July 21, 2012

Danny Sullivan, I Hope Google Keeps Ignoring FTC Definition Of Paid Inclusion

Two days ago Danny Sullivan wrote a post hammering Google for ignoring the FTC definition of "paid inclusion" and disregarding the government guidelines for how a search engine should operate. The idea here is simple and appealing. As a big company, Google's decisions affect a lot of people and a lot of other businesses. Therefore, we need the government to step in and protect the little guys. The job of the FTC is to write and enforce rules that tell such companies what they can and can't do.

But is the FTC better equipped than Google to design a search engine and tell it how to operate?

The FTC is responsible for millions of taxpayer dollars being spent on drawn-out lawsuits and investigations. And their regulations, while well-intentioned, have driven companies to spend millions of dollars on lawyers just to make sense of the thousands of pages of regulations the FTC pumps out every month. In both cases, it's the consumers who end up picking up the tab.


Google may be an almost-monopoly, but the FTC is an absolute monopoly. If I don't like Google and their search/shopping results, I'll switch to Bing for search and Amazon for shopping (which also uses paid inclusion). Meanwhile, the FTC is part of the federal government. Thus, they have the authority to enforce their rules using deadly force or the threat of jail. As big as Google is, they don't have that power. And unlike Google, if I don't like the FTC, I can't just switch to a different agency.

Ultimately, Google is a large, successful company. When it makes poor decisions, it hurts a lot of people. Hell, even when it makes a great decision, it will hurt some people. But I am still a lot more cautious about the FTC flexing its muscle.

One can argue that Google shouldn't get to define "paid inclusion" since it can't be impartial. The FTC, meanwhile, is a government agency and is supposed to be objective. But does anyone really believe that politicians and bureaucrats are unbiased? Just look at what companies the government has historically given money to. They all tend to be friends of the politicians or companies with the strongest lobbying arms. Similarly, when government agencies write rules, they inevitably hurt some companies while benefiting others. The "others" tend to be close to the people in charge.

Will Google always make fair business decisions that benefit the consumer? No. But neither will the FTC. Nor will any other group, for that matter. But Google has done a lot more good for the consumer than the FTC while costing the country a lot less money.

I will not always trust Google's decisions. I will not always follow them unquestionably. But I will trust them a lot more than I will trust a group of unelected government bureaucrats with only a marginal understanding of the businesses they regulate (Mr. Sullivan supports this point himself here and here).