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A Peek Behind the Curtain of the Texas Antitrust Complaints against Google - Updated 3Xs
Sunday, September 05 2010 @ 12:58 PM EDT

I guess you heard that the Texas attorney general has opened an investigation into antitrust complaints against Google, complaints lodged by Foundem, SourceTool, and myTriggers.com. Them again? Their complaints are not new. Here's Google's blog post about it.

And likely you heard about that utterly tasteless ad in Times Square from Consumer Watchdog, a cartoon of a creepy looking Eric Schmidt handing ice cream to children and asking for their secrets.

I think I can explain both events, because they are part of one campaign. Or as American Lawyer describes [PDF] the lawyers behind this, they are on a crusade against Google. The article is titled "The Google-Slayers". Guess who the lawyers on this crusade have as a client? Microsoft. They handle Microsoft's antitrust work. Guess who sent the first complainant to these lawyers, which led to this crusade? Microsoft. The jumping off point.

So. A crusade to destroy Google. By folks who count Microsoft as an important client, with new clients, at least one of them directly referred to the "crusaders" by Microsoft and the rest now under their umbrella. My stars, gentlemen. Where is your subtlety?

But there's more.

The Cast:

Here are the three whose complaints the Texas AG is investigating, as Google highlights each one:

  • Foundem -- the British price comparison site that is backed by ICOMP, an organization funded largely by Microsoft. They claim that Google’s algorithms demote their site because they are a direct competitor to our search engine. The reality is that we don’t discriminate against competitors. Indeed, companies like Amazon, Shopping.com and Expedia typically rank very high in our results because of the quality of the service they offer users. Various experts have taken a closer look at the quality of Foundem’s website, and New York Law School professor James Grimmelmann concluded, “I want Google to be able to rank them poorly.”

  • SourceTool/TradeComet - SourceTool is a website run by parent company TradeComet, whose private antitrust lawsuit against Google was dismissed by a federal judge earlier this year. The media have noted that TradeComet is represented by longtime Microsoft antitrust attorneys, and independent search experts have called SourceTool a “click arbitrage” site with little original content.

  • myTriggers - Another site represented by Microsoft’s antitrust attorneys, myTriggers alleges that they suffered a drop in traffic because Google reduced their ad quality ratings. But recent filings have revealed that the company’s own servers overheated, explaining their reduced traffic.
Are the complaints legitimate or trumped up? Aside from the courts ruling against one of these complainants already, I have some further details for you that strongly reinforce Google's words, at a minimum. Let's start with that article in American Lawyer, which Cadwalader put up on its site, titled The Google-Slayers. Shades of early media coverage of SCO. Do you remember Darl portrayed as the Linux Killer? We were to learn that you can't kill off a competitor with bogus claims. You can cost them a lot of money, however, and you can cast a pall of suspicion over them and that certainly can cost them business, business that goes to others. Ever track Microsoft's server sales after SCO sued IBM? Coincidence? One might so argue. But what do you think?

So, here we go again, eh? Microsoft is now trying to push Bing down our throats, and suddenly its main competition finds itself embroiled in coordinated legal messes that make little legal sense to us, the public, just as IBM had to deal with SCO's over-the-top legal allegations. It still is, actually, dealing with SCO seven years later and counting.

In the article in American Lawyer, attorney Rick Rule of Cadwalader is described as being on a crusade against Google. And what else do we learn? That in fact it was indeed Microsoft who referred TradeComet, which owns SourceTools, to Cadwalader. And myTriggers contacted TradeComet, or so they tell it, and it referred myTriggers to Cadwalader too. Guess who else is involved? The lawyer who represented Microsoft in its acquisition of Yahoo, after Google was driven out by complaints to the FTC by at least one of these same complainants, as I'll show you in a minute:

Besides Rule, the team includes [Jonathan] Kanter, a former Federal Trade Commission attorney who represented Microsoft in its acquisition of Yahoo! Inc.’s search business, and special counsel Joseph Bial, who holds a Ph.D. in economics and has studied the work of Hal Varian, who is now Google’s chief economist.
But let's go one step deeper, shall we? In April, Consumer Watchdog sent a letter to the US Justice Department which it read at a press conference, asking that it launch an investigation into Google for antitrust violations, and prior to it even launching, it asked for various remedies against Google, including that it be broken up. Consumer Watchdog is the group that placed that over-the-top ad in Times Square, causing even PC World to ask if the group was losing its credibility. You think? Guess who was there in attendance at the April media event?
Consumer Watchdog released its letter to the Justice Department today at a news conference “The Antitrust Case Against Google” at the National Press Club in Washington, DC. In addition to Simpson, participants were Joseph Bial, special counsel at Cadwalader, Wickersham & Taft, who represents myTriggers.com and TradeComet.com.; Simon Buckingham, a New York based Internet and mobile entrepreneur; and Gary Reback, an attorney with Carr & Ferrell and a founder of the Open Book Alliance. They spoke offering their personal views and analysis.
The same little gang. Mr. Bial again, who has been studying one of Google's employee's economic views closely, is working for Cadwalader as special counsel. He was there. Who is paying for all this study, one wonders, not to mention attendance at media events? But look who else was there: Gary Reback of Carr & Ferrell.

Does that law firm name not ring a bell? It certainly should, as it has long been rumored to have been the law firm SCO used for the mock trial it set up prior to suing IBM. And Carr & Ferrell originally represented Psystar against Apple. Do you remember that when Apple sued it, Psystar reacted with an answer with antitrust counterclaims? Yes, another antitrust allegation against another Microsoft competitor. And lo and behold, Carr & Ferrell is part of this new crusade against Google, another Microsoft competitor. The firm bowed out of the case when their antitrust counterclaim bit the dust, interestingly enough, and the firm was replaced by Camara & Sibley.

Say. IBM has been accused of antitrust violations too, regarding that TurboHercules thing.

