Google is likely to face a new antitrust probe by the U.S. Federal Trade Commission into whether the company is using its leadership in the online display-advertising market to illegally curb competition, people familiar with the matter said.
The fresh inquiry, which follows the FTC's decision to close a review of Google's search business in January without taking action, is in the preliminary stages and may not expand into a larger probe, said the people, who asked not to be named because the matter hasn't been made public.
FTC investigators are examining whether Google is using its position in U.S. display ads -- a $17.7 billion industry that includes the sale of banner ads on websites -- to push companies to use more of its other services, a practice that can be illegal under antitrust laws, the people said. Google has been drawing regulatory scrutiny around the world as it bolsters its market share of digital advertising.
Canada's Competition Bureau is preparing to start a formal inquiry into Google's search practices, the company disclosed last week. The European Union is investigating Google for the way it operates the search business and also has opened a probe into its handset unit, Motorola Mobility, over the licensing of its patents to rival device makers. Antitrust agencies inArgentina and South Korea are also scrutinizing the company.
Niki Fenwick, a spokeswoman for Google, and Peter Kaplan, a spokesman for the FTC declined to comment on the probe. Google fell almost 1 percent after the news of the probe was released and closed at $882.79, down $6.63, in New York trading.
Google, avoiding a potentially costly legal battle with U.S. regulators, ended a 20-month probe in January of whether it unfairly skewed search results by pledging to change some business practices and settling allegations it misused patents to thwart competitors in smartphone technology.
The company said it would voluntarily remove restrictions on the use of its online search-advertising platform and offer companies the option of keeping their content out of Google's search results.
The FTC's resolution of its search-practices probe came as a blow to Google's competitors including Microsoft, Yelp and Expedia. An alliance of such e-commerce and web-search companies pressed the agency to bring a lawsuit, claiming Google's dominance of Internet search, combined with the company favoring its own services in answers to queries, violates antitrust laws.
Microsoft isn't involved in the FTC's review of the display advertising market, one of the people said.
The FTC secured clearance to move forward with the new investigation in the display-advertising market from the antitrust division of the Justice Department under a process that ensures the two agencies don't investigate the same matters at the same time, one of the people said.
For the past two years, the antitrust division and the FTC have split investigations of theMountain View, California-based company, with the FTC conducting a broad probe of whether Google's business practices hurt competition and the antitrust division reviewing itsacquisitions.
In the new probe, the FTC is exploring concerns about Google's growing market share with some of its digital advertising tools and services, including technology that places display ads on websites, the people said.
The FTC is looking at whether Google is using its tools to force companies to bypass competing products and use other Google properties, including a marketplace for buying and selling Internet display ads, and features that help companies maximize revenue, the people said. The agency is also reviewing Google's potential to use its dominance in search advertising to squeeze out competitors in the display advertising market, the people said.
Some of the advertising tools came from Google's purchase of DoubleClick, which received antitrust approval at the end of 2007. The FTC, which voted 4-1 to approve the merger, said competition among display-ad networks was "dynamic," according to a statement at the time.
"We will closely watch these markets and, should Google engage in unlawful tying or other anticompetitive conduct, the commission intends to act quickly," the FTC said in the statement.
Google's share of the display ad market reached 24% during the first quarter in the U.S. with its closest competitors, Yahoo and Facebook, each holding less than 10% market share, according to research firm IDC.
Facebook, the largest social-networking service, lost its lead to Google last year and is expected to expand its market share at a slower pace. Facebook will grab 16% in 2015, up from 15% last year and less than 3% in 2008, EMarketer, another research firm, estimates.
Google took 47% of total U.S. digital ad spending in the first quarter of this year, according to IDC.
"The market positions of Google and DoubleClick suggest that the combined firm could engage in a number of potential anticompetitive strategies to further enhance its positions in the various markets at issue," the FTC wrote in its DoubleClick statement.
The practice of tying, or bundling, products and services together may be a violation of antitrust laws if the company in question has the market power to force customers to acquire products or services together that they might prefer to buy from different providers, said Spencer Waller, an antitrust law professor at Loyola University Chicago.
One of the most high-profile tying cases was the lawsuit the U.S. brought against Microsoft in 1998, when it claimed the company unlawfully protected its Windows monopoly by keeping computer makers from promoting web browsers that competed with Microsoft's Internet Explorer.
The government contended Microsoft hindered access to the Netscape Navigator browser because its Java programming language let programmers write applications that ran on any operating system, not just Windows. The final judgment, a settlement in which Microsoft agreed to end the anticompetitive conduct, put the company under court supervision until 2011.
"Specialty producers may be very good at what they do, but if they can't get access to their customers, that's a legitimate harm that antitrust has addressed historically and should continue to address," Waller said.
-- Bloomberg News --