By Matthew Lynley
Google's 19-month antitrust investigation by the Federal Trade Commission came to a close yesterday, much to the chagrin of several companies and industries â" including Microsoft .
âThe FTCâs overall resolution of this matter is weak andâ"franklyâ"unusual,â MicrosoftâsÂ Vice President & Deputy General CounselÂ Dave Heiner wrote in a blog post late yesterdayÂ in response to the ruling.
The FTC said Thursday it wouldnât bring charges against Google after an investigation into whether the company favored its own results â" such as flight data and restaurant reviews â" in its search results.
Google did agree to a few voluntary concessions, makingÂ changes to its search practices and giving online advertisers more flexibility to manage ad campaigns with rival websites. Google also agreed to a settlement resolving separate FTC allegations that it was stifling competition by misusing key mobile-device patents it acquired when it bought handset makerÂ MotorolaÂ Mobility.
That wasnât good enough for Microsoft.
Microsoft devoted people, money and executive attention to lobby regulators and other Google competitors to ensure Google was dented by a regulatory review. But those efforts largely failed. HeinerÂ wrote the FTC didnât follow its typical procedure of securing binding commitments from the subjects of antitrust probes.
In a specific section devoted to Googleâs change to its advertising policies, Heiner said Microsoft was âpuzzled 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 Googleâs promise before accepting it as a suitable resolution of this matter.â
Heiner also said Microsoft was disappointed in a number of other issues, such as Google preventing Microsoft from delivering a âhigh-qualityâ YouTube app for its Windows Phone 8 smartphone operating system.
Weâve included Microsoftâs complains from the blog post below, with some highlighted emphasis from us at notable sections:
The FTC took steps today to address some of Googleâs 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 FTCâs overall resolution of this matter is weak andâ"franklyâ"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 âdata portabilityââ"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 Googleâs. 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 Googleâs 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 Googleâs 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 Googleâs promise before accepting it as a suitable resolution of this matter.
Had the agency asked, we would have explained that Googleâs 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 platformsâ"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 Googleâs 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 Googleâs 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 standardsâ"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 MicrosoftÂ announcedÂ 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.Â Â As the FTC recognizes today, GoogleÂ didÂ 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.
Microsoftâs commitment is two sentences.Â The FTCâs proposed consent decree on patents runs for 13 pages, most of which spell out exceptionsâ"the various circumstances when GoogleÂ canÂ 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.Â 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 itâs 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 Googleâs 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 advertisersÂ payÂ to Google for placement, after very publicly promising that it would never do so. This does not sound like product improvement.