Small world, isn't it? These days, if you are a Microsoft competitor, it seems there is no avoiding antitrust complaints being lodged against you, even when you are absolutely not guilty or, in Apple's case, not even a monopoly, as the court ultimately ruled it was not. Is this perhaps more abuse of the legal and administrative systems for anticompetitive purposes? If so, could somebody investigate *that*?

Gary Reback used to work for Wilson, Sonsini, as you can see from this exhibit [PDF] from the Novell v. Microsoft antitrust litigation. He was, while with Wilson & Sonsini, called the biggest thorn in Microsoft's side, back in the day during Microsoft's own antitrust troubles in the US. Of course, so was David Boies, and look at him now. Reback then:

In his assaults on Microsoft, Reback has pushed the theory that in the software business "he who has, gets" -- that whoever finds a market first may be able to dominate it, despite having what ultimately may turn out to be an arguably inferior product. If this theory is right, "it calls into question the idea that the free market can select for us the best goods," Reback argues. In that case, "there has to be a role of government to make sure that companies with superior technology" get a fair chance to compete.
And now, he supports the breaking up of Google, so "competitors" with superior products have a fair chance to compete just in case Google might be anticompetitive? Replace Google? Like who? TradeComet, SourceTool, and myTriggers hardly pretend to the crown of supplanting Google. If fact, they are barnacles attached to Google's ship, totally dependent, to hear them tell it, on Google's algorithm to send business their way at a price they can afford. So what is this really all about? Can it be about what they say it's about, when it makes no sense?

Reback wrote an editorial about Google Books published by TechCrunch in February, and the tie-in for Reback is Google Books. It turns out that was "preventive" in nature as well. And here is his book, Free the Market, which argues actually for the opposite, that government regulation of the market with antitrust law is necessary so it doesn't overdose on Ayn Rand, so to speak. And of course, us little people can't possibly know on our own what search engine we like to use. Dude. Let me explain something to you. In search, there is no lock in. All I have to do is find a better search engine, and I'm totally there. I can't, so far, find one. Microsoft has said that it's really hard to compete with Google, because they got a head start, so their algorithms are based on real life experience with millions of users. Might this all be about discovery, to find out how those unreachable algorithms work, with the very enjoyable effect, to Microsoft, of taking away from Google the very thing that makes Google so great at what it does? Let's think about that.

Reback has been an antitrust Big Gun, and a worthy one. But he's in bed with some strange bedfellows now. Here we find him in May of this year taking the Foundem folks around Washington, DC and introducing them to all the big wigs he knows that might be helpful:

This month, Mr. Reback shepherded Adam and Shivaun Raff, the husband-and-wife entrepreneurs behind the London comparison shopping site Foundem, around Washington. The three held meetings with Congressional staff members and antitrust enforcers at the Department of Justice and the Federal Trade Commission.

Their goal was to air the Foundem couple’s complaint that in 2006, Google’s supposedly objective algorithms suddenly dropped Foundem into the netherworld of Google search results. They say Google also raised the rates Foundem had to pay to advertise alongside search results. These moves, the couple say, pushed their comparison shopping site out of view, and Google later put the spotlight on its own shopping listings.

Google is the “arbiter of every single thing on the Web, and it favors its properties over everyone else’s,” said Mr. Reback, sitting in a Washington cafe with the couple. “What it wants to do is control Internet traffic. Anything that undermines its ability to do that is threatening.”

A little hyperbole. No doubt that yearning to control everything on the Internet explains why anyone can use the Android operating system any way they wish. See how stupid his argument is? If Google really wished to control Internet traffic, wouldn't it instead create closed devices, like Apple does? Just because Microsoft acted the way it did when it was dominating, it doesn't follow that everyone else who is successful will do the same. And how in the world could Google be any more open to the world than it is with Android? I'd answer by saying if they used the GPL instead, but that is me. Because they didn't, actually, literally anyone can use the operating system as they please, including Microsoft and other proprietary folks if they want to.

Did you see that Bing has a free app for Verizon's Android phones now? The LA Times tries to spin it as Android showing "its proprietary side", which it does in a way, but I'd view it more as showing that Google's not an anticompetitive monopoly, since Android lets partners do pretty much whatever they want, and anyone, even kids, can write an app with Android's tools. How less controlling can it be? Verizon wanted to do an exclusive deal with Microsoft and put Bing on its phones. They think it's a selling point. So they can. Can you imagine Microsoft doing that, though, allowing Google as the exclusive search engine on Windows phones? In fact, instead they've recently announced that Bing will be the only default search engine on Windows Phone 7. Apparently it's hardwired in:

Greg Sullivan, a senior product manager at the company, explained to Stuart Miles, "The search engine has been heavily integrated into the OS, so it would be hard to offer an alternative."
Of course. Integrated. I recall that argument playing a big role in the US Justice Department's antitrust litigation against Microsoft. Remember the doctored video, presented as "proof" that you couldn't remove the integrated IE browser without a downgraded experience?

To finish the cast of crusaders on the list, I don't know who Simon Buckinham is, the last name in our cast of crusaders, unless he's the guy who writes Appitalism, and who wrote a piece about Google allegedly doing secretive things that you find praised by those insulting Google, a piece that claimed that Google "duped advertisers" out of money, an article that was submitted to the FTC when it was considering the Google purchase of AdMob. The blog post is no longer available on Appitalism at the place that article links to. Maybe because he lost, maybe because it wasn't so, which would make it libelous? The deal was approved in May to his chagrin.

So the Google-Slayers are heavy-duty legal guns, with ties to Microsoft. As for the three small complainants in Texas, I am questioning now why anyone would base an investigation on complaints by them. Without the Google Slayers pushing their cases, I doubt it would ever have happened. SourceTool already lodged a complaint against Google in a courtroom and failed miserably. Another quite similar antitrust complaint was filed by a company that TradeComet, which owns SourceTool, tried to join as a plaintiff in a class action that also went down in flames, with sanctions ordered by the court for filing frivolous claims, as I'll show you. So why would the attorney general in Texas, or anywhere else, open an investigation into these complaints, I am wondering? Why would he take it seriously, after that kind of water under the bridge?

