India Joins Antitrust Lawsuit Bandwagon Against Google

Story first appeared in Information Week.

Compounding Google's regulatory entanglements, India has begun an antitrust investigation into the search company's online advertising business, say Chicago Antitrust Lawyers.

According to the Secretary of Competition Commission of India, said the investigation is expected to take several months and is in response to a complaint about discriminatory AdWords practices filed by Bharatmatrimony.com, an Indian marriage website.

The investigation aims to determine whether there's any merit to the complaint against Google. Google is confident that their products are compliant with competition laws in India.

In February, India's financial law enforcement agency, the Directorate General of Economic Enforcement, launched an investigation into Google's and Yahoo's business practices to determine whether either of the two companies had violated the country's foreign exchange law. India's Economic Times suggests the inquiry is linked to litigation in the country to make Google, Yahoo, and other social networking sites take more responsibility for objectionable content.

Late last month, the U.S. Federal Trade Commission signaled it was getting serious about taking action against Google. The agency hired an experienced antitrust litigator to helm its own antitrust investigation into Google's search advertising business, a possibility that Google has been lobbying to avoid for the past three years.

Regulators in Europe have been engaged in their own fact finding about Google's ad business, following complaints from Google's competitors in Europe. Last week, a EU Competition Commissioner told Reuters that the Commission was in no hurry to decide whether to pursue formal charges and that it is very serious about the case.

Three states--California, New York, and Texas--are conducting their own inquiries into Google's ad business. Regulators in Argentina and South Korea also are looking into whether Google has violated antitrust laws, according to St. Louis Antitrust Lawyers.

On Monday, the National Taxpayer's Union, a business lobbying group, published an open letter expressing concern that the FTC's approach to antitrust enforcement could hamper corporate competitiveness.

Google, with its popular online search engine, is the latest target of regulators claiming to be acting in consumers' interests, even though barriers to entry into the search market are exceedingly low and Google's competition is but one click away for online users.

How low are the exceedingly low barriers that bar entry into the search market? Try over a billion a quarter. As of last September, Microsoft had spent $5.5 billion building and running Bing.

The letter urges regulators to revise the broken, burdensome regulatory and fiscal management systems in order to foster strong competition and economic growth into the future.


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Apple & Samsung Ordered to Tone it Down

Story first appeared in themacobserver.com.
The Judge handling the case has ordered Apple and Samsung to scale back the number of claims in their patent infringement lawsuits, and warned both sides that failing to do so could delay their trial until some time in 2013. As of now, their patent infringement trial is scheduled for July 30 of this year.

With some 37 products listed in the lawsuits, along with 16 patents, five trademarks and an antitrust claim, the Judge told both companies that a jury shouldn’t have to deal with this, according to Washington DC Patents Lawyers.

Apple and Samsung are both claiming the other company is refusing to cooperate in reducing the number of claims in the case, and Apple told the court that while it wants the trial to stay on schedule, Samsung doesn’t.

Apple and Samsung have been involved in a months-long patent infringement battle in courts around the world over allegations that each side is using mobile patents without proper licensing. At one point Apple’s attorneys claimed in court that Samsung has been “slavishly” copying the iPhone and iPad designs.

The two companies are scheduled to discuss a possible out of court settlement later this month at the urging of the Judge. The CEOs from Apple and Samsung will be involved in the negotiations, although there isn’t any guarantee they will reach an agreement.

Assuming the talks fall apart, Apple wants to keep the trial on schedule, say San Diego Intellectual Property Lawyers.

The Judge also set a tentative trial date of March 31, 2014 for another lawsuit where Apple is suing Samsung for patent infringement.


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Google Battles Antitrust in Europe Too

Story first appeared in The New York Times.

Google may soon be fighting antitrust battles on two fronts.

The European Commission has been looking for two years into whether the search giant abused local competition laws, and it is expected soon to either file formal charges or achieve a significant settlement.

Now the Federal Trade Commission, which began examining Google last year, is starting its own antitrust inquiry. The commission hired a former federal prosecutor this week to lead any potential case.

The European Commission and the F.T.C. are investigating the same things. But, Google faces a tougher situation in Europe, where courts have a lower threshold for assessing market dominance. Also, antitrust regulators in Europe are much more powerful than they are in the United States. For instance, they do not need a court order to impose sanctions.

