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Summary:

An “upstart competitor” is claiming Google (NSDQ: GOOG) punted it to the farthest reaches of its search results and is now fighting to level…

Google Europe
photo: Corbis

An “upstart competitor” is claiming Google (NSDQ: GOOG) punted it to the farthest reaches of its search results and is now fighting to level the playing field. Its claim has the makings of a great underdog story — but for the fact that the case looks a lot like other “David vs. Goliath” cases that have come unraveled in the last year.

The David this time around is ShopCity.com, a Silicon Valley valley company that runs a network of local shopping sites like ShopBuffalo.com and ShopPaloAlto.com. Yesterday, Bloomberg reported that the firm filed a complaint with the Federal Trade Commission accusing Google of rigging its search results to make it hard for consumers to find the ShopCity sites. The crux of the complaint is that Google regards ShopCity as a potential competitor to its own shopping sites so the search giant schemed to crush its would-be rival in its crib. For its part, Google alleges that it downgraded ShopCity because, well, its sites are kind of lousy.

To make sense of what is going here, it’s helpful to recall the case of MyTriggers.com, an Ohio-based shopping site that accused Google of a similar plot in 2009. The apparent plight of MyTriggers attracted headlines and fueled calls for investigations into Google’s business practices. Soon after, the Texas attorney general said the state was looking into claims that Google had used its power to suppress MyTriggers and other small sites like Foundem and Trade Comet. The small companies also sued Google in court.

Since 2009, however, various courts have dismissed the claims, and it has emerged that Microsoft (NSDQ: MSFT) has been behind the lawsuits. The Wall Street Journal (NSDQ: NWS) reported, for instance, that MyTriggers was represented by the Washington office of Cadwalader, Wickersham & Taft, a gold-plated law firm that represents Microsoft and that is far beyond the budget of most small companies.

The new ShopCity case appears to resemble these previous ones. This time around, the small company is being represented by Gary Reback, a legendary anti-trust lawyer who directed Microsoft’s campaign against the Google Book Settlement. Reback and Microsoft are likely using ShopCity as a front to help convince regulators and the public that “if there’s smoke, there must be fire” when it comes to Google. [Update: In an email message, a Microsoft spokesperson denied that the company is behind the ShopCity.com complaint]

This attack-by-proxy tactic is also consistent with Microsoft’s efforts to harass Google on other fronts. For instance, the company funded an NYU professor to annotate objections to the Google Book Settlement, and it continues to retain Florian Mueller, a patent blogger who regularly writes negative news reports about Google’s smartphone technology.

None of this means, however, that ShopCity’s claim lacks merit. Despite its protestation that “competition is just a click away,” Google does have dominant market power in the search business — which is the first of a two-part test used to determine if a company is breaching Section 2 of the Sherman Act. The second is whether a company is abusing that dominance, and so far there is no evidence that Google has done so.

Legal tests aside, commonsense also suggests that the ShopCity claim is trumped up. The company’s shopping web sites have a content-farm quality, which, as Marketing Pilgrim and others have noted, doesn’t tend to go over well with either search engines or consumers. This is similar to the now-defunct MyTriggers which, rather than offering a rich shopping experience, simply aggregated a host of trailer-park merchandise like Lil Wayne t-shirts.

The shoddy nature of these sites raises the question of whether they are in fact “competitors” and, more obviously, why Google would risk its reputation and further regulatory attention by crushing them. If Google did in fact want to use its search power to downgrade rivals, it’s a safe bet that it would begin with the likes of Amazon (NSDQ: AMZN) rather than a two-bit start-up.

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  1. Hi Jeff,

    Thanks for your assessment, though I think your headline is a little misleading, as you haven’t actually dug into the story behind the FTC filing.

    If you’d like a copy of the complaint, or to speak with us so you can get the inside scoop for any further articles, please contact me via Twitter.

    I think your piece is missing a few key details about our situation…

    First, let me clarify that this is not a lawsuit. I was unaware of ‘mytriggers’ until this article, but after looking into it, it’s a totally different situation than ours.

    We have filed a complaint with the FTC in hopes of sparking a serious investigation into Google’s business practices to determine if, and how, they are behaving in an anti competitive manner.

    To paraphrase Google’s Chairman, Eric Schmidt (http://tinyurl.com/yk46p64), if they have nothing to hide, then there’s no reason for them to oppose an investigation.

    We wish that Google would be more transparent, and that they would not engage in practices that, to us, certainly appear anti competitive.

    It seems that the only time Google responds is when they are faced with negative publicity or government intervention, which leaves few options outside of filing a complaint with the FTC.

    Believe me, I would rather just run my business, but unfortunately, we were forced head-on into this issue when Google began penalizing our websites under the guise of ‘quality control’. This despite the fact that we regularly receive compliments from businesses and users on the ease of use, appearance and functionality.

    You say that we pose no threat to Google, and that if they were to risk going after a competitor, it would be Amazon. However, you seem to ignore the fact that Google was never capable of squelching Amazon as their brand was established ahead of Google’s. Same thing with a competitor like Yelp that built its brand in local search prior to Google launching their own local search service.

    It’s much easier for Google to suppress startups like ours because consumers are not yet searching for our brand on a large scale (though, on a local level, they certainly are).

