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November 13, 2012

David vs. Goliath: Consumer Watchdog Gets Their Day in Court With Google

Posted in: Uncategorized

Gary Reback

Antitrust attorney Gary Reback represents Consumer Watchdog

Updated – 8:39 PM ET — Documents have been added below and are indicated in red.

You’ve got to give it to Consumer Watchdog.  The plucky California group has long been a thorn in the side of health insurance companies, advocating for patients’ rights and successfully opposing Prop 33, the auto insurance industry’s bid to hike rates in the last election.

But they have also been fierce anti-trust crusaders and privacy advocates, which placed them in at odds with Google, probably the biggest government-protected monopoly in existence.

Google’s response to the group’s critiques was to reach out to a Consumer Watchdog donor and discourage them from donating to the organization.

Undeterred, Consumer Watchdog went on to publish a 32-page report entitled Lost in the Cloud:  Google and the US Government (PDF), a must-read for anyone who wants to understand how dangerously monopolistic Google has become, and just how intertwined they are with the government agencies ostensibly regulating them.

And this Friday, CW will get their day in court as they oppose the proposed settlement between Google and the FTC over the Safari browser hack, wherein Google allegedly violated the consent decree they signed with the FTC in the “Google Buzz” case.

The hearing will take place at the U.S. District Court for the Northern District of California in San Francisco, and Consumer Watchdog will be represented by Gary Reback, the Silicon Valley antitrust whose work influenced the U.S. Department of Justice in its decision to sue Microsoft.

The proposed agreement between the FTC and Google must be approved by the court.  Consumer Watchdog has filed an amicus curiae brief alleging that Google essentially wrote the settlement themselves and that the FTC rubber-stamped it, allowing Google to pay a $22.5 million fine and retain the use of the data they collected, with no admission of wrongdoing.  CW claims that the settlement is not in the “public interest.”

Google, for their part, maintains that the settlement was reached between “sophisticated parties” and that the court has no business prioritizing the “public interest” in considering whether or not to approve the settlement.

I’ve spent a lot of time reading through the filings, and it’s pretty interesting stuff if you like trust-busting drama (sort of a wonky real-time version of “The Men who Built America”).  The back-and-forth between CW, the government and Google provides a lot of insight into Google’s business practices (they probably know a lot more about you than you think they do), as well as the company’s relationship with regulators (which is often cozy to an uncomfortable degree).

For those who want to read along, here are the filings I currently have in the case.  I’m still missing a few, so I’ll add to the list as I collect more:

Proposed Agreement – 8/7/12 – [Proposed] Stipulated Order for Permanent Injunction and Civil Penalty Judgment (PDF):  Google and the FTC agree to resolve the dispute between them with Google agreeing to pay $22.5 million as a civil penalty.  Additionally, they agree to “instruct Safari-brand web browsers to expire any DoubleClick.net cookie placed by Defendant through February 15, 2012 if those systems encounter such a cookie.”

If you don’t understand what that means, you’re not alone — the opaque language becomes an issue later on.

Dissenting Opinion8/9/12 – Dissenting Statement of FTC Commissioner  J. Thomas Rosch (PDF)The Proposed Agreement (above) was approved by the FTC Board of Commissioners 4-1.  Commissioner  J. Thomas Rosch dissents from the majority opinion “because it arguably cannot be concluded that the consent decree is in the public interest when it contains a denial of liability.”

Document 9 – 8/21/12 – Consumer Watchdog – Notice of Motion and Motion for Consumer Watchdog for leave to file Amicus Curiae Brief (PDF):  Consumer Watchdog asks the court for permission to file an amicus curiae brief.

Document 13 – 9/21/12 – Consumer Watchdog – Memorandum of Points and Authorities in Opposition to the Entry of [Proposed] Stipulated Order for Premanent Injunction and Civil Penalty Judgment (PDF)

Consumer Watchdog lays out their case for why they believe the FTC is allowing Google to skate with this agreement.  And if you read one thing in the case, it should be the “Statement of Facts” in this document. Which Google will later bitch about as axe-grinding irrelevant to the settlement.  But it establishes that Google has a distinct pattern of breaking the law, lying about what they’ve done, signing an agreement with government regulators not to do it again … then doing it again.

Consumer Watchdog basically objects to the proposed order on three grounds:

  1. It fails to include a permanent injunction
  2. The penalty of $22.5 million is insufficient to deter Google from doing the same thing again, and
  3. The FTC “has taken the rare if not extraordinary step of permitting Google to deny liability.”

They claim the FTC must provide the court with its facts and reasoning in reaching the agreement, and that the court must conduct its own independent evaluation to determine whether the legal standard is satisfied. Most importantly, they claim that it is in the “public interest” for the public to know the truth of the matter, and allowing Google to deny liability does not meet that standard.

Because Google was allowed to deny liability after they violated consumer privacy and signed a consent decree with the FTC in the Google Buzz case, CW claims Google was able to spin the facts in the media which created “considerable confusion in the public over what the company actually did, who was at fault, whether the conduct really violated the Buzz decree, and what the effect was on consumers.”

“A decree that results in consumer confusion and produces the strong possibility if not likelihood of consumer injury cannot possibly meet the public interest standard,” they argue.

Document 15 – 9/28/12 – FTC – United States’ Response to Consumer Watchdog Amicus Curiae Brief (PDF) -   The FTC lays out their justification for coming to the proposed agreement with Google.