Let's take a closer look at the complainants in Texas, none of whom to my knowledge have any particular ties to Texas more than to any other state, and see what we find out about the folks adopted by the crusaders. It will give you the flavor of this campaign. I can't help but ask, are these three really the best cases these crusaders could find? If so, I think it speaks well of Google's business practices.

Foundem:

Let's start with Foundem, because it filed a similar complaint with the EU Commission last February, joined by Ciao, and here's a little background from Tom Krazit of CNET on Ciao:

And so it begins: the European Commission has opened an antitrust investigation of Google.

The Telegraph reported late Tuesday that European regulators have sent a letter to Google asking the company to explain how it ranks search results and advertising after complaints from European businesses such as Foundem, a price comparison site, and Ciao, another price comparison site owned by Microsoft. Those companies--Foundem in particular--have long complained that Google penalized their Web sites in search results under competitive pressure....

In its blog post Tuesday, Google implied that the complaints from Ciao were directed from Microsoft, easily its biggest rival in the tech industry. "Regarding Ciao!, they were a long-time AdSense partner of Google's, with whom we always had a good relationship. However, after Microsoft acquired Ciao! in 2008 (renaming it Ciao! from Bing) we started receiving complaints about our standard terms and conditions," Google said.

Ah. Microsoft again. Foundem holding hands with Ciao, now called Ciao! from Bing. Some of us recall that Microsoft helped fund SCO's wars against Linux, with a primary focus on IBM, another Microsoft competitor. And here they are again, in yet another battle against another competitor of Microsoft's, Google.

Foundem, we learn from the Guardian, has been fighting Google for three years now, trying to make it explain its algorithm, which it claims is unfairly discriminating against Foundem because Google allegedly fears competition from them. Really? The company is a husband and wife and "a computer friend."

Here's what Foundem does:

Foundem.co.uk directs shoppers to online deals for goods such as TVs or flights, but has struggled since one day it suddenly disappeared from Google search results for these categories.
Perchance one might call their business model more beneficial to themselves than to Google's users? Google's point of view:
"We can't comment on individual cases," said a spokesman. "But our systems are designed to produce the most relevant and useful results for the people who use Google search.

"Where sites are adding little value or original content, they are likely to fall in our ranking. Surveys of our users show that what they most dislike when they search is to receive multiple results from sites showing the same or very similar content."...

One problem faced by Foundem is that as a price comparison service its raison d'etre is to pull in information from elsewhere on the web so a lot of the text – such as product descriptions – will be replicated. Google says its users do not want to be presented with a list of options on the site they visit, while the Foundem pair point out that is, in essence, all that Google itself does. Meanwhile, Foundem results are appearing relatively highly on Yahoo and Bing – Microsoft's search engine.

Google set up to be useful to its own users, after all, not to push companies that try to make money from clicks, so if it thinks you are annoying its users, what do you expect? Google's blog post says this:
Occasionally, we’re asked about the “fairness” of our search engine -- why do some websites get higher rankings than others? The important thing to remember is that we built Google to provide the most useful, relevant search results and ads for users. In other words, our focus is on users, not websites. Given that not every website can be at the top of the results, or even appear on the first page of our results, it’s unsurprising that some less relevant, lower quality websites will be unhappy with their ranking.
If you wish to be a real competitor to Google, why not set up your own search engine like they did? No one helped them get noticed. I find it very odd that businesses that parasite on Google think that Google owes them a leg up. No one gave Google a leg up, and what, I can't help but ask, is Reback doing with a company like this?

The Guardian in that 2009 article mentioned SourceTool, one of the other Texas complainants:

Exactly how AdWords operates is to be tested in the US courts by a company called TradeComet.com, owner of search engine SourceTool.com, which has accused Google of "engaging in predatory conduct to block search traffic by imposing massive, unjustified price increases" through the system.
May I inquire why Texas? Or are these folks shopping around all the states looking for someone to nibble? I can't help but notice that this MediaPost article has a quotation from the Ohio attorney general attacking Google and in support of myTriggers.com, one of the Texas complainants, which was sued by Google in Ohio for some money it owed and countered with an antitrust allegation, as I'll show you in a bit:
Ohio Attorney General Richard Cordray recently weighed in against Google. He argues that accepting Google's argument "would immunize an entire industry from the reach of this state's antitrust laws."
I see his point, but consider the other side of the coin. What about if some company, wishing to damage its competition, funds or in other ways encourages bogo antitrust complaints in one state after another? What's the remedy there?

Here's a recent article by Chris Lake on eConsultancy with an update on the Foundem v. Google story:

In August last year I wrote an article called Foundem vs Google: a case study in SEO fail. Foundem had been complaining about Google, due to its lowly search rankings.

My article was based on a story published in The Guardian, which pretty much sounded like a big bunch of sour grapes to me. As such I called out Foundem, which didn’t appear to be doing an amazing job of SEO best practice.

But Foundem insisted that The Guardian article had been heavily edited, claiming that the newspaper’s lawyers didn’t want it to use words like ‘penalties’ and ‘whitelisting’ in the article, when referring to Google. Big, scary Google.

IT WAS A PENALTY! OR WAS IT?

Foundem claimed that its inconsequential search rankings were due not to any SEO-related issue, as I had stated in my article, but the result of some hideous penalty imposed by Google. The reason for the penalty? The firm says via its Search Neutrality blog that it was penalised “simply because it is a vertical search engine” (as opposed to a technical or spam-related penalty). This seems thoroughly unlikely given that Google indexes thousands of other search-based companies.

A penalty would explain why the site wasn’t ranking brilliantly, but then again so would other things. As Fresh Egg's Jaamit Durrani says: “Most of the time people claim ‘penalty’ when it is just a roadblock (eg iframes/javascript) or a filter (eg duplicated / scraped content). Often fixing these onsite issues can lead to immediate reinclusions.”

