Government Talks of Suing Google in Antitrust Lawsuit
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UPDATED: Oct 15, 2012
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Federal regulators with the Federal Trade Commission (FTC) are moving closer to a possible antitrust lawsuit against Internet titan Google Inc., according to Reuters.
Widespread news articles are reporting that the lawsuit, which if filed will come next month or early December, alleges that Google uses its dominant search engine to suppress competitor sites in order to boost their own products.
The investigation into possible anti-competition practices is considered among the most significant of its kind in many years. Investigations by the U.S. government into Google’s Internet power have been underway for some time, but regulators are now taking a serious stance, recommending that a lawsuit be filed, with pressure from Google rivals.
Reuters reports that four of five FTC commissioners agree Google may be stifling competitors. Some believe government interference to this degree could be harmful to the overall freedom of the Internet marketing landscape and that Google did not arrive at its dominant position through antitrust means. Others believe Google has actively gained a competitive edge of search results for areas like travel, media and jobs through posting Google-related results first and moving other sites further down.
A More In-depth Look into Antitrust Laws
While individual states have antitrust laws, there are three main federal acts that govern anti-competition. They include:
- The Sherman Act: prohibits such unreasonable trade restraints as price fixing, market division and rig bids. This act seeks to stop willful intention to monopolize.
- The Clayton Act: among other endeavors, this act governs mergers and acquisitions, and “interlocking directorates”, which is when one person works with competing companies.
- Federal Trade Commission Act: violation claims of this act can only be brought by the FTC; elements are basically the same as those of the Sherman Act (and allows the FTC to bring suit without envoking the Sherman Act). Click here for more on the Federal Trade Commission Act.
These antitrust laws are in place to prohibit unfair business practices and ensure monopolies don’t exist for any given industry. But it’s important to note that it’s not illegal to have a monopoly; it is only a violation of government law to become a monopoly through anti-competition means. This would be a major element of a Google antitrust lawsuit. Federal regulators would have to show that Google employed some sort of misconduct in their strategy to achieve their search engine dominance in order to prevail.
A court will consider whether a violation of the Sherman Act is a per se violation or a rule of reason violation. A per se violation is one that requires no investigation into the effect of the antitrust practice; it is clear that the violation caused anti-competition and a civil action would only require proof that the violation took place. Rule of reason, on the other hand, is not so clear-cut, but will require proof that a combination of actions (with an overall look at the industry) has led and will lead to future consequences for fair competition in that industry. In Google’s case, the FTC will have to prove a rule of reason violation as the issue of suppressing Internet competition is not definite, and not per se.
In addition, because proving a rule of reason violation requires a look at the bigger picture, prosecutors may have a difficult time proving that in looking at the overall world of online advertising, Google has the significant advantage they are claiming. In other words, there are many other avenues for successful advertising online, and perhaps Google does have a monopoly over their search results, but competitors have other options. Some would even argue that Google is merely setting the stage for more innovation through competition and that this is not grounds for a lawsuit, but a fundamental element of the marketplace.
But without all the facts of a pending lawsuit, or whether it will be filed at all, it is hard to say one way or the other. We can say, however, that the issue has sparked some interesting legal debate and has the capacity to shape Internet antitrust laws for years to come.