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November 30, 2012

Jon Leibowitz’ Legacy at the FTC: Irrelevance in the Digital Age?

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FTC Commissioner Jon Liebowitz

Will FTC Commissioner Jon Leibowitz leave a weakened FTC behind him?

An article in Politico Pro this morning entitled High Stakes for FTC in Google Outcome says that the FTC’s “reputation is on the line” if it decides to punt on the Google antitrust case — just as it did the Microsoft antitrust case a decade earlier.

The FTC under Chairman Jon Leibowitz fought hard with the Department of Justice for the right to investigate Google for antitrust violations over search manipulation, and now appears poised to conclude there’s no there there.

From the article:

“If the FTC fails to act on the search manipulation claim, there will be a large, loud echoing outcry from the industry,” said a former FTC lawyer who asked not to be named. “The thinking is that the commission will get vilified if it fails to act in a meaningful way. It will essentially amount to a Google exception to the well-settled policy that violations of antitrust law should be followed by a consent decree.”

Sen. Richard Blumenthal (D-Conn.), a former state AG in Connecticut, said in an interview that he couldn’t speculate on what the FTC will do or is doing, but he said there are alternatives if the FTC probe fails to generate results. “If the [FTC] investigation concludes without a finding that would warrant some action, the Justice Department can take action as well to investigate and secure remedies,” he said.

And wouldn’t that be the grand irony — if, once again, the Department of Justice and the state Attorney Generals had to come in and clean up after the FTC, just as they did in the Microsoft case.

“The FTC started investigating in 1990 but in 1993 could not decide what to do and as a result did nothing” says Gary Reback, the Silicon Valley antitrust attorney whose work basically embarrassed the government into pursuing antitrust charges against Microsoft.   “The Justice Department picked up the investigation a few months later and after several investigations and a lot of travail, brought the winning case in 1998. The FTC could have brought that kind of case years earlier.”

The irony gets even thicker when you consider that if it wasn’t for the Microsoft antitrust action, it’s possible there would be no Google.

“It is worth noting that Microsoft understood the threat Google posed to the Microsoft monopoly and could have and would have killed Google in the cradle but for all the investigations and cases against it,” says Reback.

The commissioners are evidently looking for a “political solution” that makes everyone — including Google — happy.  But finding “political solutions” isn’t really the job of a regulatory agency.

“If the FTC doesn’t do something significant many will ask why we have an FTC in the first place” says Reback.  “Just let DOJ handle monopoly cases. In fact, we might not need an FTC at all since it doesn’t seem to be doing anything significant in terms of protecting privacy either.”

The Justice Department does not have jurisdiction over privacy, and Reback’s comments no doubt refer to the recent FTC settlement with Google over the Safari hack, which allowed Google to deny liability despite being caught red handed.   Reback represented Consumer Watchdog in a challenge to the settlement, which resulted in Judge Susan Illston granting Google the right to retain the data they hacked from up to 190 million Safari users –  even though FTC Commissioner J. Thomas Rosch explicitly states that this was never the intention of the commissioners.

Commissioner Edith Ramirez has declined to contradict Rosch, and the entire episode made the FTC look like a bit of a clown car.

Google is already under investigation by several state attorney generals including the Texas Attorney General, who is suing Google for refusing to turn over documents (per John Paczkowski of allthingsd).

It’s expected that Leibowitz will leave the FTC by the end of the year, and he’d like to wrap up the Google antitrust case before he does.  But if he decides that his swan song will be another softball settlement for Google, his legacy at the FTC would likely be the agency’s irrelevance in the digital age.


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