I asked Google to comment, and while it won’t talk about individual sites, it did confirm that it does not whitelist sites, nor does it punish sites purely due to their sector. Google’s Peter Barron said:

“Our algorithms are designed to provide users with the best possible search results. We publish our guidelines for webmasters and advertisers, but we do not penalise specific types of site.

“Vertical search sites are important to us and our users - indeed sites which offer added value often come top of our search rankings. We make all of our search quality assessments based solely on relevance to the user.”

None of which sounds like a sector-based ‘penalty’ to me, but then again…

YOU FOOL, YOU GOT IT ALL WRONG!

Earlier today I endured a fiery 35-minute call with Foundem CEO Shivaun Raff, who advised that: “On 1 December our penalty was lifted”, adding that it led to a 10,000% surge in traffic. And this apparently proves that my previous article “is incorrect from the headline down”, and should be corrected.

I refuse to touch it, as I maintain that the Foundem site doesn’t tick enough best practice boxes in order to secure brilliant search rankings, and I’m not convinced that there was a penalty. Foundem says there was one. Google won’t confirm this, but says that it doesn't punish sites simply because they operate in vertical search, as Foundem claimed.

Regardless, I stand by what I said, penalty or no penalty: there are enough reasons why the Foundem site might not rank so well. It isn’t a niche site. It contains tons of duplicate content, aggregated from various sources (Update: Foundem crawls and scrapes, as well as using feeds). There’s not much in the way of original content. It resembles a link directory.

There were technical issues too, though some of these appear to have been fixed.

Jaamit Durrani explains: “Two of the major issues that Foundem had in summer was content in iFrames and content requiring javascript to load – both of which I looked at in August, and they were definitely in place. Both are huge barriers to search visibility in my book. They have been fixed somewhere between then and the lifting of the supposed ‘penalty’. I don’t think that’s a coincidence.”...

The fact is that Google now dominates is simply because it does search very well, and its competitors have repeatedly failed to match it, at least as far as the user experience goes. And the user experience is incredibly important. Web users love the simplicity of the Google search experience.

And obviously the results must be of a high quality, otherwise searchers would quickly switch to some other engine for answers.

So yes, yes, Google is massive, but it’s massive for a reason. It didn’t get to where it is through nefarious means, but because it works better than any other search engine, at least in the eyes of the people who use it.

Foundem has its own website about all this, which it cunningly calls Search Neutrality, if you would like to hear them tell their own story their way. Here's their latest explanation of their EU complaint:
The principles of search neutrality are both reasonable and straightforward to implement. Foundem’s EU Complaint, for example, proposes that a search engine should not be allowed to discriminate in favour of its own services; and that where it does insert its own services, these should be clearly differentiated from real search results just as sponsored links are. Foundem’s Complaint also addresses Google’s increasing use of arbitrary and discriminatory penalties, which, through error or design, exclude legitimate sites from search results, irrespective of their relevance. Foundem proposes that search engines should be transparent about the rationale behind these penalties and that affected sites should have access to a timely and transparent appeals process, so that penalties applied in error can be quickly rectified.

Google’s standard reply to the observation that it is dominant in search is to point out that its competition is “just a click away”. While it is true that users have a choice of alternative search engines, it is equally true that web sites do not. Because nearly all users choose Google, there are no alternative search engines by which web sites can reach them. The unique role that Google plays in steering traffic and revenues through the global economy means that Google is not just a monopoly; it is probably the most powerful monopoly in history.

I don't know. If Microsoft couldn't favor its own services with Bing, I dare say their search engine would die altogether or at least disappear under the sea in the Bermuda Triangle. That's about all it does, from what I've seen. Foundem said this about the "penalty" that doesn't sound like one at all to the rest of us:
In a post last August on its site, Foundem said: “Google has always used various penalty filters to remove certain sites entirely from its search results or place them so far down the rankings that they will never be found.

“Whereas these penalties used to be reserved for spam, or sites caught attempting to cheat Google’s algorithms, they are now increasingly targeted at perfectly legitimate vertical search and directory services.

“It may not be coincidence that, collectively, these services present a nascent competitive threat to Google’s share of online advertising revenues.”

Foundem claims that Google lifted the “penalty” in December, resulting in an increase in traffic from Google searches of “10,000pc overnight”.

I'm guessing Foundem was so hot on the phone about it, because unless there is an illegal penalty, Foundem has no case. Foundem recommends that you read Cade Metz at The Register, who found their arguments persuasive, and in this article in March explains why the antitrust action is not about Microsoft. Allegedly. You can find the complaint [PDF] Foundem also filed with the FTC in the US in that article. Such tireless complainers, these three are.

SourceTool/TradeComet:

Let's look at SourceTool, because it was one of those who also filed a complaint with the US Justice Department, seeking to block the Yahoo-Google deal. We know how that played out and who benefited the most when the deal died.

Here's a 2008 article on Traffick, which specializes in info on business search, that mentions SourceTool complaining to the US Justice Department about Google's Quality Score algorithm. SourceTool built its entire business model around Google and AdWords, apparently. The New York Times had an article too, by Joe Nocera, that same year which described it like this:

A few days ago, Dan Savage had his lawyer send a nine-page, 4,000-word letter to the antitrust division of the Justice Department. Mr. Savage, 59, runs Sourcetool.com, a business-to-business Web site that acts as a directory, listing — and ranking — hundreds of thousands of companies that sell industrial products.

Like many Internet entrepreneurs, Mr. Savage built his business model around Google when he started it in late 2005. Using Google’s AdWords program, he planned to make bids on specific search terms — “ball bearings,” say — that would ensure that a Sourcetool ad would be placed high on the right-hand side of the Google page whenever someone searched for places to buy ball bearings. That’s how paid search works.

But because his was a free site, he needed to generate his revenue from advertising. For that, he used Google’s other ad program, AdSense, which placed targeted advertising on the right-hand page of the Sourcetool home page whenever a user “clicked through” to Sourcetool to find a company that would sell him ball bearings.

