The 2012 FTC staff papers

A recent D.C. parlor game has been to second-guess the Federal Trade Commission’s 2012 decision to close its antitrust investigation into Google. (That investigation looked at search design, similar to the case filed last year by various state attorneys general.) In response to recent speculation in the press about the FTC’s decision, we wanted to set the record straight.

In a unanimous, bipartisan decision, all five FTC Commissioners concluded that the evolution of Google Search was designed to “improve the quality” of search results and “likely benefited consumers.”

Now, the staff papers and memos that helped inform this decision have been made public. 

These documents show why, after a comprehensive review, the Federal Trade Commissioners all voted to close their investigation nearly a decade ago. The memos conclusively confirm that the decision to not bring an antitrust case against the design of Google’s search engine was supported by clear and unambiguous recommendations by all sections of the FTC who reviewed it, including the Bureau of Competition, the Bureau of Consumer Protection, the Bureau of Economics and the Office of the General Counsel. 

It’s also clear from the papers how actively Microsoft and other rivals were encouraging these complaints. The FTC put consumers' interests in higher-quality search results over the interests of a powerful commercial rival, which has since grown even further, to become the second-biggest company in the U.S. by market capitalization.  

The memos also show that the FTC and its staff looked in detail at our Android and Apple distribution agreements (the subject of the Department of Justice’s current case) and, after uncovering evidence that people can readily choose alternatives but “overwhelmingly” prefer Google, declined to challenge them.

Some highlights:

People choose to use Google.

• One click away:“The argument that competition is just ‘one click away’ is a compelling one.” (Bureau of Competition staff memo)

• Users prefer Google: “Like the wireless carriers, Apple states [Google] is the overwhelming preference of its customers.” (Bureau of Competition staff memo)

• Partners prefer Google:“The companies have made it apparent to Staff that they have no interest in being released from their current contracts, and little interest in pursuing negotiations with alternative search providers.” (Bureau of Competition staff memo)

Google Search benefits users.

• Universal Search was indisputably a product improvement:“First, I endorse the staff’s recommendation not to bring a case on search preferencing. To bring such a case would intrude deeply into product design, an area into which courts have been extremely reluctant to go unless the design feature in question has no legitimate justification. … Universal Search was indisputably a product improvement…”(General Counsel memo)

• Universal Search benefits users: “Google's documents show that Universal Search was a procompetitive response to pressure from vertical sites and general search sites and an improvement for users.”(Bureau of Economics staff memo)

• Substantial benefit for users:“Universal Search is a ‘product improvement’ that has resulted in substantial benefit to its users...Google's organization and aggregation of content from other websites adds value to the product for consumers.”(Bureau of Competition staff memo)

• Google’s search practices benefit users:“Google can legitimately claim that at least part of the conduct at issue improves its product and benefits users.”(Bureau of Competition staff memo)

Google’s distribution agreements

• Our search distribution agreements with web browsers, like Apple’s Safari browser, aren’t exclusive: “[W]e find strong reasons for doubting that ... default status on web browsers (both desktop and mobile) can be properly viewed as ‘exclusives’ in the sense that users are unable, with relatively low cost, to access rival search engines.” (Bureau of Economics staff memo) 

• Our Android agreements aren’t exclusive:“As an initial matter, recall that Google’s agreements with smartphone manufacturers do not actually require exclusivity. Rather, they are contracts that require Google search to be the initially installed default search engine. Consumers are free to switch to other search engines, or even to replace Google as their default search engine, should they wish to do so.”(Bureau of Economics staff memo)

Google faces competition from specialized search engines.

• Search and vertical search compete:“[S]ubstantial documentary evidence that Google competes against specialized search engines for certain types of queries. Google's competition with specialized search engines is similar to a supermarket's competition with a convenience store.” (Lead staff economists)

Google’s Apple agreement

Lead staff economists on the Google investigation:

• Apple chooses Google because it’s the “best”:“Apple stated... ‘Apple's focus is offering its customers the best products out of the box while allowing them to make choices after purchase. In many countries, Google offers the best product or service.’” 

• The agreement is not exclusive: “Additionally, similar to the desktop Safari agreement, both Microsoft and Yahoo are preloaded alternatives to Google in mobile Safari. According to Apple, to change the default, go to "Settings> Safari > Search Engine."

• Switching search engines is trivial:"[C]hanging the default search option on mobile browsers involves a few taps and downloading other search apps can be achieved in a few seconds. These are trivial switching costs."
  

Overall conclusion

• No antitrust violation:“[I]n my judgment at least, the weight of the available evidence...indicates that Google's conduct has not risen to the level of an antitrust violation.” (Deputy Director in the Bureau of Economics)
  

• Consensus:“I agree with both [Bureau of Competition] and [Bureau of Economics] staff recommendations that the Commission not issue a complaint or pursue remedies for discriminatory ‘search preferencing’ by Google.”(Head of the Bureau of Economics)

• Staff raise doubts about the case: “We have identified throughout this memorandum the many substantial risks associated with bringing a case against Google. On a global level, the record will permit Google to show substantial innovation, intense competition from Microsoft and others, and speculative long-run harm.“ (Bureau of Competition staff memo)

by Rosie Lipscomb via The Keyword