TradeComet Sues Google for Antitrust Violations

By Eric Goldman LLC v. Google, Inc., 09 CIV 1400 (SDNY complaint filed Feb. 17, 2009). The Justia page.

TradeComet, which operates the website, has sued Google for a variety of antitrust violations. As is typically the case with lawsuits against Google, this lawsuit turned into a media event, and TradeComet’s PR firm did a great job pushing this story into AP, NYT, CNET, BusinessWeek and many others. Maybe SourceTool hoped to get some PageRank bounce from such broad media coverage? (sorry, no link love from me).

The lawsuit was filed by lawyers at Cadwalader Wickersham & Taft, one of the oldest and most prestigious law firms in the country, which is of some note because that firm has represented Microsoft in various dealings that would have some bearing on Google’s market position (such as Microsoft’s aborted takeover of Yahoo). Further, Cadwalader has had a particularly rough time in this market downturn, so perhaps they had some lawyers with idle hands…?

The complaint itself is the typical grumblings of an unhappy advertiser who wanted more traffic for less money. We’ve heard these complaints from advertisers many, many times before. Advertisers tend to be a particularly hard-to-please bunch. TradeComet tries to connect the dots that Google’s price increase was due to Google’s efforts to squelch SourceTool’s competition with Google, which would be a more convincing argument if anyone actually believed that the two were bona fide competitors.

In terms of legal precedent, there are three cases of note here:

1) KinderStart v. Google. KinderStart was a vertical portal (in this respect, not dissimilar to SourceTool in marketplace juxtaposition with Google) that had its PageRank slashed and was de-indexed for a time. KinderStart brought a variety of claims against Google, including an antitrust claim alleging that the PageRank drop was designed to punish a competitor, but those claims went nowhere–and, in fact, the plaintiff’s lawyer was ultimately sanctioned for making unsupportable claims in the complaint.

2) Person v. Google. This was a pro se lawsuit by a disgruntled Google advertiser who wasn’t happy with his treatment by Google, so he brought an antitrust lawsuit against them. It wasn’t a meritorious lawsuit from inception, but of particular interest is that in dismissing the case, Judge Fogel defined the relevant market for antitrust purposes as “Internet advertising,” not “search advertising.” There’s no question Google is a dominant player in the search advertising market, but they are only a major player in the much larger Internet advertising market.

3) Langdon v. Google. This wasn’t an antitrust case, but it stands for the proposition that search engines have the absolute right to reject ads in their discretion.

The combination of these three precedents shows that (A) most/all of TradeComet’s complaints have been advanced before, and (B) they haven’t gotten a favorable reception in court. Then again, all three of these rulings are from 2007, so it’s possible that Google and the market have changed since then in ways that degrade Google’s antitrust posture. Indeed, last year the DOJ said it was hours away from filing an antitrust lawsuit based on the Google-Yahoo deal, although I think it’s easy to read too much into that situation. It is not uncommon for government enforcement agencies to take aggressive positions that may not reflect the law, and usually their targets back down rather than test those aggressive positions in court (just like Google did in the Yahoo transaction). So even if the DOJ took the position that the relevant market was search advertising, not Internet advertising, there is no guarantee that a court would have agreed with that position.

There is another troubling aspect of the TradeComet lawsuit. Google and other search engines have been repeatedly criticized for not doing enough to police their ads on a variety of dimensions, including allowing advertisers to hawk bogus products and distribute malware through their ads. We want–and expect–Google to police its advertisers. Google can do so in a variety of ways, including manual review of ads, but its pricing mechanisms and ad sorting algorithms (including its landing page quality score) provide an effective first-line of defense against ads that aren’t useful to consumers. Therefore, it would be odd/dichotomous for antitrust law to conclude that Google’s ad cleanup mechanisms are anti-competitive.

While I think this lawsuit is much more rehash/ennui than groundbreaking, there was one set of allegations that caught my eye. Check out Paragraphs 100 and 101, where TradeComet alleges that Google “relaxes its Landing Page Quality methodology for certain ‘search partners'” such as I’d sure like to know more about this allegation and the factual basis for it. If true, I imagine Google’s advertiser community would be up in arms about this favoritism. However, I suspect that if and other search partners get seemingly premium ad placement, it’s due to some consistently applied factor that measures an independent attribute that happens to correlate with attributes of Google’s search partners.