Not exactly inventing the telephone or anything. The complaint had to do with a change in Google's minimum bid requirement which more or less, according to Savage, discriminated against his site. Savage, so the story goes, came to believe, or at least claim, that Google was discriminating against SourceTool because it viewed it as a competitive threat.

Uh huh.

TradeComet describes itself more flatteringly in its Complaint [PDF], quoted in the judge's Opinion and Order [PDF] dismissing its case, like this:

TradeComet operates the website SourceTool.com, which attracts “highly-valued search traffic of businesses seeking to buy or sell products and service to other businesses,” and provides what is commonly referred to as a “B2B” (for “business to business”) directory. (Compl. ¶ 4.)
But a rose is a rose by any other name, so Traffick calls SourceTools' model "straight click arbitrage," and here's what it thinks was the real problem instead:
Sourcetool's owner suspects that Google simply doesn't like the site because it is "another search engine," or because it competes with Business.com, a Google partner.

I doubt this is it.

Anyone with experience in the game can sense what Sourcetool is, and that sense would be augmented or confirmed by a peek at the mix of destination URL's within the AdWords account, no doubt: it's pretty much straight click arbitrage.

Recall that straight click arbitrage is a business model that is all but banned by Google.

So TradeComet was fighting to preserve the right to run a straight click arbitrage site, which Google I gather frowns on, because it doesn't want its users used or annoyed. Nocera includes his impression of the algorithm in question:
Still, the more I dug into Mr. Savage’s complaint, the more I came to think that it offers a nearly perfect example of why antitrust issues are so difficult to sort out. Listening to Google executives explain how the company’s algorithm works, I came away largely convinced that Google was operating in good faith.

“Our quality score system is an impartial algorithmic score that is designed to enhance the experience of the user, and the vast majority of advertisers benefit from it also,” said Nicholas Fox, Google’s product manager for ad quality. In addition to rewarding sites that have the qualities Google and its users like, it also tries to weed out, and punish, bad apples.

For instance, it doesn’t want companies that buy search terms and then play some form of bait and switch. The imposition of high minimum bids is Google’s way of weeding out the bad guys....

Though nobody at Google would say so directly, I got the distinct impression that Google thought Mr. Savage was practicing a form of ad arbitrage with his site. He did, after all, bid on search terms and make his money on advertisements on his site.

Yet Nocera goes on to say that monopolists can't help acting like monopolists, and if you have a problem, they always think they are right, and you have no recourse.

Savage instead of altering his business model sent his letter to the US Justice Department, and here's when and why, according to the Times:

Mr. Savage is hardly in a position to sue Google for antitrust violations, of course. But he did feel there was one thing he could do: tell his story to the Justice Department, in the hope that it might help stop the Google-Yahoo advertising deal that was announced in June. Hence the letter. “Google’s conduct is plainly consistent with acts of monopolization and attempted monopolization,” Mr. Savage’s lawyer wrote in his letter to the Justice Department. He added that “Google has achieved and maintained its market share through anticompetitive exclusionary conduct.”
Except TradeComet, Mr. Savage's company, did sue Google. What is there to stop anyone, particularly if firms like Cadwalader are right there, willing to help? Of course, the Yahoo deal fell apart, thanks to folks like Savage, who by then ought to have been Microsoft's new BFF, if he wasn't previously. Not that Bing seems to have benefited much.

Eric Goldman describes the complaint that TradeComet brought against Google back in 2009 like this:

The complaint itself is the typical grumblings of an unhappy advertiser who wanted more traffic for less money. We've heard these complaints from advertisers many, many times before. Advertisers tend to be a particularly hard-to-please bunch. TradeComet tries to connect the dots that Google's price increase was due to Google's efforts to squelch SourceTool's competition with Google, which would be a more convincing argument if anyone actually believed that the two were bona fide competitors.
The TradeComet lawsuit went nowhere, and Google's motion to dismiss was granted in March of 2010, based on lack of subject matter jurisdiction and improper venue. You can read Google's arguments in this Reply Memorandum in Support [PDF] of the motion, which also informs us that TradeComet was founded by Don Savage, a Harvard Business School graduate. Google tells the court, "TradeComet has volunteered to be a class representative in litigation previously filed in Santa Clara County." Now TradeComet was arguing it shouldn't have to go there. Here's what that is referring to, a Declaration by Daniel Savage [PDF] in yet another antitrust action against Google, Kinderstart v. Google. In it, he states that when he heard of the lawsuit on October 23, 2006, he "began considering to join Plaintiffs as a potential class member... It is TradeComet's intention to join this class action as a co-representative plaintiff on behalf of the classes." The date of the declaration is October 26, 2006, and the venue is California.

He didn't get that opportunity, because the case was dismissed. Maybe he's fortunate it worked out that way, because both Kinderstart and its lawyer were sanctioned by the court [PDF] for bringing frivolous claims, after the court granted [PDF] Google's motion to dismiss in March of 2007. Here's Kinderstart's complaint [PDF], by the way, if you want to read it. It sounds quite a lot like all the other complaints. I suggest that the Texas attorney general read it, frankly. The lawyer was described as overreaching, filing claims without first gathering evidence sufficient to sustain them. It's rare for a lawyer to be sanctioned. But it happened. That's who Dan Savage was volunteering to help. Kinderstart had to pay [PDF] for Google's attorneys' fees for the motion to dismiss also, although the court reduced the amount, because of the lawyer's circumstances and his lack of bad faith:

