Transcript of FTC Ruling on Google Anti-Trust Case

Today, a landmark anti-trust ruling was made by the FTC in regards to US patent law. The rest of the rulings came as a major disappointment to many of Google’s rivals, as well as to the many businesses that have accused Google of manipulating search results. The accusations did, however, result in Google making broad promises about how they will obtain, display, and manage their search results. Only time will tell us if they can keep their word. Our expectation is that many complaints will continue to pile-up at the FTC as businesses that simply don’t understand how 500+ algorithm changes per year affect their rankings, or how local, geo-based search results are determined and displayed. SEO isn’t dead, it’s just becoming more complicated, more intricate, and the search market is pushing towards a truly real-time, personalized results model. This is a good thing, IF you consider measuring performance to be an integral part of marketing your business. If you have any specific questions about SEO best practices, or measurement and organization of your business’s intelligence data, feel free to shoot me a message or leave a comment below and I’ll promptly reply with my thoughts, or reach out to have your questions answered from the right people.

Let me apologize in advance for the transcript’s front and end missing. I will be sure to update when it becomes available, but was limited to the failures of the FTC live stream. The core message is 100% in-tact, from the intro to the last statement prior to questions…

…OTHER PARTIES, INTERVIEWED NUMEROUS INDUSTRY PARTICIPANTS AND TOOK SWORN TESTIMONY OF KEY GOOGLE EXECUTIVES.

“There are two aspects to the settlement we announced today. The first involves Google’s misuse of patent protection to prevent competition. We stopped that abuse. The second concerns allegations that Google unfairly biases its search results. We closed this investigation finding the evidence does not support a claim that Google’s prominent display of its own content on its general search page was undertaken without legitimate justification. We do accept Google’s legally binding commitments to stop the most problematic business practices relating to search in search advertising. This also comes with monitoring obligations as well.

Let me start with the patent issue. By a 4-1 vote, a bipartisan majority of the commission orders Google to stop seeking to exclude competitors using standard essential patents that Motorola, which Google purchased, had first promised but refused to license unfair and reasonable terms. These essential patents and others like them are the cornerstone of the system of interopen — interoperability standards that we have taken for granted. Over half of American consumers own and use one of these devices, including iPhones, Android phones and Xboxes. Today’s action by the commission ensures that competition ensures to work for the benefit of American consumers in these important markets.

Now, years ago Motorola promised to license its patents essential to these interoperability patents on fair, reasonable and nondiscriminatory terms. Those are called fran terms, to any interested manufacturer. Other companies took Motorola at its word. Over many years relying on this promise, they invested billions and probably tens of billions of dollars in developing and bringing products to consumers using these patents. Rather than offering a license or the license it promised, Motorola changed the rules of the game. The company sought injunctions and exclusion orders to prevent the devices from coming into the country against products using their patents. After Google purchased Motorola, it inherited this litigation and continued the same practices. Google’s un-fair conduct threatened  laptop and tablet computers and smart phone and gaming systems or it could have increased the cost of these products by requiring manufacturers to pay higher licensing fees which then would have been passed onto consumers.

Here’s an example of one product issue in the case. It’s an iPad. I happened to have an older one. There are a number of other devices, xboxes, government-issued Research in Motion smart phones, that are all under threat if this practice had been allowed to continue and grow. Google’s settlement with the commission requires to Google to abandon their claim for relief on any essential patents with a fran commitment and offer a license on fran terms to any company that wants to license these patents in the future.

Today’s landmark enforcement action will become, we hope, a template for resolution of SEP licensing disputes across many industries and builds on more than 15 years of bipartisan work in the Federal Trade Commission from patent reports, to workshops, to enforcement actions like this one aimed at protecting the integrity of the patent system and even more importantly, protecting American consumers. Today’s action makes clear the commitments to make patents available on reasonable terms matters and that companies cannot make these commitments when it suits them, and to have a patent included in one standard and behave differently later once the standard is in place makes those relying on it vulnerable to extortion. Today’s commitment action will relieve companies of hoarding patents for defensive purposes, savings we hope that can be invested in job creation, research, and development.

Before we turn to the commission’s investigation of Google’s search and search advertising practices, let me say a few words about the commission’s section 5 authority, which was the statutory basis for our challenge to Google’s unfair conduct.

