'Total Scandal': Memos Expose Failure of Obama-Era FTC to Stop Google's Monopoly Power

A damning new Politico series based on 312 pages of internal memos reveals that federal antitrust regulators appointed by former President Barack Obama "misread the evidence in front of them and left much of the digital future in Google's hands," even though investigators concluded that the tech giant's effort to dominate mobile internet searches was well-documented and illegal.

The reporting sheds light on the 19-month probe by the Federal Trade Commission that, in early 2013, amounted to what some described as a slap on the wrist. The series comes as Google faces three antitrust lawsuits from the Department of Justice and coalitions of state attorneys general--one of which was expanded Tuesday--and lawmakers' calls to break up Big Tech.

As technology reporter Leah Nylen details:

Hundreds of pages of unreleased internal FTC memos, obtained by Politico, show for the first time that the agency's commissioners dismissed substantial evidence to support the monopoly claim, including taking the rare step of rejecting a recommendation by staff investigators to sue.

The contracts at the center of the fight made Google the default search engine on almost all U.S. smartphones and locked in that exclusivity for years, giving the company a major advantage just as Americans were starting to flock to smartphones. In its antitrust suit against Google last October, DOJ revealed that the company pays as much as $12 billion a year to Apple alone to keep its search engine as the default on iPhones, iPads, and the Safari browser.

Antitrust experts and critics of Google's practices responded by blasting decision-makers at the FTC and reiterating demands for an end to such exclusionary contracts.

Fordham University law professor Zephyr Teachout called the expose a "devastating takedown" of the FTC and its economists under Obama.

"These documents are really extraordinary," tweeted Matt Stoller of the American Economic Liberties Project, who writes a monopoly-focused newsletter. "Obama's FTC knew Google was engaged in monopolization, the lawyers said sue, and... nothing. All of this was in 2012. Total scandal."

Politico published five articles by Nylen as part of its "The Google Files" investigation:

• "How Washington fumbled the future"
• "The government's lawyers saw a Google monopoly coming. Their bosses refused to sue."
• "Facebook and Amazon dropped the dime on Google"
• "Four things the documents reveal"
• "Power players"

The memos, partially obtained and reported on by the Wall Street Journal in 2015, "reveal what the FTC's lawyers and economics experts were thinking--including assumptions that were contradictory at the time and many that turned out to be incorrect about the internet's future, Google's efforts to dominate it, and the harm its rivals said they were suffering from the company's actions," Nylen explains.

"The documents also add to doubts about whether Washington is any more capable today of reining in the tech industry's titans, despite efforts by a new generation of antitrust enforcers to turn up the heat on Google, Facebook, Apple, and Amazon--all of which now rank among the United States' wealthiest companies," Nylen adds. "That will be a crucial test awaiting President Joe Biden's regulators, including the outspoken Silicon Valley critic he plans to nominate to an open slot on the FTC's five-person board."

Though opponents of corporate consolidation have applauded Biden's reported decision to nominate Columbia Law School professor Lina Khan to the FTC, Nylen notes that "many of the people who were involved in the FTC's Obama-era probe of Google are still players in the antitrust fights involving the tech giants--sometimes for the opposite side." The series identifies former FTC commissioners and other staffers now associated with not only Google but also Amazon, Facebook, and Microsoft.

Amazon and Facebook weren't publicly critical of Google during the FTC's probe, but they both privately complained to the comission, charging that "Google was taking overt actions to dominate markets that made products more cumbersome for users," according to Politico--which notes that at the time, their D.C. lobbying efforts were no match for those of Google.

"We wouldn't be in the situation we are today with any of these big companies if [the FTC] had done something then," said Silicon Valley antitrust lawyer Gary Reback, who represented eight companies that complained and told Politico he remains "bitter to this day" about the commission's decision not to sue Google. "If they had stopped that in its tracks, the world would be a different place."

Google responded to the Politico's reporting with a lengthy blog post in which Rosie Lipscomb, the company's senior competition counsel, called second-guessing the commission's move to close its investigation a "recent D.C. parlor game" and said that "the memos conclusively confirm that the decision to not bring an antitrust case against the design of Google's search engine was supported by clear and unambiguous recommendations by all sections of the FTC who reviewed it, including the Bureau of Competition, the Bureau of Consumer Protection, the Bureau of Economics, and the Office of the General Counsel."

The tech company also continues to fight against the antitrust suits, with Google spokesperson Peter Schottenfels dismissing the new allegations in the case led by Texas Republican Attorney General Ken Paxton as "meritless."