The move by the F.T.C. could help embolden the European Union’s competition commissioner to send Google a formal charge known as a Statement of Objections.

The antitrust authorities in Europe may have grown wary of being seen as being too tough on successful U.S. technology companies like Microsoft and Google. So the appointment of a seasoned litigator to head the investigation in the United States could help the commissioner to move a bit faster with his case.”

Google acknowledges that its prominence invites scrutiny, but says that its search service — which it points out is free to users — does not stack the deck and that there are competing search engines.

Google’s share of the search market is more than 90 percent in some of the largest markets in the European Union. That is significantly higher than in the United States, where Google’s market share is less than 70 percent.

Any decision on filing a case in the United States is likely to be many months away. But bringing in a seasoned litigator was widely interpreted as a signal by the trade commission that it meant business.

The agency has been investigating Google’s behavior since last spring. Regulators have taken depositions and issued subpoenas involving Google and some of its competitors, according to people who have been contacted by the trade commission.

The commission is looking at whether Google has abused its dominance in Internet search and advertising, giving its own products an advantage over those of others while maintaining that it offers a neutral, best-for-the-customer result.

Antitrust lawyers say that proving a case of unfair competition against Google will be difficult, because it will not be enough simply to show that some search results rank lower when Google changes its algorithm. The trade commission will have to prove in part that the changes were purposely designed to disadvantage competitors.

The issues raised by the inquiry have come into sharp focus in the example of niche search sites. If a user searches for airfares to Los Angeles, for instance, the first result that comes up is from Google flight search, which lists airlines on the route and ticket prices. Other travel companies selling tickets are farther down the results list.

Studies of Internet user behavior show that consumers rarely look beyond the first few results of a search. If Google has purposely changed the way it ranks results to make its own product show up at the top of the list, even if it is not the best result for the user, that could be interpreted as anticompetitive conduct.

The same theory would apply to the advertisements that appear on the right-hand side of the Google results page. If Google changed how it determines which ads appear at the top in a way that makes it less likely that an ad for a competitor ranks at the top, that could be anticompetitive behavior.

Google says the changes it makes are to make its search engine more useful.

The trade agency is also looking at whether Google made exclusionary agreements with other companies to have a powered by Google search box on their own Web sites, and whether it strong-armed phone manufacturers using the Android operating system to offer only Google search on their phones, sources close to the investigation said.

The search company, which did not exist when the antitrust case against Microsoft was first developed nearly two decades ago, is now a commanding presence in the tech world. It has been embroiled recently in numerous investigations.

In just the last week, Google officially responded to a Federal Communications Commission complaint that it had obstructed an investigation into its Street View project, its plan to photograph every street of the inhabited world. Google denied obstructing the inquiry but agreed to pay a $25,000 fine. It also said that Street View had been investigated by the Justice Department, which did not pursue a case. The Justice Department declined to comment.

If the trade commission files an antitrust suit against Google, a Silicon Valley lawyer can claim a share of the credit. The Silicon Valley antitrust lawyer, represents several companies who have complained to the government about Google. He was also the primary instigator of the federal government’s case against Microsoft. He has said that the search giant was able to succeed only because Microsoft was hobbled. Competitors need room to breathe, he said.


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Google Antitrust Escalates

Story first appeared in the Pittsburgh Post-Gazette.
Federal regulators escalated their antitrust investigation of Google on Thursday by hiring a prominent litigator, sending a strong signal that they are prepared to take the Internet giant to court.

The Federal Trade Commission is examining Google's immensely powerful and lucrative search technology, which directs users to hundreds of millions of online and offline destinations every day. The case has the potential to be the biggest showdown between regulators and Silicon Valley since the government took on Microsoft 14 years ago.

Then as now, the core question is whether power was abused. The agency's inquiry has focused on whether Google has manipulated its search results, making it less likely that competing companies or products appear at the top of a results page.

Federal Trade Commission officials cautioned that no decision had been made about whether to bring a formal case against Google. But the hiring of a former Justice Department prosecutor who played a lead role in the conviction of the Oklahoma City bomber, immediately catapulted the investigation to another level. The agency has hired outside litigators only twice in the last decade.

