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FTC Punt on Google May Open Way for More Comprehensive Antitrust Probe by DOJ and States

If the FTC and European regulators are not yet ready to deal with the ultimate source of Google's economic power, its control of user data, then it may be just as well that any likely settlements in coming months will be limited.
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With reports that Google is likely to be let off the hook with minor restrictions on its behavior, the Federal Trade Commission seems ready to punt on the most important antitrust case to come across its desk in years.

Given how narrowly the FTC had been approaching the case in the first place, that's probably a good thing for consumers, since it means we can hope for the Department of Justice or state attorneys general to move forward in the future on a more comprehensive case against Google's monopoly abuses. Senator Richard Blumenthal (D-Conn.), a former state AG in Connecticut, has already argued, "If the [FTC] investigation concludes without a finding that would warrant some action, the Justice Department can take action as well to investigate and secure remedies."

In fact, that's exactly what happened with the Microsoft probe in the 1990s. The Federal Trade Commission first looked at the Windows operating system monopoly problem back in 1991, but the department punted the case in 1993. But that led the Department of Justice and state attorneys general across the country to take on Microsoft - see John Heilemann's near-epic Wired recounting of the twists of that case -- leading ultimately to the court decisions and consent decrees that reined in that company's abuses over the last decade.

The problem has been that the FTC - and even its slightly more aggressive European counterparts - has been focusing on a handful of issues, like abuses of Google's patents and its manipulation of search results. While important, these are ultimately only symptoms of how Google uses its economic power to benefit itself.

What needs to be addressed in any antitrust probe is the source of Google's monopoly power, namely its overwhelming control of user data. Data is the oil power of the online economy, fueling advertising and profits, and Google is the modern Standard Oil dominating control of that data.

It's not just all the search data that Google collects.

  • * Watch a video online? You're probably feeding Google more data on your YouTube viewing habits.

  • * Sending an email? All you Gmail users are giving Google a blow-by-blow on your interests through the text of emails.

  • * Checking your location on your cellphone? You're probably feeding Google location data through its Google maps and more general geolocation services.

  • * Visiting any website? Google is tracking data on you through the Google Analytics software used by most websites to evaluate traffic on their sites.

  • * Or just surfing the web means you're almost certainly being tracked by Google cookies and web ads delivered up through its DoubleClick visual ads subsidiary.
  • With that unprecedented amount of data about online users, Google becomes the only game in town for most online advertisers seeking to deliver ads to users searching words or products online. Google faces no viable competition in the search advertising field because of this control of data. Microsoft's Bing loses as estimated $2.5 billion per year because Google is able to charge such a premium price to advertisers over its main rival. And most so-called alternative search options for users are actually Google partners, either using its search technology or delivering up user data even without the Google brand in the online header.

    Some antitrust regulators are beginning to admit that they need to change their view of how big data and its control should change antitrust policy. Joaquín Almunia, who heads competition policy for the European Union, gave a speech last week where he admitted, "Companies evidently try to use their access to personal data to gain commercial advantage vis à vis users." But this has not led to antitrust authorities in either Europe or the United States fully grappling with its implications for retraining Google's power or other companies like it in other markets where control of user data will reinforce monopoly power.

    The problem for consumers is not just that advertisers will face higher prices - with users ultimately getting those costs passed on to them. The deeper problem, as I outlined last year in my Cost of Lost Privacy series, is that this deep control of user data allows Google to sell what can be predatory access to advertisers. Payday lenders use Google to track financially distressed consumers to offer punishing terms, illegal online pharmacies offer illegal or fake drugs, and con job "loan adjustment firms" can find and ripoff homeowners with underwater mortgages. More generally, advertisers can engage in a range of what economists call price discrimination to extract the highest price from each consumer and expanding corporate profits at the expense of the consuming public generally.

    If the FTC and European regulators are not yet ready to deal with the ultimate source of Google's economic power, its control of user data, and the broad consumer harm being inflicted by its day-to-day tracking of user behavior on behalf of its advertising clients, then it may be just as well that any likely settlements in coming months will be limited.

    As long as they don't foreclose alternative investigative paths in any settlement, ideally the U.S. Department of Justice and the state attorneys general will step up with more comprehensive investigations in coming years, just as they did after the FTC punted on the Windows monopoly problem in the early 1990s.

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