FTC to Serve Google With Subpoenas in Broad Antitrust Probe

FTC to Serve Google With Subpoenas in Broad Antitrust Probe
By THOMAS CATAN

WASHINGTON—The U.S. Federal Trade Commission is poised to serve Google Inc. with civil subpoenas, according to people familiar with the matter, signaling the start of a wide-ranging, formal antitrust investigation into whether the search giant has abused its dominance on the Web.

The new FTC investigation, by contrast, will examine fundamental issues relating to Google's core search-advertising business, which still accounts for the majority of its revenue. Those issues include whether Google—which accounts for around two-thirds of Internet searches in the U.S. and more abroad—unfairly channels users to its own growing network of services at the expense of rivals'.

In November, the European Commission opened its own formal investigation into allegations by several companies that it had violated European competition laws.

Many see in the possible case against Google an echo of the Justice Department's landmark lawsuit against Microsoft Corp. in the 1990s. The company narrowly managed to survive being broken up, but the case is credited with checking the company's ability to use its dominance in personal computer operating systems to control other technology sectors.

Still, Google won't be an easy case for the FTC to win, experts say. Under U.S. antitrust law, it isn't illegal to have a monopoly—only to abuse it. And courts have significantly narrowed the scope of antitrust law in recent years, further raising the bar for the FTC.

Some companies complain about the way that Google ranks its services in its "natural" search results or the amount it charges them for placing ads, contending that its market power gives it the ability to determine whether businesses succeed or fail.

Foundem.co.uk, one of the companies that triggered the European probe, claimed that Google demoted their comparative shopping services in their listings and gave prize placement to its own Google product search results instead.

In the U.S., Google has stirred complaints by travel services like Expedia Inc. and TripAdvisor LLC, local listings services like Yelp—as well as Google's perennial rival, Microsoft. Many of them say that Google promotes links to Google's own websites above their own, starving them of vital Web traffic.

Still others say that Google is abusing its dominance in search advertising to extend its control into other markets, from mobile telephony to online television, publishing and airline travel.

Google has long denied acting in an anticompetitive manner, saying that users can easily navigate to other choices on the Web. Many of the antitrust inquiries, Google says, are motivated by companies that fear their business models will be upended by its entry into their market.

"Given our success and the disruptive nature of our business, it's entirely understandable that we've caused unease among other companies and caught the attention of regulators," wrote two Google executives in a company blog post after the official European probe was launched in November.

Google handles some two-thirds of all U.S. web searches, according to comScore Inc. In many parts of Europe, its market share is above 80%.

The Justice Department is also conducting the antitrust review of Google's recent purchase of Internet advertising company Admeld Inc. for around $400 million, people familiar with the investigation said.

The FTC's investigation is expected to take a year or longer to unfold, and it won't necessarily lead to any charges. But the FTC fought hard with the Justice Department to take the case, and so is thought unlikely to simply walk away without taking any action. The FTC and Justice Department share responsibility for enforcing federal antitrust laws in the U.S.

The FTC has been making informal inquiries about Google's business practices for several months. Google lawyers have met with FTC officials several times to explain various aspects of their business, the people said.

Some companies also said privately that they had been contacted by the FTC in recent months, as it decided whether to open an investigation.

The expected issuance of subpoenas is the first concrete signal that the Commissioners have decided there is enough evidence to move forward with a formal investigation.

Write to Thomas Catan at thomas.catan@wsj.com