Report: Google Antitrust Settlement Coming Tomorrow, Opponents Frustrated With FTC

Much is already known about the contours of the likely antitrust settlement between Google and the US Federal Trade Commission (FTC). The terms of the settlement were previously “leaked” (intentionally or otherwise) a couple of weeks ago and critics quickly berated the FTC as having “rolled over.”

Broadly speaking, the rumors were that Google would make certain “voluntary changes” and avoid a consent decree (mostly) or any formal finding of antitrust violations. The settlement was supposedly to be announced in mid-to-late December but was delayed amid harsh criticism the FTC received following these settlement leaks. It’s also being reported today that the FTC may be waiting for the European Commission to resolve its parallel inquiry and settlement negotiations with Google.

Regardless of what motivated the delay here’s what we understand and think is going to happen with the FTC settlement, which is now imminent:

• Opting out of snippets: publishers are going to get the broad ability to opt-out of snippets/content excerpts for specialized search results but still remain in the general index. This is much like what Yelp accomplished: remaining in the general index but denying Google the ability to include its content in local pages results. The model may be what Google currently does with News and opting out.
• An ads API: Google will likely enable ad campaigns to be easily ported (via API) to Microsoft’s adCenter or any other third party ad platform. This is a victory for Microsoft.
• Mobile patent licensing on “FRAND” terms: see discussion below

The first two will probably come without the entry of any consent decree. Various Google critics, including Microsoft Deputy General Counsel Dave Heiner, argue that these “voluntary commitments” may thus be unenforceable. However that’s not necessarily true.

Section 5 of the FTC Act could provide a basis for future enforcement if Google should fail to make good on its promises. Section 5 prohibits “unfair methods of competition” and/or  “unfair or deceptive acts or practices.” The FTC has used this section as the basis of enforcement actions against Google in the past. However without a consent decree the FTC would not be able to fine Google should it not live up to these “voluntary agreements.”

A third part of the settlement (or perhaps an independent settlement) is expected to include Google’s agreement to license certain “standards-essential” mobile patents, acquired along with Motorola, to third parties such as Apple, Nokia, Microsoft on “fair and reasonable” (“FRAND”) terms. This could be perceived as a win for those competitors.

Google had been using mobile patents aggressively to try and block imports of competing products (i.e., Apple iPhone). The company will no longer be able to wield those patents as a “sword” in the wake of the FTC settlement. In addition, the patents agreement could well come with a consent decree. A consent decree could be the basis of subsequent legal action or litigation and would enable the FTC to levy fines and penalties against Google if violated.

Still, assuming what I’ve said is basically correct, Google dodges a major bullet it would appear. Completely gone is the “search bias” claim and any potential intervention or involvement with the SERP or Google’s algorithm. The search bias argument was always one of the hardest and most unconvincing parts of any potential case against Google — though it’s the issue competitors probably care most about.

It remains to be seen what the Europeans do. Because of the greater discretion of their regulators they arguably have a stronger negotiating position than the FTC. The Europeans also seem more intent on exacting bigger concessions from Google than the FTC. Yet a full-blown antitrust action against the company in Europe is unlikely.

US States Attorneys General may still independently pursue antitrust actions against Google irrespective of any FTC settlement. Texas currently has an active antitrust investigation against the company and could later be joined by other states (e.g., New York, California Ohio, Oklahoma) in a combined multi-state action if there were enough legal and political will. Presumably the burdens of proof would be the same for the states as for the FTC in any such action.

Indeed, if the FTC “lets Google off easy” you can expect Google’s rivals and critics to take the battle to the Attorneys General or possibly the US Department of Justice.

Postscript: Bloomberg reports the formal FTC-Google settlement announcement will come tomorrow:

The U.S. Federal Trade Commission is poised to announce that Google has agreed to voluntarily change some business practices and settle allegations it misused patents to thwart competitors in smartphone technology, said the people, who asked not to be named because the decision isn’t public . .  .

As part of its voluntary concessions, Google will make changes in the way it uses content from other websites and allow advertisers to export data to other platforms, the people said.