Distribution, Competition, and Antitrust / Intellectual Property (IP) Law

On the FTC-Google Settlement

Much has already been written about the specific terms of the settlement, so I will not attempt duplicate that effort. You can find the actual settlement here.  There is some interesting background /behind-the-scenes information on Google’s “antitrust escape” in this Wall Street Journal article.

In a nutshell, the settlement addressed three areas: (1) standard-essential patents (SEPs); (2) advertisers’ management of their ad campaigns; and (3) website “scraping.”

1. The settlement restricts Google (and its subsidiary, Motorola Mobility) from seeking injunctions on SEPs against potential licensees who are willing to enter into a license on fair, reasonable, and non-discriminatory (FRAND) terms. As a result, Google is generally prohibited from seeking injunctions for FRAND-encumbered SEPs. Although Google is allowed to seek injunctions in certain narrow situations—e.g., when a potential licensee refuses to enter into a license agreement on FRAND terms and is an “unwilling” licensee —the settlement outlines specific procedures that Google must follow when negotiating with potential licensees for its SEPs.

Practical result: The settlement reinforces the general rule that SEP owners may not seek injunctions. It also makes clear that potential licensees should pay particular attention to notices of alleged SEP infringement, because failure to respond could be interpreted as being an unwilling licensee.  However, the settlement’s complex license negotiation procedures may encourage opportunistic efforts to portray companies as “unwilling” licensees who can be enjoined.

2. Google agreed to 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.

Practical result: Some advertisers may have at least a marginally easier time pursuing their advertising goals on non-Google platforms thanks to this commitment. However, it is not clear how robust the effects of the commitment will be.

3. Google committed to refrain from “scraping” the content of certain competing websites, passing the content off as its own, and threatening to de-list rivals entirely from Google’s search results if and when they protest about the alleged misappropriation of content. Websites will now have the ability to “opt out” of display on Google “vertical” properties (websites that focus on specific categories such as shopping or travel).

Practical result: Unclear, although arguably at least somewhat pro-competitive by removing a possible obstruction to innovation on the Internet.

The elephant in the room, however, is that although the Commission did investigate the central issue for many observers – allegations of so-called search algorithm bias favoring Google properties over others – the Commission’s settlement does not address this issue. Instead, the FTC “concluded that the introduction of Universal Search, as well as additional changes made to Google’s search algorithms – even those that may have had the effect of harming individual competitors – could be plausibly justified as innovations that improved Google’s product and the experience of its users. It therefore has chosen to close the investigation.”

Many observers think that the FTC missed the boat on this one.

The European Commission is still investigating Google’s search practices, and it may not be deterred by the FTC’s decision. EU competition law is generally more protective of competitors’ interests than U.S. law, which tends to focus more narrowly on competition itself and on consumer welfare. 

Rivals — including Microsoft, which owns search engine bing — are also not terribly impressed with the settlement, see the report in the linked article below.  Whether competitors, advertisers, or consumer classes attempt to bring their own challenges to alleged Google search engine bias remains to be seen.

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