed decree gives Google leeway to sue for an injunction on its standard essential patents if it takes the position that injunctive relief sought against it is based on a patent that is standard essential. Since it is often hard to tell which patents are standard essential, the risk of injunction lawsuits from Google may dissuade firms from seeking to enforce their non-standard essential patents against the company.
We are also disappointed that the FTC chose not to seek relief on other issues. Google continues to prevent Microsoft from offering a high-quality YouTube app for the Windows Phone. Google built its large lead in search and search advertising in part through a series of contracts requiring other websites and distributors to use Google exclusively. The latter issue is something that has plagued competition in the search market for years, and Google in fact has finally said that it’s prepared to address this with the European Commission. But the FTC, by contrast, has chosen not even to pursue the matter, thereby depriving American consumers of benefits that appear on the horizon in Europe.
And what of the search bias issues? Google has long said that it merely aims to offer customers the most relevant answer to their query, and the FTC Commissioners accepted that view. Yet we know that Google routinely and systematically heavily promotes its own services in search results. Is Google+ really more relevant than Facebook? Are Google’s travel results better than those offered by Expedia, Kayak and others? We also know that Google ranks shopping results (the most important category commercially) in part on the basis of how much advertisers pay to Google for placement, after very publicly promising that it would never do so. This does not sound like product improvement.
Google Declares Victory
As we know from experience, one of the litmus tests of any antitrust outcome is the set of statements made by a company on the day that the outcome is announced. Has the company truly learned from the experience? Does it acknowledge that its practices raise serious antitrust issues?
In response to a question at his press conference today, Chairman Leibowitz said that he doesn’t believe that Google will be emboldened by today’s FTC decisions. But Google seems to be walking with a new spring in its step today. As Google’s official statement on its public blog today put it, “The U.S. Federal Trade Commission today announced it has closed its investigation into Google after an exhaustive 19-month review that covered millions of pages of documents and involved many hours of testimony. The conclusion is clear: Google’s services are good for users and good for competition.”
In other words, there appears to be no reason, despite the FTC’s optimistic statements this morning, to believe that Google recognizes its responsibilities as an industry leader. That is certainly consistent with the lack of change we continue to witness as we and so many others experience ongoing harm to competition in the marketplace.
The good news is that other antitrust agencies, within the United States and overseas, are still examining Google’s conduct. In Europe Vice President Almunia has made clear that he will close his investigation of Google only with a formal, binding order that addresses search bias and other issues. We remain hopeful that these agencies will stick to their established procedures, ensure transparency, and obtain the additional relief needed to address the serious competition law concerns that remain.