Wednesday, January 9, 2013

Why Does Everyone Think Google Beat the FTC?

“The Commission was right to investigate Google, right to stop the practices it did, and ... right to settle the case instead of beating the firm into submission. In the end, as corporate defendants go, Google was pretty clean. What saved the company weren't the millions Google wasted lobbying Senators or paying Republicans to be its friends. It was its engineers, who designed its services in a way that maximized effectiveness while avoiding rampant illegality. . . .

“Google hasn't always been averse to flexing its muscle in legally ambiguous ways. In an important example the firm produced clones of sites like Yelp and Tripadvisor, complete with their reviews stripped from the sites. When the companies complained, Google, it turned out, effectively presented the firms with an extortionary choice: ‘hand over your reviews, or delist yourself from Google.’ The former was a form of slow death, the latter, high-tech suicide.

“The FTC was right to call foul here. It wasn’t just that Google was using its monopoly power to make money. It was more serious: it was threatening the very incentive to be the next Yelp or Tripadvisor. If tech startups know that they’ll be both cloned and their goodwill purloined, why be a startup at all? And who would bother to buy out a startup if you simply take everything it has? There is some line between invitation and extortion, and Google crossed it.

“The Commission also found out that Google was issuing threats based on patents that Motorola had long ago agreed to license openly as part of important industry standards. Yes, you could say that Apple’s abuse of the patent system has caused more harm to consumers, and you might be right. But the crucial point is that Google crossed another line when it messed with standard-setting processes that it is the FTC's responsibility to safeguard.

Tim Wu