Today the American Bar Association is hosting a panel on the settlement between the FTC and Google, which in the aftermath is starting to look like a complete clown show.

It’s starting to look like Chairman Jon Liebowitz intentionally kept the commissioners from all meeting in one place and discovering what one another felt, because according to Commissioner J. Thomas Rosch, a majority favored bringing a suit against Google for manipulating search results. But because Liebowitz skirted Sunshine Act Meeting Laws by only meet with one Commissioner at a time, they had no chance to hear each others’ views since November.

Yesterday the European Union indicated that Google was “diverting traffic” to its own sites and would be forced to change its policies.  Which makes it look like Liebowitz rushed a decision to reach a political end before the EU came out with its decision, skirting FTC process and representing at the press conference that there was unanimity of opinion when there was none.

Today’s panel should be interesting because it includes Rosch, who has been very critical of the process by which a decision was reached.  It also includes Gary Reback, who represented Consumer Watchdog in its challenge to the FTC’s agreement with Google over the Safari hack.

You can read Rosch’s dissent here (PDF).  Once again, the FTC allowed Google to get away with no admission of guilt in the decision, which Rosch also strongly criticized in the Safari agreement.

Today’s panel

Program Chair:  Paula W. Render, Jones Day, Chicago, IL
Moderator :  Hill B. Wellford, Bingham McCutchen LLP,  Washington, DC
Panelists:

  • Jonathan M. Jacobson, Wilson Sonsini, Goodrich & Rosati, New York, NY
  • Geoffrey A. Manne, Lewis & Clark Law School, Portland, OR
  • Gary L. Reback, Carr & Ferrell LLP, Menlo Park, CA
  • J. Thomas Rosch, Federal Trade Commission, Washington, DC
  • Charles F. (Rick) Rule, Cadwalader, Washington, DC

Liveblog

12:10:  Wellford is giving background on the decision.  You can read Bytegeist’s liveblog of Commissioner Liebowitz’s press conference announcing the decision here.

12:18:  Rosch:  Has not been a commissioner since Joshua Wright was sworn in this morning.  Does not represent the views of his colleagues and that’s why he issued separate statements.

Questions he’s been asked:

1)  Why did I concur?  None of my former colleagues agreed that a Section 5 violation had occurred. Expressed “strong concerns” about a couple of practices.  In the end I agreed with conclusions about scraping and API, and once it became clear where everybody stood, there was no reason to not to agree with the conclusions.

2) Why did I dissent?  I disagreed with how the conclusions were reached.  I disagreed with the fact that we created false expectations, and I take credit for creating some false expectations about what we were going to do when we hired Beth Wilkinson.

I believe EU’s Almunia is also responsible.  You’ll remember he said there were 4 things Google needed to do to avoid prosecution.

Third, I believe the media and the Hill were to blame.  They touted the investigation as the greatest thing since sliced bread, and I did not think it wound up that way.

Moreover, I thought the scraping and search claims were not winable as a matter of law.  They thought the search claim was not winable as a matter of fact, which I disagreed with.

Voluntary commitments were like ABCs (?)

I was always willing to litigate, as I said in my dissent, about “half truth” claim against Google. As I indicated before, I was bureau director of BCP, and I thought the half-truth claim was a legitimate, legally viable claim .  However I felt Google would fight that claim because it went after their entire business model, which is based on search advertising.

I agreed that a FRAND commitment violated Section 5, so I concurred.  But I disagreed with how they reached that conclusion.

I felt there needed to be some lmiting principle to federal unfair standalone competition claim under section 5.  A monopoly or near-monopoly power was one factor that would establish a “limiting principle,” but I thought it was not the only factor.  I thought a particularly pernicious practice might do the trick as well, but the complaint did not identify any of these practices as being pernicious.

I felt that Google’s refusal to admit anything was tantamount to its earlier refusal to admit or actually deny any admission with respect its liability, and I thought that was tantamount to a denial as well.

GARY REBACK (lawyer who has Google competitors as clients):  Certainly this FTC decision has created the greatest uproar since Bingaman announced her decision against Microsoft in 1994.

Certainly the case sets the record for recriminations and leaks.

Very recently I tendered a company to talk to a state AG.  They had been unwilling to talk to them previously because they felt the information would get back to Google, and they’d take them to the woodshed.

Certainly the leaks led to creating this environment.

My clients are search engines by which consumers can get information to get products and services.  My clients competed against each other to get to the top of google listings.  Google continued to say they were giving consumers the best results, but my clients found that they were being lowered in rankings.  Sometimes it was done manually, but more recently through algorithms.

My clients submitted email trails to the FTC documenting this, but to my knowledge the FTC never followed up on this.

Google also began developing their own verticals to compete with my clients, and began favoring their own products over my clients, adding features like pictures to draw consumers to its own pages.

How should the FTC have investigated this?  By determining whether the anti-competitive harm of the conduct outweighs the product improvement benefit, according to the Microsoft decision.

