How the FTC Could Beat Google

Robert Lande, Jonathan Rubin, Oct 16, 2012

The U.S. Federal Trade Commission (“FTC”) is rumored to be deciding whether to bring a “pure Section 5” case against Google as a result of complaints that the company unfairly favors its own offerings over those of its rivals in its search results. If successful, the case could do more than improve competition in the crucial multi-billion dollar online marketplace. It also could revitalize Section 5 of the FTC Act and solidify the agency’s authority to prevent the  “unfair methods of competition” or “unfair or deceptive acts or practices” that do not violate the other Antitrust or Consumer Protection statutes. But the case will fail miserably at the hands of a reviewing court and the agency will be confined to relatively non-controversial enforcement violations if the FTC fails to impose upon itself a tightly bounded and constrained legal framework that contains clear limiting principles.

As former FTC Chairman Bill Kovacic recently warned, an unbounded Section 5 case will never be sustained by a reviewing court. He is correct. The FTC’s 2008 N-Data settlement, for example, would have been overturned if it had reached the appellate court because its Section 5 formulation was without constraining principles. There is clear Supreme Court precedent holding that the FTC Act is broader than the other antitrust laws and covers incipient violations and conduct violating even the “spirit” of, or policies underlying, the other antitrust laws. Nevertheless, the only way a court will allow the FTC to pursue a pure Section 5 theory against Google would be if the agency constrains itself with a coherent principle of competitive harm: the consumer choice framework.

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