Citing Logistics, F.T.C. Pushes Antitrust Inquiry Against Google Into January

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Correction Appended

WASHINGTON -- Google was prepared to start the holidays early this week, by settling its antitrust dispute with federal regulators without a harsh punishment.

But in shelving its inquiry until January, the Federal Trade Commission has put stronger penalties back on the bargaining table, people briefed on the investigation who were not authorized to speak publicly about it said Wednesday.

For two years, the F.T.C. has been looking into whether Google abuses its market power by favoring its own services over rivals in search results. Google and the agency had been planning to sign a settlement this week that would have said Google would change some of its behavior but that would not have been subject to court action.

The agency may now demand a consent decree -- a formal order detailing anticompetitive behavior and an agreement that if the company does the same thing again, it could be fined and subject to court sanctions. Google has instead offered voluntary concessions.

But the people briefed, and others close to the negotiations, said the agency was unlikely to take a second look at one of the major issues -- Google's dominance in specialized search, like travel and local reviews -- because the legal hurdles remain high.

Google has long said that it does not believe it has broken antitrust laws and that the agency's case against it is weak. Jill Hazelbaker, a Google spokeswoman, said that it continued to cooperate with the F.T.C. but declined to comment further.

Cecelia Prewett, an F.T.C. spokeswoman, declined to comment.

Competitors of Google called for the agency to use the additional time to take harsher legal action against Google. Failing to do so would hurt consumers in many ways, including by allowing Google too much control over private data, said Pamela Jones Harbour, a former F.T.C. commissioner and a lawyer representing Microsoft.

Supporters of Google said its case had already been made.

"If in 19 months they did not offer the kind of evidence and facts to support a case or conclude the behavior was such that it was posing legal difficulties, then frankly another couple weeks isn't going to make a difference," said Ed Black, chief executive of the Computer and Communications Industry Association, of which Google is a member.

Regulators' decision to delay resolution of the case offered a glimpse of the tense negotiations and a series of missteps that have bedeviled the negotiations.

As details of a possible settlement appeared in news reports over the last week, Google's competitors began arguing that a settlement without court-enforced sanctions was meaningless.

At the F.T.C., people close to the agency said, commissioners grew irked that they were being portrayed as spineless. In a parallel investigation, European regulators were said to be wringing a more stringent agreement from Google.

But it was unclear that Jon D. Leibowitz, the F.T.C. chairman, could get the two votes necessary to approve a tougher case against Google.

The five commissioners had yet to vote on possible sanctions. Julie Brill, a Democrat commissioner, supported strong antitrust action, while Edith Ramirez, the commission's other Democrat, has resisted the strictest sanctions, said the people who have been briefed on the inquiry.

J. Thomas Rosch, a Republican, questioned whether the agency had the evidence to bring a case on search manipulation, but also expressed skepticism at a settlement that did not involve a consent decree, the people briefed said. Maureen K. Ohlhausen, the other Republican commissioner, opposed the government's interference in private enterprise, they said.

Each of the commissioners and an F.T.C. spokeswoman declined to respond to queries about their views on the settlement.

Throughout the deliberations, both sides have complained about leaks to the news media of details of private meetings and settlement terms.

In a letter to Mr. Leibowitz in November, two members of Congress, Anna G. Eshoo and Zoe Lofgren, who have supported Google, reprimanded the F.T.C. for leaks, calling the behavior "irresponsible."

Weeks later, people inside the F.T.C. suspected that Google had leaked details of a settlement and boasted that it had avoided severe punishment, the people close to the agency said.

Google denied it was the source of the leaks. The F.T.C. often "market tests" settlements in an antitrust investigation, conferring with sources that aided the inquiry like the target's competitors about how they would respond to certain penalties.

State attorneys general, some of whom are undertaking their own Google investigation, were briefed on the potential agreement, and some were unhappy that they were not included in the talks and that the proposed punishment seemed light.

With the holidays approaching, some commissioners and critical staff members were embarking on vacations, so it was growing difficult to prepare formal documents before the end of the year.

At issue is how Google runs its search business. Competitors complain that Google alters the formula that produces search results to favor its products, like flight listings and restaurant reviews.

F.T.C. officials had apparently concluded that Google's actions in those forms of search did not violate anticompetition statutes.

In three other areas, however, the agency had raised questions about Google's behavior. It included snippets of information from other sites on its site.

Google also had often prevented companies that used Google-powered search on their own sites from allowing customers to choose other search engines. And Google had often prevented advertising clients from moving their ad campaign to another search site.

According to people who have been briefed on the details of the F.T.C.'s proposed settlement, Google agreed to promise the agency in writing that it would change those practices.

Opponents said such a written promise was worthless, because while the F.T.C. could punish Google for violating its word, the punishment would be to take the next step and secure a consent decree after all.

Edward Wyatt reported from Washington and Claire Cain Miller from San Francisco.

Correction: December 20, 2012, Thursday

This article has been revised to reflect the following correction: An earlier version of this article misspelled the surname of the chairman of the Federal Trade Commission. He is Jon Leibowitz, not Liebowitz.

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This article originally appeared in The New York Times.


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