A panel of the 9th circuit decided they knew better than the Microsoft decision, in the Tyco decision, a widely criticized decision.  Under the Tyco decision, Microsoft would have won its case, certainly with regard to bundling its browser.  The Microsoft court would never have considered damage done by the bundling process, and could have included a search engine as well — killing Google in the cradle.

I understand the FTC staff opposed a case against Google on search bias.  They took very little evidence on anti-competitive effect in the market.  They looked primarily if not entirely at Google’s intent.  How did they deduce what their intent was?  They averaged what Google “typically” does, what “the totality of the evidence in the main” does.  But compare it to what the complainers was — Google penalized spam sites, but applies that standard to its competitors as well.  Sends consumers to its own site, whether it is the best for consumers or not.

I’ve never heard of a company’s monopolistic practices being overlooked because the “majority” of the time they didn’t engage in anti-competitive practices.

The staff made little effort to find the evidence to see if there was a Section 2 case.  They did not look at emails indicating Google had manually adjusted its searched results, nor did they follow up on the complaints made by very competitors.

The commissioners could not evaluate what the staff did not investigate. If the staff does not do a real Microsoft investigation, the commissioners do not have anything to take action on.  They did a Tyco investigation, not a Microsoft investigation.

Doubtless people will say “if you don’t like Google’s results, use a competitor.”  That’s not a reasonable expectation.

The staff certainly read everything we gave them, but I represent only a small number of all the effected parties, and people from the outside cannot do a market analysis.  I think the expectation was for a thorough investigation, and those expectations were not omet.

Geoffrey A Manne (conducted Google-funded research with new FTC commissioner Joshua Wright) :  I continue to find it amazing that people continue to find cause for a Section 2 case.

Gary seems to have missed this statement from the decision:  Based on this evidence, we do not find Google’s practices based on balance to be anti-competitive.  [I think Reback did go on at length about "on balance."- jh]

What does the evidence look like?  It backs up what Josh Wright and I found in our paper on search result bias, and how it’s more likely to be found in Bing results.

We said that search engine bias is extremely low, and the FTC’s finding bears this out.

The commission seems to have tried to find very hard to find an anti-trust case, but they did not find any evidence of that.

Anti-trust does not require that Google adjusts its algorithms to accommodate its competitors’ business decisions.

The #1 travel search is Kayak, Google has a small fraction of this traffic, even after it offered its own Travel vertical. Therefore Google’s biased practices aren’t affecting vertical competitors.

[Sorry this guy is reading his statement and he's not making a lot of sense -- jh]

Google has made “trivial” attempts to match users with advertisers.  In fact, Google does not serve up ads on 70% of users on its sites because users aren’t looking for products.

Studies say that 30% of all people looking for products started on Amazon, and only 13% on all search engines, not just Google.

Google has no ability to block access to Kayak or any other competitor, which is a necessary component for antitrust activity.

Moreover, Google’s intent is not relevant to any exclusionary content case, only the results.  That should be the sole determination.

Patents:  Google was only attempting to enforce rates it had been charging for years.

RICK RULE (represented clients that have complained against Google):  The opinions I represent are my own.  Am also going to constraint my remarks to the non-SEP parts of the case.

I want to congratulate Jon and the team at Google. Iepresented Microsoft when they were in the dock.  When I look at the decision, it looks like an inside-the-beltway decision about how you play the system.  This was the first nominee for case of the new century and managed to turn it into, as Rosch said, a “mouse.”  The fixers and political poobahs have reason to crow.

The decision was 5-0 and resulted in a completely meaningless voluntary agreement, even though 4 of the commissioners wanted to bring a suit.  By keeping the commissioners apart, Google was able to keep them from reaching a consensus, so congratulations to them.

It also brings into question the FTC’s ability as an agency to bring antitrust actions, because they’re not set up to be an enforcement agency, as the Justice Department is.

The commission focused unduly on the question of what Google’s conduct is on free search, and a lot of time on a red herring, how Google designs its pages, as opposed to specific actions by Google to deal with competing online advertising.  I don’t think adequate attention was paid to Google’s bad acts regarding online search advertising, and adwords in particular.

Since the DoJ was willing and able to do the investigation, the big whiff calls into question why the FTC fought so hard to do the investigation in the first place.

To my knowledge, the FTC never sent out fruits of discovery requests to third parties see what was out there regarding Google’s practices.  The DoJ routinely does this.

There was basically no quantitative analysis done by Bureau of Economics, certainly nothing like DoJ did in Google-Yahoo case, so I have to have serious questions about what Geoff says.  That basic evidence and questioning wasn’t done by economists.  They may say they were relying on Google’s own analysis, but that in itself raises questions.

Also, I question a unilateral voluntary commitment.  From my days in the DoJ, it was pounded into my head that you don’t take that kind of decision.  If you don’t think there’s a case you close the investigation.

If you don’t have a formal order, there is no opportunity for a third party to look at the process.  At the DoJ the process would be subject to the light of day through the Tunney Act.

