To head off further investigation by the Federal Trade Commission and risk penalties from a negative finding, Google today agreed to change some of its business practices to resolve FTC concerns around practices the commission thought could stifle competition for smartphones, tablets, and gaming consoles, as well as for online search advertising.
In settling with the FTC, Google agreed to abide by prior commitments to allow competitors access -- on fair, reasonable, and nondiscriminatory (FRAND) terms -- to patents on critical standardized technologies needed to make popular devices such as smartphones, laptops, tablets, and gaming consoles. Specifically, Google agreed not to seek injunctions against products it believes may infringe its patents; it acquired a portfolio of 24,000 patents when it bought Motorola Mobility last year, patents that have figured in some of the Android-iOS patent battles that have raged for several years among Apple, Samsung, HTC, Motorola, Microsoft, and to a lesser extent Google.
Google also agreed to give online advertisers more flexibility to simultaneously manage ad campaigns on Google's AdWords platform and on rival ad platforms, and to refrain from misappropriating online content from third-party websites that focus on specific categories such as shopping or travel for use in Google's own category-website offerings.
"The evidence the FTC uncovered through this intensive investigation prompted us to require significant changes in Google's business practices," said Beth Wilkinson, an outside counsel to the FTC. But she said the practices did not merit legal action against Google: "Undoubtedly, Google took aggressive actions to gain advantage over rival search providers. However, the FTC's mission is to protect competition, and not individual competitors. The evidence did not demonstrate that Google's actions in this area stifled competition in violation of U.S. law."
But the FTC did allege that Google had reneged on its FRAND commitments and pursued -- or threatened to pursue -- injunctions against companies that need to use Motorola's standard-essential patents in their devices and were willing to license them on FRAND terms. The whole point of FRAND is to remove such uncertainties in the use of technologies incorporated into technical standards. "This type of patent hold-up can lead to higher prices, as companies may pay higher royalties for the use of Google's patents because of the threat of an injunction, and then pass those higher prices on to consumers. This may cause companies in technology industries to abandon the standard-setting process and limit or forgo investment in new technologies," the FTC said. To remedy this concern, Google has agreed to a consent order that prohibits it from seeking injunctions against a willing licensee, either in federal court or at the U.S. International Trade Commission, to block the use of any standard-essential patents that the company has previously committed to license on FRAND terms.
Under a separate commitment, Google has agreed to remove restrictions on the use of its online search advertising platform, AdWords, that may make it more difficult for advertisers to coordinate online advertising campaigns across multiple platforms. Some FTC commissioners were concerned that Google's contractual conditions governing the use of its API made it more difficult for an advertiser to simultaneously manage a campaign on AdWords and on competing ad platforms, and that these restrictions might impair competition in search advertising. In today's agreement, Google will give websites the ability to opt out of display on Google category-specific websites, such as for travel.
Under the same commitment, Google also has promised to provide all websites the option to keep their content out of Google's category-specific search offerings, while still having them appear in Google's general Web search results. The FTC investigated allegations that Google misappropriated content, such as user reviews and star ratings, from competing websites to improve its own category-specific offerings, such as Google Local and Google Shopping. Some FTC commissioners were concerned that this conduct might chill firms' incentives to innovate on the Internet.
The FTC also investigate whether Google had manipulated its search algorithms to harm category-specific websites and unfairly promote its own competing properties, a practice commonly known as "search bias," particularly in Google's Universal Search offering, which prominently displays targeted Google properties in response to specific categories of searches, such as shopping and local. The investigation also looked to see if Google altered its search algorithms to demote certain category-specific websites in an effort to reduce or eliminate nascent competitive threats. But the FTC concluded that the introduction of Universal Search, as well as additional changes made to Googles search algorithms -- even those that may have had the effect of harming individual competitors -- could be plausibly justified as innovations that improved Google's product and the experience of its users. It therefore chose to close the investigation.
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