In 2011 they busted Google for violating its own privacy agreement  by using the data of gmail users to launch Google Buzz (making your Gmail contacts publicly visible to create an “instant Facebook”).  So on October 13, 2011 the FTC issued an order enjoining Google from making misrepresentations to consumers about the privacy of their data.

But woops!  Nary 3 months later,  Google is once again bustado for hacking the Safari browser.  So now the FTC asserts that Google has violated the earlier consent decree by breaking its privacy agreement once again.

This becomes important in both the argument being made by Consumer Watchdog as well as dissenting opinion of Commissioner Roach, because both contend that Google, as a repeat offender, should not be allowed to continually evade admission of liability.

The government claims that the proposed agreement is fair, reasonable and adequate, which is all that the court should consider.  They also get a bit pissy over Consumer Watchdog’s assertion that the FTC had “simply accepted whatever Google wanted,” and imperiously slam them for “attempt[ing] to supplant the Commission’s judgment with its own.”

Document 16 – 9/28/12 – Google – Response to Consumer Watchdog Amicus Curiae Brief (PDF)

Picture the rich guy who marches up to your front door sputtering with rage that your Maltese just bit him, and you’ll capture the tone of Google’s response.

Google claims that this was all just a big accident, based on the way that Safari was interacting with Google’s DoubleClick ad cookies, and that they never intended to hack the Safari browser’s privacy protections and send your personal information back to its servers.  So, no admission of guilt is necessary.

Further, they claim that $22.5 million is the largest penalty the FEC has ever imposed, which is true, so that ought to be sufficient.

But they really get their hackles up over Consumer Watchdog’s contention that the court has any business assessing whether the agreement is in the “public interest”:

While CW seeks to interpolate a further separate and distinct requirement that the proposed decree must also be in the “public interest,” CW significantly overstates the import of this factor (to the extent it is properly considered as a separate factor at all).

Shorter Google:  “Public interest.  Harrumph.”

Document 17 – Consumer Watchdog – Motion for Administrative Relief (L.R. 7-11) In order to File Reply Brief (PDF)

In which Consumer Watchdog basically wigs out and goes “WFT?”

In the government’s September 28 response to Consumer Watchdog’s Amicus Curiae brief, they implicitly acknowledge that the settlement does not require Google to delete the data it got from the Safari hack.  “[T]he proposed order only requires Google to stop collecting new data (to “expire” the cookies) but otherwise permits Google to keep and use the data it collected improperly.”

CW asks the court for permission to file a reply brief so that they can address this issue, and also respond to Google’s claims that “the ‘public interest’ is not part of the relevant standard in this circuit.”

Document 18 – FTC – United States’ Response to Consumer Watchdog’s Motion for Leave to File Supplemental Reply Brief (PDF)

The government says that Consumer Watchdog should’ve known from the language in the proposed settlement agreement that Google wasn’t required to destroy the data they got from the Safari hack, and that CW shouldn’t be allowed to raise new arguments on reply.   If CW wants to correct its earlier filing, feh, the government doesn’t really care.

Document 25 – Court grants CW the right to file a reply brief.

Document 25-2 – 10/18/12 – Consumer Watchdog – Reply Memorandum of Points and Authorities in Opposition to the Entry of [Proposed] Stipulated Order for Premanent Injunction and Civil Penalties (PDF)

Consumer Watchdog responds to briefs filed by the government and Google.

Specifically, CW wants to know how the government suddenly concluded that Google “earned no more than $4 million from the alleged violation.”  Which makes no sense when you think about it — if Google gets to retain the data and keep using it, and has already made $4 million from it, that figure doesn’t represent future potential profits.  Which makes it impossible to assess if a penalty of $22.5 million is an actual deterrent.

If Google is going to make more money from the use of the data than they pay in penalties, it basically waves a flag and shouts “start your engines, boys!” inviting them to do it again.

CW also addresses Google’s contention that the court doesn’t have to evaluate whether the agreement is in the “public interest.” They argue that the FTC Act, under which the suit is brought, expressly empowers the commission to protect the public, and thus the Commission’s actions must satisfy the public interest standard.

Document 28 – 10/23/2012 – Consumer Watchdog – Revised Reply Memorandum of Points and Authorities in Opposition to the Entry of [Proposed] Stipulated Order for Premanent Injunction and Civil Penalty (PDF)

Consumer Watchdog revises its reply memorandum (Document 25-2), and takes the long knives out for the government and the weak settlement they’ve crafted with Google.

They maintain that if Google is allowed to continue using the data it got from the Safari hack of 190 million users, it neither eliminates nor prevents “potential ongoing harm”:

Basically, the proposed remediation requires Google to “expire” the cookies it set in violation of the Buzz Decree, but permits Google to keep the data those cookies collected (including IP addresses) and to use that data in its ongoing business, thereby continuing to profit from its misconduct.  The government is either unaware of this result or has simply neglected to mention it to the Court, the press and the public. (my emphasis)

They argue that with this settlement, the FTC fails to even meet the standard they set in the Wi-Spy case: that Google agree not to use (and profit from) their ill-gotten data in the future.

There’s also a pretty interesting section on how the Safari hack worked, which makes Google’s “oh it was all just a big mistake” contention sound really lame.

CW holds that if the court accepts arguments made by both the government and Google that an FTC settlement need not be in the public interest, it would be the first in the nation to do so.

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