    You also say that our system doesn’t work with search, or consumers, which is just not true.

    For instance, go to Google and do a search for any category – ex. restaurants, plumbers, dentists, etc. plus ‘midland, ontario’ and look to see where we come up (the full ‘midland, ontario’ geo-modifier is necessary as there are so many places called Midland). Or, do a search for ‘palo alto restaurants’.

    Want to buy a gift certificate online for a local business in Corona, California? Go to http://www.shopcorona.com/giftcertificates. It’s the easiest way to get what you’re looking for.

    Hundreds of thousands of consumers have used our local sites, and in some communities, our sites are the hub of local commerce.

    You can see some of our active cities here:

    http://www.shopcity.com/examples

    We have developed a very comprehensive and holistic platform for community commerce, and that is why companies like The Buffalo News, owned by Berkshire Hathaway, have partnered up with us and paid substantial licensing fees to use our system (ex. http://www.shopbuffalo.com).

    You can see how it works and what the platform offers here:

    http://www.shopcity.com/platform

    The fact that Google recently began copying our multi-domain model (http://tinyurl.com/c72kbpj), and our in-community approach, is a good indication that we are onto something and not just a ‘two-bit upstart’.

    Google has stated that the local space is of great importance to them (http://tinyurl.com/7so9l34), so they definitely have a motive to hinder others from becoming leaders, and if all it takes to stop a competitor from developing is a quick tweak to a domain profile, then why not?

    Most companies don’t get as far along as we have with our campaign to have our sites restored in Google and end up just fading away. We were able to make progress with Google because we have entire communities backing us, because we met Gary Reback, and because we were persistent in raising awareness in the press and pursuing our case with the FTC. Otherwise, we would probably still be penalized right now.

    I appreciate the opportunity to respond, but perhaps next time, you could do more research on the companies you claim to have inside information on before you come up with a catchy headline and hit ‘post’.

    All the best,

    Colin

  2. Hi Colin,

    Thanks for your detailed response and apologies to you and other readers it did not appear when you submitted it this afternoon (our back-end system that processes comments was down and no reader comments for this or any other story appeared until quite late this evening).

    As for your substantive arguments, I stand by my final point that it seems improbable for Google to risk its reputation by manipulating its search results in order to sabotage a much smaller entity that (in my opinion at least) does not pose a strategic threat.

    Nor do I belittle your accomplishment in creating a national shopping network with a number of city partners. The issue is that the type of content you are offering is not valued by search engines nor by users (the preponderance of commentary on SEO sites appears to back this position).

    I take at face value your claim that you were unaware of MyTriggers and the related complainants. Still, your situation resembles the other ones in that it involves a prominent person with close ties to Microsoft. This may be a coincidence but it does not change the underlying fact; I will leave it to others to draw their own conclusions.

    As for the idea that “they should just come clean”, Google’s reticence is understandable given that the subject in question is its search algorithm — the company’s most critical trade secret. No company, small or large, is willing to share this sort of information. In Google’s case, there is no question that competitors would dearly love to use the legal discovery process to allow their lawyers to peer at the company’s confidential documents.

    None of this meant to be dispositive as to whether or not Google engages in anti-competitive behavior. The reality is that the company holds a near 70% market share in search (a dominant market position if there ever was one) and that companies live and die by its results. Abuse of this market position would have huge implications for you, for paidContent and anyone else with a website. But for now, no compelling evidence has arisen to refute Google’s position that it does not tamper with its results and that doing so would be bad for the company’s business. And that includes, in my opinion, the allegations of ShopCity.

    Jeff

  3. Hi Jeff,

    Thanks for your response.

    I think you underestimate how difficult it is to pose a threat to Google’s reputation as well. They have loads of goodwill (because they give everything away for ‘free’, because they did such a great job at search in the early days, and also because they have a quirky, fun personality) and a chorus of defenders who assume they can do no wrong.

    Whether or not Google considers us a strategic threat, no one outside of Google knows.

    The fact of the matter is that it’s much easier for Google to ‘kill
    competition in the cradle’ than to try to mitigate it after a large
    brand and following has been built.

    Besides, there are many large competitors that believe they unfairly use their search monopoly to prevent consumers from reaching them as well.

    Regarding our content being of little value, I beg to differ. We are actually going out into the communities we serve to bring small businesses and their offers online for local shoppers. In many cases, this content does not exist anywhere else and is high-value, unique information that is structured, human-verified and serves consumer demand. We have exactly the kind of content that Google searchers want.

    We are a small company, and I can assure you we have no ties to Microsoft. In fact, Gary was one of the driving forces behind the campaign to have Microsoft investigated by the FTC, so I’m not sure how you think he is associated with them.

    There are many steps Google could take to limit themselves from acting as both the platform and the product, and they have had ample opportunity to put procedures and policies in place to avoid creating the appearance of anticompetitive behavior. To my knowledge, none of these measures, or even an FTC investigation would require them to open proprietary technology up to competitors.

    With all due respect, as you don’t have a copy of our FTC filing, or know the details of our experience, I don’t think you are in a position to say that there is no compelling evidence. I have offered it to you previously, and would be happy to share more information if you would like to do a follow-up article.

    All the best,

    Colin

  4. Seems like such cry-babies.. Quit depending on google to have any type of success.

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