This shows Google that if it doesn't give you the remedy you want, you're going to litigate, say Chicago Antitrust and Trade Regulation Lawyers.

Several antitrust experts compared the hiring of the former Justice Dept. prosecutor -- who has brought about 40 major cases in government and private practice and won them all -- to the government's hiring to represent it against Microsoft.

The Microsoft case in the late 1990s transformed the tech industry, reining in its most powerful company and allowing for the rise of new companies like Google. Now Google wields the same sort of power that Microsoft once did, and is under the same sort of scrutiny.

It has been involved in one privacy controversy after another over the last year. Indeed, the announcement of the hiring eclipsed Google's formal response earlier Thursday to a fine by the Federal Communications Commission for obstructing a separate investigation.

The litigator noted that she does not underestimate Google. No one else was underestimating it Thursday either. Antitrust cases charging the abuse of a monopoly are difficult to prove.

The general issue underlying the investigation is whether Google abuses its power in the market for Internet search. Google controls about 66 percent of the United States search market, according to comScore. Microsoft's Bing accounts for about 15 percent of Internet searches, with Yahoo gathering 14 percent.

Competitors have said that Google at times adjusts the algorithm that produces its search results to lower the likelihood that a link to a competitor or a potential competitor for its products appears near the top of the results.

For example, if Google were to program its system so that a consumer's search for "washing machines" is more likely to produce as its top result a link to Google-related shopping sites, that could be interpreted as putting its competitors at a disadvantage.

Questions have also been raised about whether Google has done the same thing with the paid advertisements that appear on the right-hand side of a Google search page.

While critics might say that Google is manipulating its results to hinder competitors, Google might assert that it is tweaking its model to provide the best results to consumers.
Google's power comes not from its large market share, but from the fact that consumers are unable to evaluate the product. It would be difficult to decide in many cases whether the results are exclusionary in a bad way or in a way that helps consumers.

Google argues the latter, and has said many times that competition is a click away. When the company announced in June that the F.T.C. had begun a review of its business, it noted that it makes public much information about how its rankings work.

Earlier Thursday, Google formally denied obstructing a Federal Communications Commission investigation into whether privacy laws had been violated in its Street View project, but agreed to pay a small fine anyway.


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Apple Antitrust Gains Attention

Story first appeared in The Washington Post

Apple Inc.’s best defense against accusations it conspired to fix e-book prices may be to turn on its absence from meetings in Manhattan restaurants where publishing executives allegedly worked out the scheme.

The maker of the iPad will need to show it negotiated pricing arrangements separately with each of the five publishers named in the Justice Department’s lawsuit, avoiding group gatherings such as those in The Chef’s Wine Cellar at Picholine described in the government’s complaint, antitrust lawyers said.

If Apple agreed with each single publisher and can show it talked to them individually and didn’t suggest they collude, then those agreements would be legal. If Apple in fact orchestrated the agreements, then it doesn't have a defense.

The antitrust suit filed last week by the U.S. Justice Department is already reshaping the fast-growing market for e- books. Settlements with three of the publishers will allow retailers to return to setting their own prices after their agreements with Apple shifted pricing power to book producers.

Amazon.com Inc., which opened the digital books market in 2007 with $9.99 titles for its Kindle e-reader, may be the biggest beneficiary of the suit and settlements.

As the world’s largest online retailer, Amazon can afford to sell e-books at a loss to gain market share. Amazon said last week it plans to drop e-book prices again.

Market Share

The Seattle-based company is the largest U.S. seller of digital books with about 60 percent market share, followed by Barnes & Noble Inc. with about 30 percent and Apple with about 10 percent.

E-book discounting may erode Barnes & Noble’s market share. New York-based Barnes & Noble, the largest U.S. bookstore chain, has been losing money on developing and marketing its Nook e-reader and is less able to subsidize e-book sales.

Meanwhile, book publishers are likely to see smaller sales and margins with the return of aggressive e-book discounts.

Amazon shares are little changed from before the Justice Department sued on April 11, while Barnes & Noble fell almost 10 percent. Apple shares have declined almost 7 percent amid speculation that demand for the iPad may wane.

