Texas Conducting Antitrust Review of Google
Google on Friday said that the Texas Attorney General's Office is conducting an antitrust review of the search giant, following a similar investigation launched in Europe earlier this year.
The attorney general's office has asked Google for information regarding Foundem, SourceTool/TradeComet and myTriggers, each of which have complained in the past that Google pushed them down its search rankings or reduced their appeal to advertisers.
As it did during the initiation of the European Commission antitrust investigation, Google on Friday highlighted connections between the complainants and Microsoft. Foundem, Google notes, is backed by the Initiative for Competitive Online Marketplace, an organization funded in part by Microsoft. MyTriggers and SourceTool/TradeComment are represented by Microsoft antitrust attorneys, Google said.
Microsoft has responded in the past that antitrust complaints usually do come from competitors.
In its blog post, Google said it recognizes that as it grows, it will face more questions about how its business works. "Given that not every website can be at the top of the results, or even appear on the first page of our results, it's unsurprising that some less relevant, lower quality websites will be unhappy with their ranking," Don Harrison, deputy general counsel at Google, wrote in the post.
Google is cooperating with the Texas Attorney General's Office, he said.
Foundem, one of the companies that complained to the European Commission, has said that it believes it was essentially blacklisted from Google's search results for a while because Google sees it as a competitor.
In a suit filed last year, SourceTool alleged that Google raised the prices it had to bid for advertisements by 10,000 percent. Its suit was dismissed because the New York court it was filed in said the suit should have been filed in California.
MyTriggers filed an antitrust suit against Google earlier this year after Google sued it for failing to pay a US$335,000 AdWords bill. MyTriggers says Google inflated the rate it paid for ads after it decided MyTriggers was becoming a competitive threat. Ohio's attorney general has joined the suit against Google.
In addition to complaints referred to in Texas, earlier this year, consumer group Consumer Watchdog urged the U.S. Department of Justice to investigate Google for antitrust practices.
While it's difficult to know exactly what happened with each of the companies, the complaints seem to point to a couple of issues. "The theme, I think, running through this is the lack of transparency," said Greg Sterling of Sterling Market Intelligence.
Google does make an effort to explain to companies how it ranks search results and it has a clear motivation to make its results useful, but it doesn't reveal how its algorithms work. That means Google has sometimes made changes to its algorithms that have hurt some companies' rankings, Sterling noted. Without being able to know how the algorithms work, those companies may struggle to recapture their previous rankings and could find their revenues significantly impacted.
But from Google's point of view, "it's a cat and mouse game," he said. That's because if Google reveals too much about how its algorithms work, sites will be able to game the system with the result that some sites with very little value will rise to the top of the rankings, he said.
The lawsuits are an indication of how important Google has become. "It shows you how high the stakes are and how many people rely on Google as a fundamental marketing vehicle or as a driver of their revenue," Sterling said. Even though the Yahoo/Microsoft search deal gives Bing nearly 30 percent of the market, that leaves Google with essentially the remainder. "Google's importance and centrality to the whole 'Net experience has created this enormous industry around ranking and placement and so everybody is trying to compete for position on Google," he said.
The legal system is now tasked with examining this complicated network of interests. "Do the courts say, 'Well, Google needs to disclose how it ranks things and give everybody access because Google is really a utility and needs to be regulated,' or do they say, 'Google has a right to protect the quality of its own users' experience versus the spam or quasi-spam sites?'" he said. "It's a difficult problem."