Implications:

As someone who has questioned whether we need an FTC, this decision validates those views.  It’s really difficult to do as a 5 headed commission.  You really need a single vision to craft a case and bring it.  If you look at all the big antitrust cases over the past 50 years, they’ve all been brought by the DoJ. Same thing happened in the Microsoft case:  FTC blinked & DoJ picked it up. I think the decision calls into question the process, and that Congress may be the only place we can look for oversight as to the process.

DoJ must pick up the case.  They know about Google and have shown they are capable to standing up to Google to get an appropriate result.  I predict that’s what will happen.  I predict the joy that Google and John feel now will be seen as a Pyrric victory.

Until there is an enforceable decision and Google agrees to change its conduct to conform with the  law they will continue to be pursued.

John Jacobson (represents Google): I want to point out that the FTC voted 5-0 to drop the case.  They concluded there was no case to be made, and they also voted that there was no case to be made on scraping.

When this all started the FTC wanted to bring a case, they hired a prominent outside lawyer & economist, they battled the DoJ for the right to bring the case and they won.  But as Liebowitz said at the end of the day, “the evidence just wasn’t there.”

Bringing an outside case is difficult, and it’s to be applauded for the FTC to decline to bring a case.

Search bias:  It was rejected unanimously [not it wasn't, Rausch said he and Gonzales wanted to bring a case - JH]

If a consumer wants to search online for products, she has already made a choice by the time she comes to Google, and not Nextag or Bing.  [I believe he says that at this point Google is justified in serving up its own products first if someone chooses to search on Google.]

Even if Google does feature its properties over others, it’s not an antitrust matter.

Microsoft case:  Microsoft violated Section 2 by forcing computer manufacturers to favor Internet Explorer.

Google is just increasing quality of its results, and increasing quality is not an antitrust problem.

Displaying snippets is protected as fair use under copyright laws.  The use of Yelp and TripAdvisor skyrocketed because Google scraped its results, so much so that Yelp offered itself as an IPO.

Commissioner Rosch’s result indicates that there were only 3 complaints on this to begin with, and that they were resolved by Google programmers.

The comments made by Reback and Rule made about influence peddling was an insult to the commission.  The idea that the FTC is incompetent to deal with antitrust cases is just wrong.  It sued Intel in one of the big Section 2 cases in recent years, and resolve this with a settlement that brought relief to the consumers.

If there was any lobbying out there it was two sided.  Microsoft and Fair Search was out there.  If Google was biasing the search results, Bing would be the big winner.

Q: To Rick Rule, why do you  you think the DoJ would be more successful with Section 2, which has a higher threshold of proof than Section 5?

Rule:  Because they don’t have 5 heads, not just 1. I always thought a case against Google could be brought under Section 2.

Rosch: There is no question in my mind that things have changed at the commission.  That is not to say that the staff isn’t lobbied from tie to time, and I have no idea.  But i can tell you, that in the old days, Miles Kirkpatrick and Lou Engman both wrote letters to people who tried to influence this agency, and reminded them that this was an independent agency.

My question to Jacobson:  Did Google lobby the White House to intervene with the FTC?

Jacobson:  N-O.  Absolutely not.

Rosch:  let me explain half-truth claim.

First:  It’s a BCP claim.  So the fact that BC did not suport the claim is no import to me.  The notion that BCP did not support it, and I’m not talking about David Raddick as head of BCP, I’m not sure that’s true either.  If BCP never supported the claim, they never opposed it either.

Frankly, I think there’s a very definite antitrust dimension to this claim as well.  Google’s entire business plan is based on its search advertising revenue, and there’s no question in my mind that there is a link between its revenue and its search position on the other hand.  To be sure the staff never investigated this claim either, but that doesn’t mean that the claim is baseless as well.

I am an equal opportunity opponent:  let me talk about Rick’s notion that the DoJ is better suited than the FTC to being antitrust cases.  I don’t know what cases you’re talking about, certainly not the ones I was involved in.

Q:  Does Google’s conduct discourage innovation?

Jacobson:  Nobody in antitrust enforcement takes that seriously. Not relevant in an antitrust investigation.

Reback:  I disagree vigorously.  The notion that this is not relevant is not wrong.

Rule: To the extent that Google lowered or discouraged competitors, either by lowering results or pricing advertising to competitors more highly, that’s an antitrust violation.  And I’m confident that this not only would be borne out by the investigation, but was ignored.

Jacobson:  No evidence that Google demoted rivals, nascent or otherwise.

Rosch:  Gary has argued himself out of court.  As he has said, the 9th circuit defines predation in a way that does not require balancing.  We have no instruction either in the DC circuit or from any of the panelists how to balance benefits vs detriments in this area.

Reback:  If you want to see how balancing works, take a look at the District court opinion, balancing how browsers help vs. hurt consumers.  This has been done before, it’s not a Big Foot sighting.  If the FTC