The Federal Trade Commission reportedly will begin a formal investigation into fundamental search-advertising issues at Google.   The agency's Commissioners preparing to serve the giant search engine company with civil subpoenas - formal demands for information.  At a later date, other companies may receive official requests for information about their dealings with Google, as well. 

Although Google has faced several antitrust probes in recent years, the inquiries, at least in the U.S., have largely been limited to reviews of the company's mergers and acquisitions - e.g., the Justice Department currently is conducting an antitrust review of Google's recent $400mn purchase of Internet-advertising company Admeld Inc. This new antitrust probe that's unfolding at the FTC, however, is the most serious to date - from Google's perspective, although it won't necessarily lead to any federal allegations of wrongdoing against the company.

Fundamental Search-Advertising Issues.    The new inquiry is expected to delve into fundamental issues relating to Google's core search-advertising business - the source of most of Google's revenue.  At issue is whether Google unfairly channels users to its own growing network of services at the expense of rival providers.  Google presently accounts for some 2/3's of Internet searches in the U.S. and more abroad.  Last November, the European Commission - the European Union's executive arm - opened its own formal investigation into allegations by several companies that Google had violated European competition laws.  Google denies the allegations.

FTC 2011 Probe of Google vs. DOJ 1990's Probe of Microsoft.   Many policy watchers think an FTC probe could ultimately be as much of a watershed for antitrust policy as the Justice Department's landmark lawsuit against Microsoft Corp. in the 1990s.  The company narrowly managed to survive being broken up, but industry and legal experts credit the suit with checking the company's ability to use its dominance in personal-computer operating systems to control other technology sectors. 

However, for the FTC to succeed, it must go beyond proving that Google has a monopoly - which is not, in and of itself, illegal.  The FTC must prove that Google abused its position.  And the FTC faces a further hurdle because courts have significantly narrowed the scope of antitrust law in recent years.  

Competing Companies Complaints.  Others specifically complain about the way Google ranks its own services in its "natural" search results, and the amount it charges them for placing ads.  In doing so, they contend that Google's market power gives it the ability to determine whether businesses succeed or fail. 

Complaints from one such company, Foundem.co.uk, triggered the European probe.  The company claims that Google demoted Foundem's comparative shopping services in its listings and gave premium placement to Google's own product-search results instead. 

Complaints in the U.S. are not much different.  Travel services like Expedia and TripAdvisor, and local listings services like Yelp, and Google's perennial rival, Microsoft, among others, say that Google promotes links to its own websites, starving their sites of vital traffic.

Still others contend that Google abuses its dominance in search advertising by extending its control to other markets - from mobile telephones to online television, publishing and airline travel.  Google has long denied acting in an anticompetitive manner, saying that users can easily navigate to other choices on the Web. 

"Given our success and the disruptive nature of our business, it's entirely understandable that we've caused unease among other companies and caught the attention of regulators," wrote two Google executives in a company blog post after the official European probe was launched in November.

FTC Preparations - Sign of Things to Come.   The FTC's preparations to subpoena Google are the first concrete signal that its commissioners have decided there is enough evidence to move forward with a formal investigation.  An FTC probe would likely take a year or more to unfold and, although the outcome is uncertain, the agency fought hard with the Justice Department to handle the case.  That makes people familiar with situation believe it would be unlikely for the FTC to walk away without taking any action.  The FTC and Justice Department share responsibility for enforcing federal antitrust laws.

For further details, go to:   [WSJournal Online, 6/23/11]