Missouri Launches Probe Into Google's Business Practices -- 3rd Update

By Jack Nicas Features Dow Jones Newswires

Google is facing a new front in its regulatory battles after Missouri's attorney general launched a broad investigation into whether the internet giant's business practices violate the state's consumer-protection and antitrust laws.

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Missouri Attorney General Josh Hawley on Monday said he issued an investigative subpoena to probe Google's collection of user data, its use of other sites' content, and its alleged manipulation of search results to favor its own services.

Google, a unit of Alphabet Inc., has so far skirted the scrutiny in the U.S. that it has faced in Europe, where regulators levied a record $2.7 billion fine against Google in June for allegedly favoring its shopping ads in its search results. Mr. Hawley said his investigation was in part prompted by the European fine. "We're concerned they're engaged in a similar pattern of behavior in the United States," he told reporters.

Google said in a statement: "We have not yet received the subpoena, however, we have strong privacy protections in place for our users and continue to operate in a highly competitive and dynamic environment." It has disputed European regulators' charges.

The Federal Trade Commission ended a nearly two-year antitrust investigation into Google in early 2013 after the company agreed to make some changes to its business practices for five years -- a period that is about to expire. In the U.S., some federal lawmakers such as Sen. Al Franken (D., Minn.) have called for new probes into the company's power. Congressional committees are also investigating how Russian agents allegedly used Google, Facebook Inc. and Twitter Inc. to try to influence last year's election.

Mr. Hawley said the FTC went too easy on Google. "That seemed to me to be short even of a slap on the wrist. Now this is why I think there needs to be a fuller inquiry," he said in an interview. "I don't see a lot of action coming out of Washington. I don't see a lot of action coming out of the FTC....So I think that it's important that some law enforcement agency actually steps forward."

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The FTC pointed to past comments from commissioners that stated its "exhaustive investigation" into Google found the company's practices weren't "on balance, demonstrably anticompetitive."

Mr. Hawley, a 37-year-old Republican lawyer who was elected as Missouri's attorney general last year, announced last month that he is running for Democratic U.S. Sen. Claire McCaskill's seat in 2018.

Some critics and competitors of Google see state attorneys general as potentially the most likely route to regulatory action in the U.S.

Mississippi Attorney General Jim Hood has sued Google several times, including in January over its collection and use of data on Mississippi public-school students who use its services. Mr. Hood is looking closely at other aspects of Google's business and considering further action, a person familiar with the matter said.

Utah Attorney General Sean Reyes and District of Columbia Attorney General Karl Racine last year called on the FTC to reopen its antitrust investigation into Google. This year, when Mr. Reyes was a candidate for FTC chairman, Google deployed Republican lobbyists to dissuade Trump administration officials from naming him to the post, according to people familiar with the matter.

Mr. Reyes said in an email that the FTC never replied to his call for a new federal probe. "We may have to take matters into our own hands as state attorneys general on those and possibly other issues," he said. "In many ways, we can be more effective investigating and if necessary, holding companies accountable at the state level." He declined to say whether his office was investigating Google.

States usually team up to prosecute large corporations like Google, with bigger states like New York or California leading the way, said New York University economics professor Nicholas Economides. He predicted Missouri would try to recruit other states if it seeks charges. "Google is going to be a significant case," he said. "If it's going to be just Missouri, that would be a very unequal fight."

States can be effective regulators. In 1998, after years of lawsuits, 46 states agreed to a $206 billion settlement with tobacco companies that required the firms to change their marketing practices, among other changes.

The federal government's antitrust case against Microsoft Corp. in 2001 began with an investigation by the Texas attorney general, said Gary Reback, a key attorney who persuaded the Justice Department to sue Microsoft.

European Union officials have been the most aggressive regulators of Google in recent years, with four separate probes ongoing.

Google has disputed antitrust allegations and said the internet remains a competitive marketplace. The company says it has several webpages that shows users what data it has on them and enables them to delete data and opt out of future collection.

Mr. Hawley's examination focuses on allegations that regulators and academics have scrutinized for years. A 2012 staff report that was part of the FTC's investigation concluded Google illegally pulled content from other sites and recommended the commission file a lawsuit, The Wall Street Journal reported. Three commissioners said they had "strong concerns" about Google's so-called scraping behavior but opted against filing a suit.

The staff report also said Google's practice of favoring its own services in its search results harmed competitors but would be difficult to prosecute.

In September, reviews site Yelp Inc. sent a letter to the FTC alleging Google was using Yelp photos for its local-business listings, breaking a promise to not scrape content from certain sites that was part of its FTC settlement. Yelp also sent the letter to all the state attorneys general, and Mr. Hawley said Monday that he would be investigating the Yelp example. Mississippi's Mr. Hood also sent a letter on Oct. 31 asking the FTC to investigate Yelp's claims, according to a copy of the letter viewed by the Journal.

Google said at the time that if Yelp went to Google before regulators "we would have immediately taken steps to look at the issue and update these results -- as we're doing now."

Write to Jack Nicas at jack.nicas@wsj.com

(END) Dow Jones Newswires

November 13, 2017 19:23 ET (00:23 GMT)