There is no evidence that Yu acted with subjective bad faith in including the sanctionable allegations, and he appears not to have extensive financial resources. The Court will grant sanctions “sufficient to deter repetition of such conduct or comparable conduct by 12 others similarly situated.”
And here's something strange to me. In the Opinion and Order granting Google's motion to dismiss the TradeComet litigation, the court said that TradeComet could bring the case in California, the proper forum, instead of in New York, where it had filed improperly, having agreed in the terms with Google that all disputes would be handled in California:
Because TradeComet’s claims fall within the scope of the relevant forum selection clause that requires that this action be brought in California, and because enforcing that clause would be neither unreasonable nor unjust, Google’s motion to dismiss is granted.
But instead of going to California, TradeComet has appealed the New York order, and that is still pending, as you can verify on Justia's page. Why not just file in California? I can't understand that. Because it's "a crusade" I suppose. These plaintiffs are positively fixated on Google. Kanter is quoted in American Lawyer like this:
“The question isn’t whether Google is the next Microsoft,” said Kanter, who has worked closely with Rule for a decade on Microsoft and other cases. “The question is whether Google is the next monopolist.”
The *next* monopolist? Was he misquoted? If Google isn't yet a monopolist, on what basis are they suing them currently? Here one explanation, not that it satisfies:
"The markets are changing rapidly," said Albert Foer, president of the American Antitrust Institute in Washington, D.C., which has called on regulators to keep an especially close eye on emerging technologies like mobile advertising networks. "You certainly have to watch these guys like a hawk, figure out where they're going and figure out what each move means strategically and whether it will be (anti-competitive) in the future."
They want to harass them with investigations now in a preventive way because they might become anticompetitive *in the future*?

When people say things that don't make sense legally, in my experience it's because what they are doing doesn't make sense legally, and that instead of being about a legal issue, it's about a manufactured legal issue being used for competitive purposes. I'd call that a misuse of the courts, personally. You can't sue people for antitrust violations that haven't yet happened, unless somebody just changed antitrust law. Can you punish a company for success because they are so successful that it worries you that someday they might do things that are illegal? That's Alice in Wonderland territory. But here's what you can do: you can launch a huge media storm about "violations" that ultimately get tossed out a decade later when no one is still paying much attention. And that hurts your victim. Unjustly.

When Microsoft was fined by the EU Commission the last two times, it was for *actual* antitrust violations, violations that were well known to the world long before the Commission got involved. There is a difference. If you've forgotten all that, here's ECIS's Microsoft - A History of Anticompetitive Behavior and Consumer Harm [PDF], and Groklaw has a page just on Microsoft's legal cases, and you'll find a mountain of antitrust evidence, if I may borrow a phrase, on that page.

Maybe there's a reason for appealing the loss, instead of the obvious and easier and less costly choice of filing again in California, where they should have filed in the first place, that isn't jumping off the page. Here's what is jumping: the familiar feeling that maybe they are appealing because it's more costly for Google this way, not to mention dragging the entire process out in the media. Shades of SCO, the kings of dragging the process out to the very last drop. I don't read their minds, of course, but it's at least conceivable, isn't it? I mean, it happened once. We watched it in slow motion, so we know it can happen. Just saying.

myTriggers.com:

Interestingly enough, the third complainant mentioned in the article about the Texas investigation, myTriggers.com, also had an earlier dispute with Google. Here's Eric Goldman writing about that dispute in February of this year, and he unearthed some oddities that made him ask about a Microsoft link:

Meanwhile, an intriguing and unexpected new antitrust battlefront has opened up. myTriggers is run by NexTag alums and, IMO, has an even worse brand name than TradeComet. Do a search for “mytriggers” and see if you can avoid juvenile giggles. myTriggers’ properties include three shopbots/shopping comparison websites: mytriggers.com, comparisonsearches.com and shopbig.com. A quick review of these websites revealed no obvious reason why I would choose them over better-known shopbots.
If you do that search, you'll find MyTriggers.com is the first result, of course. Here's a bit more from Bloomberg last April on the dispute, after Google filed a motion to dismiss. The Ohio attorney general, it says, joined in the dispute:
Cordray joined the dispute after Google sought to have the counterclaim thrown out in an April 2 filing in state court in Columbus, Ohio. Google said the Valentine Act, the state’s antitrust law, doesn’t apply because the federal Communications Decency Act precludes state regulations.

Agreeing to Google’s claim “would immunize an entire industry from the reach of this state’s antitrust laws,” Cordray said in court papers filed April 26. Preempting the Valentine Act with the federal law “would result in a significant restriction of antitrust enforcement in Ohio,” he said.

To understand Goldman's point, you need to know that law firms can't represent a new client if there is any conflict with another client, at least not without the first client's approval and the second's. Here, it was Microsoft suggesting it.

Main Justice spoke with the lawyer representing myTriggers and TradeComet, Rick Rule of Cadwalader, back in February, and he pooh-poohed any Microsoft involvement, or tried to:

In January, Google filed suit against a comparison shopping site myTriggers.com in Ohio state court, hoping to collect on $335,000 in unpaid bills. Instead of paying the bill, myTriggers enlisted the help of both Microsoft’s antitrust lawyer, Rick Rule at Cadwalader, Wickersham & Taft, and famed trial lawyer Stanley Chesley ... The company then filed a counterclaim earlier this month accusing the search giant of violating antitrust laws by manipulating search results to punish potential rivals.

“Google employs a variety of exclusionary acts that ensure that rivals cannot divert traffic to their own competing search websites, particularly if the effect of such diversion is substantially to compete against Google’s dominant platform,” myTriggers said in its complaint.

Rule also advises another search engine, TradeComet.com, which filed a similar suit against Google in a New York federal court last year.

Observers have questioned both lawsuits’ ties to Microsoft, but in an interview with Main Justice, Rule denied Microsoft’s interest in either matter.

“Microsoft is not involved,” he said, “our clients are only the named plaintiffs.” Rule declined to explain how his firm was hired in either case, but did say: “It is my practice to answer phone calls, and I’ve been blessed that I haven’t had to go out and elicit clients.”

Microsoft-related entities also appear to be going after Google on the other side of the Atlantic.

In a blog post last night, Google acknowledged that it had received word from the European Commission that it was investigating complaints filed by three companies accusing Google of manipulating its search rankings to punish other search engines and engaging in other anti-competitive conduct.

“This kind of scrutiny goes with the territory when you are a large company,” wrote Google senior competition counsel Julia Holtz, on the company’s blog.

