FTC Not Compelled to Enforce Consent Order Concerning Google Social Networking Service

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The federal district court in Washington, D.C. has denied a request from the public interest group Electronic Privacy Information Center (EPIC) for an order compelling the Federal Trade Commission to enforce an October 2011 consent order that the agency signed with Google, Inc. EPIC’s complaint seeking injunctive relief under the Administrative Procedure Act was denied.

Following dismissal of the action, EPIC announced that it had filed an emergency appeal with the Court Appeals for the DC Circuit. EPIC said that it had asked the appellate court to overturn the lower court decision before March 1, when Google intended to “change its terms of service and consolidate user data without consent.”

The FTC’s enforcement decisions were committed to agency discretion and were not subject to judicial review, the court held. EPIC, which was not a party to the consent order, contended that Google’s proposed implementation of new privacy policies would violate portions of the consent order.

EPIC alleged that “[r]ather than keeping personal information about a user of a given Google service separate from information gathered from other Google services,” the new policies “will consolidate user data from across its services and create a single merged profile for each user.”

While EPIC’s concerns might well have been legitimate, the FTC was in the best position to evaluate whether Google’s new policies would in fact violate the Consent Order and, if so, to determine what course of action the agency should pursue. The court rejected EPIC’s argument that the FTC had a “mandatory, nondiscretionary duty” to enforce the consent order.

The court noted that it had been advised by the FTC that the matter was under review. Thus, the agency might ultimately decide to institute an enforcement action.

In denying the requested relief, the court noted that its “decision should not be interpreted as expressing any opinion about the merits of EPIC’s challenge to Google’s new policies.” The court did not reach “the question of whether the new policies would violate the Consent Order or if they would be contrary to any other legal requirements.”

The February 24, 2012, decision in Electronic Privacy Information Center v. FTC, Civil Action No. 12-0206 (ABJ), will appear at 2012-1 Trade Cases ¶77,807.

Senator Calls for Close FTC Scrutiny of Google’s Acquisition of Mobile Ad Provider AdMob

This posting was written by Cheryl Beise, Editor of CCH Guide to Computer Law.

A key U.S. Senator this week urged the Federal Trade Commission to closely scrutinize Google’s proposed acquisition of mobile advertising service provider AdMob. Senator Herb Kohl (Wisconsin), Chairman of the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy, and Consumer Rights, expressed his concerns in an April 6 letter to FTC Chairman Jon Leibowitz. Shortly after Google announced its acquisition of AdMob for $750 million last November, the FTC requested further information.

Senator Kohl pointed out that the deal’s critics argue that the combination would allow Google to “leverage its dominance of PC-based search advertising market into the emerging mobile advertising market.” Google-AdMob’s combined market dominance potentially could result in higher mobile advertising prices and lower revenues for applications developers, Kohl said.

Google and AdMob contend that the mobile advertising market is too nascent to determine if any one transaction will result in dominance. According to Senator Kohl, however, the stakes are too high to avoid protecting competition in an emerging market where revenues are predicted to leap from $416 million in 2009 to $1.56 billion in 2013. “[T]he incipiency of the smart phone advertising market is not in itself a reason for the FTC to desist from taking any necessary action to enforce the antitrust laws or protect competition,” Senator Kohl wrote. Advertising accounted for 97% of Google’s $23.7 billion in revenues in 2009.

Senator Kohl also urged the Commission to ensure that consumers’ privacy would be safeguarded if the deal is approved. “[T]he combined firm will gain access to a treasure trove of data on millions of consumers’ behavior, search and product preferences,” Senator Kohl noted.

Senator Kohl’s letter arrived amidst news reports that FTC lawyers are preparing to challenge the Google-AdMob deal on antitrust grounds. Any action taken by the FTC would need to be cleared by the agency's Bureau of Competition and approved by the FTC Commissioners.

Justice Department Opposes New Google Book Settlement

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

Despite the substantial progress reflected in the proposed amended settlement agreement in The Authors Guild Inc. et al. v. Google Inc., the U.S. Department of Justice has advised the federal district court in New York City that class certification, copyright, and antitrust issues remain.

The settlement agreement between Google and the authors and publishers aims to resolve copyright infringement claims brought against Google by The Authors Guild and five major publishers in 2005, arising from Google's efforts to digitally scan books contained in several libraries and to make them searchable on the Internet.

In a Statement of Interest filed with the court on February 4, the Justice Department said:

“Although the United States believes the parties have approached this effort in good faith and the amended settlement agreement is more circumscribed in its sweep than the original proposed settlement, the amended settlement agreement suffers from the same core problem as the original agreement: it is an attempt to use the class action mechanism to implement forward-looking business arrangements that go far beyond the dispute before the court in this litigation.”

On September 18, 2009, the Justice Department submitted views to the court on the original proposed settlement agreement.

At that time, it proposed that the parties consider changes to the agreement, such as imposing limitations on the most open-ended provisions for future licensing, eliminating potential conflicts among class members, providing additional protections for unknown rights holders, addressing the concerns of foreign publishers and authors, and providing a mechanism by which Google’s competitors can gain comparable access. (For further inforamtion on the Justice Department's objections, see September 21, 2009 posting on Trade Regulation Talk.)

In last week’s filing, the Justice Department recognized that the parties made substantial progress on a number of these issues.For example, the proposed amended settlement agreement:

 Eliminates certain open-ended provisions that would have allowed Google to engage in certain unspecified future uses,

 Appoints a fiduciary to protect rights holders of unclaimed works,

 Reduces the number of foreign works in the settlement class, and

 Removes a “most-favored nation” provision that would have guaranteed Google optimal license terms into the future.

The changes, however, do not fully resolve the government's concerns. The agency commented that the revised amended settlement agreement still confers significant and possibly anticompetitive advantages on Google as a single entity, thereby enabling the company to be the only competitor in the digital marketplace with the rights to distribute and otherwise exploit a vast array of works in multiple formats.

The Justice Department’s filing with court regarding the amended settlement is available here on the Department of Justice Antitrust Division’s web site.

Revised Google Book Settlement Attempts to Address U.S. Competition Concerns

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

After consulting with the U.S. Department of Justice, lawyers representing the parties in a copyright dispute brought by authors and publishers against online search engine Google have filed a revised settlement agreement with the federal district court in New York City.

The settlement would resolve claims that Google violated copyright laws by scanning books, creating an electronic database, and displaying excerpts without the permission of copyright holders. Google has denied the claims.

On November 13, 2009, the revised settlement proposal was filed with the court for preliminary approval. The revised proposal comes after the Justice Department expressed concerns that an earlier settlement agreement could harm competition. Specifically, the Justice Department questioned the proposed settlement’s pricing terms and its creation of "de facto exclusive rights for the digital distribution of orphan works."

The latest settlement proposal, which narrows the scope of the books involved, "clarifies how Google's algorithm will work to price books competitively," according to the parties. It will simulate the prices in a competitive market. Moreover, the new proposal removes the so-called "most-favored nation" clause, which pertains to licensing of unclaimed works.

The Justice Department had contended that the most-favored nation clause in the earlier settlement could discourage potential competitors from attempting to compete with Google in digital-book distribution.

Whether these concessions will satisfy the Justice Department's competition concerns is unclear. It has been reported that the Justice Department will provide its views on the revised settlement early next year.

Another change to the proposed settlement limited its scope to books published in the U.S., Great Britain, Canada, and Australia. This change was prompted by objections by foreign governments, rather than the Department of Justice.

Text of the revised settlement agreement in The Authors Guild, Inc. v. Google, Inc., appears here. In the next week, the federal district court is expected to set a date for a “fairness hearing.”