UNIT
ED
STATES
OF
AMERICA
FEDERAL TRADE
O
MMISS
ION
WASHINGTON D.C. 20580
Project Code:
DX
I MEMORANDUM
TO FROM
: DATE:
August
8 
2012
SUBJECT
: Googlc Inc. File No. 111-0163
1
RECOMMENDATION: That
the
Co
mmission Issue the Attached
Co
mplai
t
 
natural and probable effect
ofGoogle s
conduct is to diminish the incentives
of
vertical websites
to
invest in, and to develop, new and innovative content.
Jn
the alternative, Googlc s conduct may
be
condemned as a stand-alone violation
of
Section 5. Google has presented no efficiency justi
fi
cation for
it
s conduct.
Third 
Staff has investigated whether Google has employed
ru1t
icompetifve contractual restrictions
on
the
·
utomated cross-management
of
advertisi
ng
camp
aigns. . Googl
e s
main rival (Microsoft) has a
ll
eged that Googlc is denying Microsoft c ·tical scale by employing these restrictions, and thus impairing Microsoft s ability to compe e effectively in the markets for general search and search advertising. We conclude that thes restrictions should be condemned under Section 2 because they limit the ability
of
advertisers to make use
of
their
own
data, and as such, have reduced innovation and increased transaction costs among advertisers and third-party businesses, and also degraded the quality
ofGoogle s
rivals
in
search and search advertising. Google
s
proffer
ed
efficiency
ju
stification for these restrictions appears to be pretextual.
Fourth 
Staff
has investigated whether Google has entered into
anticomprt
ive, exclusionary agreements with websites for syndicated search and search advcrtisrng services. We conclude that Google s agreements should be condemned under Section 2 because they foreclose some p01tion
of
the market, and, although the agreements result
in
only modest anticompetitive effects
on
publishers, the impact
of
the agreements
in
denying scale to competitors is both competitively significant to its
main
rival (Microsoft) today, as well as a significant barrier to entry for potential entrants
in
the longer term. While
Googe
presents efficiency justifications for these agreements, on balance, St
aff
finds them to be non-persuasive.
Il
l
 
TABLE
OF
CONTENTS
I
HISTORY
OF THE
VESTIG TIO~
AND RELATED
PROCEED~GS
-1-
A
FTC
Investigation
•
1
B
European
Co
mmission Investigation
2
C. Multi-State Investigation .
 
-3-
0
Private Litigation
,
..... 3
II.
STATEMENT
OF
FACTS
4-
A
The Parties
1 .
 
-4-
1.
Coog
le , ..
 
.
4
2.
General Search Competitors
5-a. Microsoft 5-
b.
Yahoo 5-3.
Major
Vertical Complainants 6-
a.
Amazon 6-
b. eBay ....
6
c. NexTag 6-d.
Foundem
6-
e
Expedia 7-
f
TripAdvisor
7-
g. Yelp .
 
.
 
.
 
.
 
...
 
7
4
Facebook
.
 
.
 
... 7
B
Industry
Background
· · · · · · · .. ·
T ·
8
1
Genera
l Search .
 
.
 
·
8-
v