Was that a Freudian slip or a misquote? "Our clients are only the named plaintiffs," Rule is said to have represented. That could be taken as a slip of the tongue, in that you could interpret it to mean that while they are the named plaintiffs, others involved are not named. Or maybe he said, or meant to say, "Our clients are the only named plaintiffs." That still is lawyer-ese, in that it doesn't deny that Microsoft might have made a call or shown interest in other ways, financial or otherwise, while not wishing to be a named plaintiff. And in fact, was it a true statement, now that we found out that Microsoft sent SourceTools to Mr. Rule at Cadwalader? Microsoft has no interest, Mr. Rule?

You probably recall that in the SCO v. IBM case, evidence of Microsoft involvement surfaced after SCO's then CEO denied that Microsoft was in any way involved.

Here's myTriggers' Answer with Counterclaims. It's from Harvard Law School's syllabus page for its class to read for Antitrust, Technology and Innovation: Seminar (Spring 2010). It's a great resource.

American Lawyer points out one other interesting detail:

Cadwalader’s MyTriggers counterclaim relies on Ohio’s Valentine Anti-Trust Act, but the TradeComet case was brought, in part, under section 2 of the Sherman Antitrust Act. Back in the U.S. v. Microsoft days and before, repealing that law became something of a crusade for Rule. He gave speeches and wrote op-eds calling for its repeal, calling it “a cure that is worse than the disease.” (Asked about the apparent contradiction, Rule says that the law has changed over the years. He also quotes former Harvard University professor Graham Allison: “Where you stand depends on where you sit.”)
Indeed. I gather that if you sit on Microsoft's lap, perchance you decide to go on crusades against Microsoft's competition. Then there's no telling what you might say.

So we've learned some interesting facts. First Cadwalader, Microsoft's antitrust firm, felt free to represent another small client in an antitrust case against Microsoft's competitor, with Microsoft referring at least one of the cases to the firm. And we've learned that the current complaints against Google in Texas are not from unrelated entities. Someone is spending serious money to go after Google in one venue after another. From American Lawyer:

Neither Google nor Wilson Sonsini believe that MyTriggers and TradeComet are just ordinary small businesses that happened to find a lawyer with relevant expertise. “It’s become clear that our competitors are scouring court dockets around the world looking for complaints against Google into which they can inject themselves, learn more about our business practices, and use that information to develop a broader antitrust complaint against us,” says Adam Kovacevich, a Google spokesman.
That's what they think it's about, that these lawyers are on a crusade all right, a crusade to use the legal system to try to dig up some dirt on Google. I think it's also possible that someone with a failing search engine would like to find out more details about someone else's successful search algorithm, and would like to use discovery for that purpose.

It's certainly hard to understand the myTriggers case unless it's a fishing expedition of some kind. It happens that myTriggers owed Google some money for AdWords, which it couldn't pay. Then when Google tried to collect, myTriggers showed up in court over a simple collection matter with three law firms, one of them Cadwalader, with antitrust counterclaims, just like Psystar did with Apple. Eric Goldman explains:

About a year ago, Google was sued by an obscure company called TradeComet for various antitrust violations. TradeComet’s lawsuit wasn’t the first private antitrust claim against Google; other scrappy claims had arisen over the years. However, none of them were serious challenges or went anywhere.

The TradeComet complaint looked equally low-merit, so I would have probably ignored it except that TradeComet’s counsel was the NYC-based Cadwalader Wickersham & Taft—which also does antitrust work for Microsoft. Those two facts could be completely unrelated, but it’s possible that they aren’t. First, I can’t imagine Cadwalader would jeopardize a lucrative relationship with a Fortune 50 company to take on a low-merit lawsuit for a no-name company. Therefore, either Cadwalader viewed the various antitrust issues as so unrelated that no legal or business conflicts were created—a risky judgment given Microsoft’s sensitivity about both Google and antitrust—or Microsoft approved/acquiesced to Cadwalader’s representation of TradeComet. Second, Microsoft has been engaged in a multi-year, multi-front effort to harass Google on antitrust issues, and Cadwalader’s involvement would be consistent with that campaign....

This is where the story gets weird. Rather than plead poverty to Google or mount a generic but low-cost contract defense, myTriggers retained THREE law firms and also brought a counterclaim under Ohio’s state antitrust law, the Valentine Act. The three law firms are: (1) local Columbus counsel, presumably initially retained to handle the collections matter, (2) a Cincinnati firm that includes Stanley Chesley, Ohio bar #852 (!), a litigator of some renown who has enough gravitas to impress most judges; and (3) the same four-person DC-based antitrust team from Cadwalader that also represents TradeComet.

I am struggling to make sense of myTriggers’ litigation choices. Assuming myTriggers even has the money, writing a $335k check to Google (and I bet Google would have taken less!) is almost assuredly cheaper than paying three law firms to mount an antitrust assault on a $20B/year behemoth. Assuming that myTriggers wants to maximize profits, then either (1) myTriggers thinks its odds are good enough that it will win AND make enough money to pay the 7 lawyers on the counterclaim's signature page plus their teams, or (2) the law firms struck an unbelievably sweet deal on fees.

Either way, how did Columbus-based myTriggers connect with the DC-based Cadwalader team? Did myTriggers independently call up Cadwalader? The TradeComet lawsuit got some press, but that was a year ago. If myTriggers really thought it had a case, it might have preemptively sued Google rather than waiting for Google to sue it. Did myTriggers get connected to Chesley for some reason, who then recommended bringing in Cadwalader? Did Cadwalader reach out to myTriggers? If so, I would like to know more how this happened and how this matter pertains to Cadwalader’s relationship to Microsoft. I’m also confused about the relative roles of Chesley and Cadwalader. It’s not immediately obvious why myTriggers would need both Chesley and Cadwalader or be willing to fund both.

