Is It Legal For Google To Shut Competitors Out Of Social Search?

Google Inside Search

Twitter and some pundits are crying foul over Google’s decision to exclude certain competitors from its new search and social networking hybrid. But what law says the company has to help its competitors in the first place?

Google’s decision to exclude Facebook and Twitter from some search results is a big deal because it’s a direct acknowledgement that the famous algorithms are not always objective. And it shows that, when it comes to grabbing a slice of social network ad dollars, the company is willing to risk regulatory blow-back.

This still doesn’t mean Google (NSDQ: GOOG) did anything wrong.

Background Context

Google yesterday announced a new feature called ‘Search plus Your World‘ that offers signed-in users a customized set of search results that contain personal photos and friends’ activities. But soon after a honcho at Twitter, aware that its results were excluded, tweeted “bad day for the Internet” and warned of “search being warped.” Google responded by suggesting that Twitter was to blame for the omissions by breaking off a long-running data deal between the companies.

Influential search engine journalist Danny Sullivan has since interviewed Google chairman Eric Schmidt, and this morning penned a persuasive piece that shows Google is not being entirely truthful about the affair. The bottom line is that, even if Twitter and Facebook are shutting off parts of their data stream, Google still has access to mountains of data from the public internet — data it chose to exclude from its personalized search results.

What this means is that a customized Google search will scrub out results that a user would ordinarily see under a regular search.

This is a big deal because Google has long maintained that it doesn’t tamper with its search results. Although Google has not technically broken its rule (its normal results are still objective,) it’s a slippery slope.

After admitting that it put a thumb on the scale in this case, Google will have to turn around and say it didn’t do so on other occasions. ‘Search plus Your World’ has already set off rumors about a new FTC investigation. And the controversy will no doubt give fresh ammunition to those like Rick Santorum, the Republican presidential candidate whose top Google result is a filthy sex term.

Do Rigged Results Violate the Law?

Blogger MG Siegler was quick to point out yesterday that Google’s gambit will amplify anti-trust accusations against it.

Recall that, in recent years, small companies have accused Google of unfairly booting them to the equivalent of search Siberia. They claim Google lowered them in the search rankings in order to clear the way for its own push into new fields like online shopping and travel. The conspiracy-minded companies (most of which have ties to Microsoft) have so far struck out in court, however, and produced no convincing evidence that Google plotted against them.

The case is different this time, though, because Google is clearly discriminating against Facebook and Twitter. It will have to argue that its actions are legal all the same under antitrust or free speech laws.

I asked a Google spokesman, Adam Kovacevich, if Google has a First Amendment right in its search results. He referred me to recent remarks by Schmidt before the US Senate:

…Google’s formulation of search results is a type of “scientific opinion”-a prediction of what the user might be looking for. Those results have been deemed by several courts to be a protected form of free speech under the First Amendment.18 Just as a government panel could not dictate to the *New York Times*, the Drudge Report, or the Huffington Post what stories they could publish on their websites without infringing their freedom of speech, so too would government-mandated results likely violate Google’s freedom of speech.

Google’s free speech theory is based on a lower court ruling in 2003 that found the company’s results were indeed just an opinion, but that reasoning has yet to tested further. It’s also unclear if the First Amendment would be a shield if Google did in fact engage in anti-competitive behavior.

But in any case, Kovacevich made clear that Google believes it isn’t breaking anti-trust law in the first place. He repeated the company’s oft-made argument that competition is just a click away.

Anti-trust investigations turn on two questions: whether a company has a dominant market share and, if so, whether it is abusing that dominant position. With a near 70 percent market share in search, Google will have a hard time arguing it’s not dominant. This means it can attempt to define the market in question not as search but as social networks where Facebook is dominant and Google clearly is not. Or else it can argue that excluding big competitors from its product is not abusive behavior.

Mark Lemley, a leading patent and anti-trust expert at Stanford, told the New York Times (NYSE: NYT) that Google’s behavior is not abusive:

“It can’t be the rule that if Facebook says no, you can’t search our links, that Google can’t search its own links. That is not antitrust.”

Lemley has worked for Google in the past but on unrelated matters.

The upshot is that, in the case of social search, Google has abandoned its strongest defense to antitrust claims — that its results are objective — in order to rely on other arguments. Is it worth the risk?

The Business Case

Perhaps it’s no coincidence that Google unfurled “Search plus Your World” the same week as another big event for social networks.

Today, the first “sponsored stories” appeared in the news feeds of Facebook users. These “stories” are in fact ads based on products that a user or their friends have “Liked’ in the past.

They also represent a gold mine that Google desperately wants a piece of. This appears to be why the company made the profound strategic shift to begin offering an altered set of results for its social search product. Only time will tell whether this will pay off with a shiny new revenue stream or if will it instead leave Google with a thinly-populated social network and a big regulatory headache.

My own take is that the biggest problem with Google’s initiative — and those of other tech behemoths like Facebook and Twitter — is not anti-trust but anti-transparency. People (and regulators) might feel much more comfortable with these companies if they bore a big sign in plain English that explained why they control the information the way they do.

Google might have had a smaller headache on its hand if the company had announced, “we are excluding Facebook and Twitter from the results because we want to build up our own social network — the rest of our search results are the same.” Instead, Google may have fueled another wave of paranoia and regulatory attention.

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