Alleged Conspiracy

The Justice Department complaint portrays Apple’s deals with the publishers as a conspiracy that raised prices and hurt consumers. At Apple’s suggestion, the publishers agreed to raise retail prices and give California-based Apple a 30 percent cut, according to the complaint. Amazon was eventually forced to fall in line.

Conspiracy to raise prices, especially among competitors, is the essence of the most evil thing we have in antitrust.

Comments cited in the complaint by Apple’s late co-founder, indicate that’s exactly what he was thinking about.

‘Not True’

An Apple spokeswoman, said the government’s accusation of collusion is simply not true. The launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon’s monopolistic grip on the publishing industry. Just as Apple has allowed developers to set prices on the App Store, publishers set prices on the iBookstore.

Apple, in court papers filed in a private antitrust case, contends its agreement with each publisher to serve as a distribution agent was negotiated separately. Each set its own prices without Apple’s interference, the company said in the filing in federal court in Manhattan.

It would be a perverse use of antitrust law to condemn Apple for successfully entering a market with an innovative new product.

Disruptive Player

Apple has a track record of being a disruptive player when it enters new markets, working independently and driving hard bargains to secure content and service for its devices. When it created the iTunes store in 2001, Apple pushed music companies to sell all songs as singles for 99 cents, something not all labels wanted to do. Apple also extracted service revenue from AT&T in exchange for giving it the first iPhone, something unheard of at the time.

Pearson Plc’s Penguin and Macmillan, which is a unit of Verlagsgruppe Georg von Holtzbrinck GmbH, have also denied wrongdoing and vowed to fight the government’s accusations.

CBS Corp.’s Simon & Schuster, Lagardère SCA’s Hachette Book Group and News Corp.’s HarperCollins, agreed to settlements, saying they denied liability but wanted to avoid protracted litigation.

An antitrust lawyer for Latham & Watkins LLP in San Francisco, said Apple can argue it was providing an alternative to the near monopoly Amazon won with low margins and deep discounts. Amazon had 90 percent e-books market before the pricing model changed.

‘Another Business Option’
E-books is the fastest growing category within the $27 billion book-publishing business, according to a Bloomberg Industry report. Revenue from e-books doubled last year to $1.9 billion, according to preliminary estimates from the Association of American Publishers.

The publishers’ distribution contracts with Apple guaranteed they would lower the retail price of any e-book in Apple’s iBook store to match the lowest price offered by any other retailer, according to the Justice Department lawsuit.

These price guarantees, which ensure a company can’t be undersold by its rivals, are known as most-favored-nation clauses and can signal uncompetitive behavior, according to professor of economics and law at Georgetown University Law Center.

Successful Challenges

Such clauses have been successfully challenged by the U.S. in cases against companies including General Electric Co. and Westinghouse Electric Co., and Delta Dental Insurance Co., an insurer and service provider. In 2010, the Justice Department sued Blue Cross Blue Shield of Michigan for allegedly entering most-favored-nation agreements that raised hospital prices. The case is pending.

The publishers’ legal ground may be shakier than Apple’s because, almost simultaneously, they entered into similar contracts with the iPad maker that allowed them to raise prices, said University of Iowa’s Hovenkamp. Under a 1939 U.S. Supreme Court decision involving movie tickets, now known as the Interstate Circuit Doctrine, collusion can be proven by circumstantial evidence when it’s clear that without the agreement of the group, each firm would be acting against its own interest.
Joint Action

The Justice Department, citing internal e-mails and conversations, claimed the publishers forged the new pricing agreements with Apple only when they were confident they could act jointly.

The publishers may argue that Amazon’s low prices would have cut the number of printed books and bookstores, hurting consumers with a loss of variety and output.

Price-fixing conspiracies can’t be used to solve an industry’s problems. Even if Amazon engaged in so-called predatory pricing by selling below cost, the solution is to go to court or appeal to Congress.

The Supreme Court has held in a landmark case involving the Addyston Pipe & Steel Co., that “ruinous competition” doesn’t justify price fixing.

‘Less Money’

The publishers were worried about making less money on hard copy books. But there are no rules of competition that say they were entitled to continue making the same profits on their hard copy books as they had in the past.

The suit was filed in Manhattan, where U.S. District Judge Denise Cote is supervising pretrial proceedings in a group of at least 27 antitrust suits by private parties against Apple and the publishers.


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