When Congress created this agency in 1914, 99 years ago, it endowed the commission with a unique commission of broad jurisdiction and limited remedies. Our section 5 authority reaches beyond the antitrust laws to prohibit unfair methods of competition. In lies a pennumbra. We can impose fines. We don’t put malefactors in jail. Section 5 violations are not violations of the antitrust laws and are not a basis for subsequent follow-up private lawsuits for treble damages in Federal court. In a society that many believe is overly litigious, the judicial use of section 5 represents a practical way for the commission to bring problematic conduct to a halt.

In the second part of the action, Google committed to stopping the most troubling of its business practices related to Internet search into search advertising. Google will stop misappropriating or scraping the content of its rivals for use of its own specialized search results. Google will drop contractual restrictions that impair the ability of small businesses particularly to advertise on competing search advertising platforms. Google has made legally enforceable and binding commitments to resolve the commission’s concerns. These commitments have reporting requirements that will allow the commission to vigorously monitor and enforce compliance if necessary.

Let me talk in a little more detail about some of this conduct.

The commission investigated allegations that Google misappropriated without consent the content of rivals websites to improve its own products and pass this content off to consumer as if it were its own. For example, Google allegedly scraped the user-generated reviews of local restaurants displayed on yelp and led consumers to believe that they were its own. When some websites complained to Google about the practice, Google allegedly — and I say allegedly — threatened to remove them entirely from Google search results. Now, Congress created our commission almost 100 years ago to stop unfair business practices and I won’t seek to characterize Google’s behavior as conduct that is clearly problematic and potentially harmful to competition because it undermines incentives to innervate. That is why you would create a new site for restaurant reviews if someone else can take them and appropriate them as if they were their own.

Going forward, Google will allow websites the ability to opt out of Google local or product shopping without being penalized or demoting in its general search results on Google.com. That is it’s organic search. This arrangement should ensure that the Internet remains vibrant and competitive.

The commission also investigated whether Google unfairly restricted the ability of businesses to use tools to manage their advertising campaigns simultaneously on Google and on other competing advertising platforms. For example, Bing. This practice is known as multi-homing. Our investigation suggested that most large advertisers preferred to multi-home. Multi-homing by small advertising and small businesses affected by the Google restrictions was much less common. Some commissioners were concerned by the tendency of Google’s restrictions to raise the cost to small business and Google has committed to drop the restrictions on multi-homing. We think that will create a more competitive environment.

Many of Google’s critics, including many competitors, wanted the commission to go further in this investigation and regulate the intricacies of Google’s search engine algorithm. The commission exhaustively investigated allegations that Google unfairly manipulated search engine results to harm competitors, a practice that most of us refer to as search bias. Today the commission has voted to close this investigation unanimously. It can always, of course, reopen any investigation if it believes that a company, in this case Google, crosses the line with respect to our investigation. Although some evidence suggested that Google was trying to eliminate competition. Google’s primary reason for changing the look and feel of its search results to highlight its own products was to improve the user experience. Similarly changes to Google’s algorithm that had the effective demoting certain competing websites had connection, applausable connection, with improving Google search results, especially when competitors tried to gain Google’s algorithm in ways that benefitted those firms but not consumers looking for the best search results.

I remember an article from the New York Times maybe a year ago about J.C. Penney paying companies to do precisely this: not commenting on the value of seeing J.C. Penney advertisements ranked higher or lower in search results. Tellingly, Google’s search engine rivals engaged in many of the same product design choices that Google did, suggesting that this practice can benefit consumers.

Now, while not everything that Google did was beneficial on balance, we didn’t believe that the evidence supported an FTC challenge to this aspect of Google’s business under American law. As Chief Justice Earl Warren wrote more than 50 years ago and as the Federal courts have consistently ruled since, “the focus of our law is on protecting competition, not competitors.”

Google is unquestionably one of America’s great companies, innovative in fielding from its core search engine to varied ventures such as driverless cars. With today’s action by the FTC, Google can refocus on its business and its products, but with a clear understanding that it must do so while competing fairly. Now, some may believe the commission should have done more in this case perhaps because they’re locked in hand to hand combat with Google around the world or perhaps in a mistaken belief that criticizing us will influence the outcome in other jurisdictions. Some may believe we should have done less. I imagine Google is one that believes that. but for our part, at this very wonderful agency, we follow the facts where they lead  and apply statute faithfully. We do it with a vigor and appropriate restraint.

Today’s bipartisan commission action brings to an end the commission’s investigations of Google in a fashion calculated to brings our investigation to a close.”