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http://www.ft.com/cms/s/0/9b6bc780-8ea5-11...144feab49a.html

Net neutrality comes back to haunt Google
By Richard Waters

Published: July 13 2010 19:52 |
Last updated: July 13 2010 20:09

Google has become the main advocate in Washington for a set of regulations to prevent internet service providers favouring particular companies’ traffic.
However, that campaign, over what is known as “net neutrality”, has handed a gift to its own detractors.

This year, “search neutrality” has become the rallying cry of activists who believe that Google has too much power to decide which internet sites are granted the attention that comes with a high search ranking, and which are consigned to outer darkness.

After regulating the “pipes” of the internet with net neutrality, says Frank Pasquale, a professor at Seton Hall law school, “we need to look at the next part of the bottleneck, and that means search”.

For now, there is no indication that Washington is interested in creating a regime to govern the search business, and the campaign has served mainly as a way for Google’s detractors to try to push it on to the defensive over other issues.

But antitrust regulators have already begun to look this year into how the company’s core search ranking system works. The announcement this month of the $700m acquisition of ITA Software, a travel technology company, is now set to extend that further.

Joaquín Almunia, Europe’s top competition official, last week gave the first direct indication that Brussels was taking Google’s search power seriously.

The European Commission began an informal review into allegations of bias in the search rankings early this year but Mr Almunia’s declaration that he was looking at the issues “very carefully” was seen in antitrust circles as a sign the issue was now squarely on Brussels’ agenda.

The German cartel office, meanwhile, is considering complaints brought by newspaper and magazine publishers, and regulators in Washington are being urged to scrutinise closely.

Speaking in an interview with the Financial Times this week, Barry Diller, who oversees a large collection of internet sites including travel service Expedia and search engine Ask, called on US regulators to either impose conditions on Google’s purchase of ITA or block the deal outright. Extending its reach into new areas such as travel would lead to Google promoting its own services above those of sites such as Expedia, Mr Diller said.

US regulators have also been taking informal soundings among companies for some months about the extent of Google’s influence on the internet, although that has not led to any official review, according to two people familiar with discussions.

The Commission case could become the thin end of the wedge in constraining Google’s power, according to some antitrust experts in Brussels.

If Brussels rules Google is dominant in its market, it would put the company on notice to act with “special responsibility” – a vague requirement in European law that could force it to re-examine many of its business practices, says Thomas Vinje, a partner at Clifford Chance. Among the issues it might have to reconsider, he adds, is whether it can give preferential treatment in search results to its own services, such as those complained of by Mr Diller.

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