Perhaps he's being polite or doesn't wish to be sued when he writes that he is struggling to understand myTriggers' litigation choices. Personally, I'm having zero difficulty understanding all of this. Are you? If you visit the last link in the MediaPost snip, here's what you find:
Comparison shopping site myTriggers is alleging in a lawsuit against Google that the search company hiked the cost of myTriggers' pay-per-click ads for anticompetitive reasons. But myTriggers previously said in an insurance claim that server crashes spurred Google to raise prices, according to documents obtained this week by Online Media Daily.

myTriggers recently amended its complaint to include allegations that its data centers overheated in January of 2008, resulting in equipment damage and layoffs. But the insurance claim filed two years ago alleges in far greater detail that the overheating incidents resulted in server crashes, which in turn caused a drop in the company's quality score.

Hmm. So is myTriggers trying to collect double, once from the insurer and then from Google for something that in one venue it said was an issue with servers melting and then in another said was the result of Google discrimination? Which is it? I know. They'll say both, I suppose. Here's the complaint [PDF] against the insurer, so you can decide for yourself. That insurance case settled back in 2009 by stipulation [PDF], so we don't get to read the terms. My question would be, did myTriggers get a money settlement? Here's myTriggers' Answer with Counterclaims [PDF] against Google in Ohio, so you can follow the story.

Discovery should be fascinating. Who is paying Cadwalader and the other firms? What promises are in this picture? Obviously a dead company can't pay them. Presumably they are working on spec, then? Like Boies Schiller originally claimed? No doubt it's all set up to look innocent enough, but discovery is called discovery for a reason.

In short, I've concluded that there is no tech debate about antitrust law or anything as high-faluting as all that. It's a crusade, or a dirty trick, depending on your point of view, trying to dig up dirt on Google and destroy its credibility. And may I please remind everyone that just because a claim is lodged in court, that doesn't make it true. Surely we learned at least that from the SCO debacle. Sometimes it's just cynical marketing. And you know who is really good at that.

Update: Eric Goldman has now responded to the news, in an article titled Texas AG Investigating Google Search, and I Have Questions. The Biggest: Are You Kidding Me???. One snip:

Is There a Role for State AG Enforcement Against Google's Search Practices? I'm always amazed by people who forget that Google’s organic search and ad ordering are editorial processes fully protected by the First Amendment. Part of this myopia is Google's own fault. It has so successfully sold itself as a technology platform that we forget about the editorial processes embedded in its core business. As a result of those judgments, any legal challenges to Google's search practices runs squarely into serious First Amendment considerations.

I'm also intrigued by the potential role of 47 USC 230(c)(2), a federal law which basically insulates websites' filtering decisions from any state law causes of action (except state wiretapping laws and possibly state IP claims). The interplay between 230(c)(2) and antitrust claims is hardly clear, but it’s possible that the Texas AG's efforts are completely preempted by the federal statute.

Remedies? Let's assume Texas can actually establish a case against Google's algorithms. Then what? Will Greg Abbott start telling Google how it should run its search engine? It's hard to imagine that the cure will be better than the disease.

Update 2: In the most recent 10K that Google filed, it describes its mission like this, and the description fairly shouts "First Amendment":
Our Mission

Our mission is to organize the world’s information and make it universally accessible and useful. We believe that the most effective, and ultimately the most profitable, way to accomplish our mission is to put the needs of our users first. We have found that offering a high-quality user experience leads to increased traffic and strong word-of-mouth promotion. Our dedication to putting users first is reflected in three key commitments:

  • We will do our best to provide the most relevant and useful search results possible, independent of financial incentives. Our search results will be objective, and we do not accept payment for search result ranking or inclusion.
  • We will do our best to provide the most relevant and useful advertising. Advertisements should not be an annoying interruption. If any element on a search result page is influenced by payment to us, we will make it clear to our users.
  • We will never stop working to improve our user experience, our search technology, and other important areas of information organization.

We believe that our user focus is the foundation of our success to date. We also believe that this focus is critical for the creation of long-term value. We do not intend to compromise our user focus for short-term economic gain.

I think you can readily see that if you are providing "the most relevant and useful" results, you are making choices. That's an editorial function. And that relevancy doesn't happen if Google just offered unsorted bulk results. That's the whole point, that they make it easier to find what you are looking for, not what businesses want you to find to suit their bottom line. Google is trying to suit *our* needs, us common users, because they are convinced that it is the secret to their success. The Internet was already unsorted, and what Google did was make it possible to find what you were looking for. You don't have to use Google if you like unsorted results. Just don't use a search engine, and see if you like the effort you then will have to put forth.

And if you think Google would be better if it were more "neutral", then how do you define your term? Is it more "neutral" if you remove the editorial function? Yes. But then you can't find anything.

And if there is an editor, who else gets to decide what is useful and relevant?

Do you see the point that Professor Goldman is making about the First Amendment? Someone has to be editor, if you want sorted and categorized results that make things easy to find. Google provides that editorial function. And just as you can't demand that the government force Time magazine or your local paper to cover your high school PTA meeting unless they feel its relevant and useful to their readers -- Time probably won't and your local paper might -- so you can't tell Google how to do what they do, because if you do that, the First Amendment has no meaning.

And let me ask you something: do you really want the government to run search engines so it gets to decide what results you get to see? Are you out of your cotton-pickin' mind?

I'd like to mention one final thing. Groklaw is a success despite forbidding Google and other search engines from crawling our most important pages. How could that be? Most of our readers come from word-of-mouth. That's been true from day one. It can be done. If you really offer what your target audience is looking for, they will find you and they will stick with you through thick and thin. I have lived it, and so I can testify that you don't actually need Google to find and retain your audience, if you offer something that they genuinely value.

Update 3: I see On Technology Now sees access to the secret Google algorithm as the goal of the Texas matter, as expressed in this entry, "Could Texas AG antitrust review lead to a leak of Google’s PageRank algorithm?":

The cynical former litigator in me is wondering whether someone lobbying the Texas AG’s office is trying to put pressure on Google by raising the specter that the company’s super-secret PageRank algorithm might be subpoenaed. Even with a court secrecy order, disclosure of the algorithm in response to a subpoena would increase the risk that the algorithm’s details might end up published by a WikiLeaks wannabe.

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