Excerpts from FTC Staff Report on Google’s Search Practices

Bloomberg News

The Federal Trade Commission inadvertently shared with The Wall Street Journal a document outlining findings by key staffers who spent more than a year investigatingGoogle GOOGL +0.07%’s business practices.  Here are some highlights from the staff report:

–The FTC’s bureau of competition recommended that the commission take legal action against Google in three areas, related to the search giant’s advertising practices and its use of content from other web sites to boost its own product offerings.  Competition staffers found that Google’s conduct “has resulted – and will result – in real harm to consumers and to innovation in the online search and advertising markets.”

–Staffers recommended the FTC bring a case against Google, but they acknowledged “the many substantial risks associated” with such a move. “On a global level, the record will permit Google to show substantial innovation, intense competition from Microsoft MSFT -0.06% and others, and speculative long-run harm,” the report said.

–On the biggest issue in the probe, whether Google unlawfully biased its search results in favor of its own products, the staffers said the FTC should not sue, but said the matter was “a close call.”

–The report said Google was “in the unique position of being able to make or break any web-based business.” Google’s prominent placement of its own properties and demotion of rival sites in its search results “has resulted in significant loss of traffic to many competing vertical websites,” the report said.

–Staffers acknowledged challenges in determining whether Google had violated antitrust laws, in part “because of the strong procompetitive justifications Google has set forth.” It added:

“We are faced with a set of facts that can most plausibly be accounted for by a narrative of mixed motives: one in which Google’s course of conduct was premised on its desire to innovate and to produce a high quality search product in the face of competition, blended with the desire to direct users to its own vertical offerings (instead of those of rivals) so as to increase its own revenues. Indeed, the evidence paints a complex portrait of a company working toward an overall goal of maintaining its market share by providing the best user experience, while simultaneously engaging in tactics that resulted in harm to many vertical competitors, and likely helped to entrench Google’s monopoly power over search and search advertising.”

–Google took unusual steps to “automatically boost the ranking of its own vertical properties above that of competitors,” the report said. “For example, where Google’s algorithms deemed a comparison shopping website relevant to a user’s query, Google automatically returned Google Product Search – above any rival comparison shopping websites. Similarly, when Google’s algorithms deemed local websites, such as Yelp or CitySearch, relevant to a user’s query, Google automatically returned Google Local at the top of the [search page].”

– The FTC staff found that, to improve Google’s shopping results, Google scraped ratings and user reviews from Amazon.com 'sAMZN -0.89% site. It also used Amazon’s product rankings to determine the order in which to rank products within Google Product Search, the staff said.

–The report indicated that Amazon sought to bolster rivals to Google search, even at a cost to its bottom line. Google provided search services on Amazon’s website, which generated almost $170 million in revenue for Amazon. But Amazon shifted some search traffic to Microsoft’s Bing, “even if it is losing money on each query,” the report said. Amazon wanted to use multiple search suppliers “just to try to foster a more competitive marketplace,” the staffers said.

–The FTC staff said the market for such “syndicated” search results was “not robustly competitive.” It said “Google has been unilaterally reducing revenue share percentages to many of its syndication customers (in effect raising prices) with apparent impunity.”