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Google must make changes but no court case; 19-month FTC probe ends

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By Noel Young, Correspondent

January 3, 2013 | 6 min read

Google is making a number of changes to its business practices – especially regarding search – after The US Federal Trade Commission revealed a number of decisions in its 19-month antitrust investigation of Google during a press conference on Thursday. But there is no legal action contemplated.

Google: case closed

No 1: Google is to stop using patents purchased by Motorola to exclude competitors. These patents cover "standardized technologies" in smartphones, laptops, tablets, and gaming consoles.

At the conference in Washington, FTC Chairman Jon Leibowitz described these patents as "the cornerstone of interoperability" that enable mobile phones to talk to each other.

Google's deal with the FTC requires it to offer a license based on "fair, reasonable, and non-discriminatory (FRAND) terms" to any company that wants to use these technologies.

Otherwise, the FTC believes "if left unchecked," these patents could give way to higher prices "as companies may pay higher royalties for the use of Google’s patents...and then pass those higher prices on to consumers."

The FTC voted 5-0 to close its investigation into whether Google unfairly skewed its search results, with the company saying it would voluntarily remove restrictions on the use of its online search advertising platform and offer companies the option to keep their content out of Google’s search results.

Leibowitz said: “The changes Google has agreed to make will ensure that consumers continue to reap the benefits of competition in the online marketplace and in the market for innovative wireless devices they enjoy.” He added: “This was an incredibly thorough and careful investigation by the commission, and the outcome is a strong and enforceable set of agreements.”

Competitors, including Yelp, Microsoft and Expedia, may however be disappointed at the decision to close the probe of Google’s search practices without enforcement action.

Jeffrey Jacobovitz, an antitrust litigator with Arnall Golden Gregory in Washington, told Bloomberg: “Google’s competitors are looking at this as though it’s a slap on the wrist. It’s clear the FTC thought this was the best deal they could get and if they had gone to court, they may not have been as successful.”

An alliance of e-commerce and web-search companies wanted the agency to bring a lawsuit, alleging Google’s dominance of internet search, combined with favouring its own services in answers to queries, violated antitrust laws.

Jon Leibowitz said: “The changes Google has agreed to make will ensure that consumers continue to reap the benefits of competition in the online marketplace and in the market for innovative wireless devices they enjoy.”

The FTC has also ordered that Google stop "scraping" the content of its rivals for specialised search results.

Businesses should now be able to opt out of Google products such as Shopping and Local without being penalised in how their companies pop up in search results.

This will create "organic search," said Leibowitz, which he believes will make search engines more "vibrant" and "competitive."

The FTC is also insisting that Google remove restrictions on the use of its online search advertising platform, AdWords, "that may make it more difficult for advertisers to coordinate online advertising campaigns across multiple platforms." Google has also agreed to this.

Google's chief legal officer, David Drummond, in a blog post, said businesses "will now be able to mix and copy ad campaign data within third-party services that use our AdWords API."

He said the FTC review had 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."

Google has worked hard to make it quicker and easier for users to find what they need. In the early days you would type in a query, we’d return 10 blue links and you’d have to click on them individually to find what you wanted.

"Today we can save you the hassle by providing direct answers to your questions, as well as links to other sites. So if you type in [weather san francisco], or [tom hanks movies], we now give you the answer right from the results page—because truly great search is all about turning your needs into actions in the blink of an eye. "

Drummond said they made clear when the FTC started its investigation, that they had always been open to improvements that would create a better experience.

They had written to the FTC making two product changes which he described as voluntary:

  • More choice for websites: Websites can already opt out of Google Search, and they can now remove content (for example reviews) from specialised search results pages, such as local, travel and shopping
  • More ad campaign control: Advertisers can already export their ad campaigns from Google AdWords. They will now be able to mix and copy ad campaign data within third-party services that use our AdWords API

He confirmed they would seek to resolve standard-essential patent disputes through a neutral third party before seeking injunctions. "This agreement establishes clear rules of the road for standards essential patents going forward."

Leibowitz said many competitors would likely have wanted the FTC to go further. But he said it was "time to move on here" and that the investigation is officially closed.

The FTC will "vigorously monitor" Google to make sure these adjustments are made.

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