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Does Google violate antitrust laws by eliminating competition?

Vertical search is an expanding market where a lot of money can be made. The term "vertical search" refers to more or less specialized search engines for specific topics, such as Google News for news or YouTube for videos. There are already more searches conducted at YouTube or eBay than at Yahoo in several countries. TradeComet also operates a specialized search engine for B2B goods and services. To promote its web site TradeComet used the Google AdWords program and was quite successful at the beginning. Officials even meet with Google to further increase the effectiveness of the ad campaigns. In December 2005 Google praised Trade Comet as "site of the week." In May 2006, however, Google raised the minimum bids for keywords on which TradeComet bid. Instead of 5-10 cents, several keywords were only available at a minimum price of 5-10 dollars. These ad rates were way too expensive for the plaintiff to continue promoting itself within Google's online marketing network. So this move strangled plaintiffs primary source of search traffic, resulting in substantial drops in traffic and revenue (about 90%). Google explained to TradeComet that the increase was due to its poor landing page quality.

TradeComet alleges that Google manipulates its auctions to favor certain advertisers like over others. Google establishes minimum pricing thresholds that can differ by advertisers based on criteria , such as "Landing Page Quality", that is exclusively in Google's control. It is impossible to know how Google actually picks the winners and losers of its ad actions. In the eyes of TradeComet officials, Google learned that its search engine was a potential competitor. The lawyers stated that, “Google understood the threat that vertical search engines posed to its business mode.” Hence Google increased the bid rates for advertisement for the company by as much as 10,000 percent.

The suit could be a real danger to Google. So far, no court has said that Google has a monopoly. But the courts only considered an online, not a smaller search advertising market. After the aquisition of DoubleClick Google has strenghtened its position in the online advertising market and remarks by the Federal Trade Commission lead to the conclusion that the relevant market indeed is sponsored search advertising only. And on that market, Google probably has a monopoly share.

Also see: Goldman, Eric, TradeComet Sues Google for Antitrust Violations , Technology & Marketing Law Blog LLC v. Google, Inc., 09 CIV 1400 (SDNY complaint filed Feb. 17, 2009).





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