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OLIVER: Google-FTC settlement a victory for the free market

Consumers don’t want a state-run search engine

- - Friday, January 4, 2013

While Christmas festivities for many concluded last month, American consumers received a late gift from two unlikely co-donors: Google and the Federal Trade Commission (FTC), who have resolved the agency's 18-month antitrust investigation into the company's search business.

This agreement is good for both the FTC and Google, as well as for the consumers they serve. The only complainers remaining are Google's competitors, well-heeled lobbyists like FairSearch, an advocacy group established to lobby on behalf of Google's rivals. They staked time and money on the claim that Google is an illegal monopolist -- with which the FTC ultimately disagreed. Their efforts were simply an attempt to gain market share by persuading the feds to do the heavy lifting for them, as opposed to competing in an open market.

There are several salient points to make about the FTC's investigation. The most important may be that Google doesn't charge searchers for the service it provides. Traditional antitrust law operates to protect consumers from monopolistic behavior -- traditionally defined as overcharging or underdelivering. If a monopolist firm raises its price, consumers have to pay that price (so the theory goes) because they can't get the good from any other supplier. That's bad for consumer welfare, so antitrust law steps in to regulate the monopolist's behavior.

With so many sources of information available to consumers today, however, it's extremely difficult to argue that Google has a monopoly in answering consumers' questions. When the good in question -- in Google's case, search results -- is free, price is obviously not an issue. That's great for consumers -- but not for an antitrust case. Because the good, a "search," was free, there wasn't any price that could be raised, and that made it difficult -- actually impossible -- to find any harm to consumers.

People use Google search because it serves their needs better than other search engines. If Google started skewing the results to harm consumers, consumers could switch to another search engine at zero cost. Tellingly, consumers haven't, even though Bing, Yahoo! and a host of niche search engines are merely "a click away."

After 19 months of rigorous investigating (during which the agency even brought in an outside litigator to help explore potential new legal theories), the FTC arrived at the conclusion most Internet users probably knew instinctively before the FTC began: The market works, and the pressures that force Google to keep innovating are far more powerful than any remedy the federal government could devise.

So who "won"? Perhaps everyone -- well, except Google's competitors. Google won because it can stay in charge of its product, and won't have to engage in a long and expensive battle with the Federal Trade Commission.

The FTC won because it avoided what almost certainly would have been a disfiguring defeat in court.

Most important, consumers won because their favorite search engine will continue to be designed by private industry, not by government. Moreover, the millions that Google would have spent battling the FTC can be spent instead on improving its products.

Even Google's rivals in the FairSearch coalition can win too -- if they want to -- by learning a lesson. The way to increase market share, they should remember, is to spend their resources on innovation, not on lobbying the FTC.

Daniel Oliver, former chairman of the FTC, is an adviser to Google. The views expressed are his own.