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Relegated to electronic Siberia by the Google Inc. search rankings, KinderStart.Com Inc. saw its Web traffic plummet and ad revenue evaporate, so it fought back with an antitrust lawsuit challenging Google’s popular ranking system. The 2006 suit in federal court in San Jose, Calif., has been dismissed once, and some observers say that the new amended version’s antitrust and free speech claims may face an uphill battle to survive. U.S. District Judge Jeremy Fogel indicated in an Oct. 27 hearing that he may not issue a written ruling until early next year on Google’s motion to toss the case. But the suit raises larger questions about Google’s future susceptibility to antitrust claims as the ubiquitous Internet search engine gains steam. “Google is so large it runs the risk of slamming into the kind of situation that Microsoft found itself in, in terms of bundling its services together,” said Robert B. Reich, former labor secretary in the Clinton administration and now professor at the University of California’s Goldman School of Public Policy. “All this means is Google needs to be ready for litigation, even if ultimately it comes out in Google’s favor. As a big dominant company playing the pivotal role it plays, it is a sitting duck for all sorts of potential litigation,” Reich said. As such a big player in the Internet industry, “not only do you become a target of antitrust plaintiffs, you also can easily use your market heft in such a way as to impose burdens, or disadvantages, on other players,” said Reich. Criticism mounts Others who watch the high-tech industry closely don’t foresee serious antitrust clouds looming on Google’s horizon. “There is no question Google does have market power in its space,” said Eric Goldman, law and technology professor at Santa Clara University School of Law in Silicon Valley. “That is a predicate” in antitrust. “No question Google is the market leader, has the numbers and is setting the market agenda,” Goldman said. “But the reality is, it is an extremely competitive market. Their market base is one click away from going to competitors.” Google’s patented rating system called PageRank employs an algorithm to rank searches not just by volume of referrals but also by the value of the referring site, scoring sites in what the company says are “objective” standards. The most valuable spots are the top 10 sites listed in any Google search results, increasing the likelihood of new visitors and more ad revenue. Google has faced criticism recently for alleged blacklisting of automaker BMW Germany for practices Google considered spamming, which were designed to improve BMW’s place in rankings. For that it was allegedly penalized. And the company has faced other criticisms for censorship after it agreed to filter out certain Web sites that the Chinese government found objectionable. It also removes some references to Nazi paraphernalia in search results in Germany and France to comply with national laws. So far, the U.S. antitrust regulators have not had any problems with Google. The U.S. Department of Justice signed off on Google’s $1.65 billion purchase of video site YouTube earlier this month. At stake in the KinderStart suit is the claim that Google went beyond its objective standards and blocked KinderStart for anti-competitive reasons. “KinderStart believes the blockage was intentional because KS is a competitor,” said Gregory J. Yu, KinderStart’s attorney with Global Law Group in San Mateo, Calif. KinderStart is a Norwalk, Calif.-based search engine company that caters to new parents, educators and nonprofit groups with access to health, education and other material about infants and toddlers up to age 7, according to pleadings in Kinderstart.com v. Google Inc., No. C06-2057JF. The company Web site, begun in 2000, saw a steady growth in 2005, reaching roughly 10 million page views a month, according to Yu. But suddenly the company found itself dropped from a spot in the top 10 of Web search results to near invisibility in 2006, even though it did nothing wrong and could not find out from Google why it was backbenched, Yu said. The suit alleges that KinderStart saw a 70% drop in monthly traffic in March 2006 and an 80% drop in AdSense revenue, the Google advertising partnership. Google spokesman Ricardo Reyes, during three days of attempting to prescreen questions, said the company did not have time to answer specific queries, but provided a prepared statement by Hilary Ware, litigation counsel. “Google’s search results function as a recommended reading list, with Google telling users what sites it believes are most likely to be of interest to them,” Ware said. “Kinderstart is suing to force Google to say what Kinderstart wants it to say about Kinderstart’s site.” Google ‘SLAPPs’ back Google responded to the lawsuit with what’s known as an anti-”SLAPP” motion, stating that the KinderStart claims amounted to strategic litigation against public participation. Anti-SLAPP motions seek to toss out suits that are shown to be efforts to intimidate or silence criticism of the powerful. Google filed its anti-SLAPP motion arguing that KinderStart improperly sued Google over Google’s exercise of its free speech rights, Ware said. But in an initial June 30 court hearing, Fogel, the San Jose federal judge, put little stock in the anti-SLAPP claim. “Clearly the origins of that statute were to protect citizens who were petitioning the government for redress of grievances,” he said. “I think there’s a point at which commercial speech is not what the legislature had in mind,” he said. In its most recent motion to dismiss KinderStart’s suit, Google’s outside counsel, David Kramer of Wilson Sonsini Goodrich & Rosati in Palo Alto, Calif., wrote, “Google is shielded from all liability both by the First Amendment and federal statutory immunity granted online service providers. “Recommendations and ratings such as Google’s are plainly opinions, entitled to the protections of both the First Amendment and the California Constitution.” Goldman called KinderStart’s claim “laughable that they are a competitor of Google.” He likened it to an indirect competitor serving a niche market, not the mass-market design at the core of Google. The suit, fashioned as a class action, alleges Sherman Act, monopolization and antitrust violations, as well as Lanham Act false representation claims, free speech violation, defamation and unfair competition under California state law. Yu points out Google is used in 60% of all U.S. search queries. In 2004, Google attained a market share based on revenues alone that exceeded 80% of search-related advertising revenue, according to the complaint. Yu alleged Google’s top two competitors, Yahoo! Inc. and Microsoft Corp., are losing market share in relevant markets. But being popular and widely used isn’t the same as being monopolistic. “If you make a better mousetrap you are entitled to take over as much of the market as you want,” said Robert Doyle, antitrust specialist with Doyle, Barlow & Mazard in Washington. “Google has grown and expanded because it has built a better mousetrap. It only remains questionable when a company the size of Google engages in questionable practices to maintain that position.” Reich sees the warning signs of that in Europe. He has criticized Google in the past for going to European antitrust regulators to complain about Microsoft’s new Vista software containing a search button for Microsoft’s MSN search engine. Reich has said Google should take care that it doesn’t find itself facing similar antitrust complaints for bundled free tools such as Gmail or new small-business applications, traditionally a Microsoft mainstay. But for purposes of the KinderStart lawsuit, Google’s actions in China, France or Germany do not make the company a state actor for purposes of KinderStart’s First Amendment claim. Yu’s argument would be akin to considering Google a public forum, like a shopping mall, that would have to give KinderStart the access to rankings that it seeks. “That argument is a dead loser,” said Goldman. “It has been made repeatedly against online actors and has never gotten any traction in the courts,” he said. “In reality Google is a media business. They should be protected. Google does what a newspaper editor does; they decide what makes the cut for a newspaper and where to put it.” He said that may give them the power to make or break companies, but that’s the issue with editors in single-newspaper towns. By contrast, Reich likened high-technology companies such as Google to telephone companies, which are common carriers. It is representing many businesses-Internet search engines and browsers are essentially gateways to millions of businesses, he said. But applying the common-carrier argument to Internet companies may be too radical for judges. “Antitrust hasn’t clarified what common-carrier responsibility means, apart from regulated monopolies,” as phone companies once were, Reich said. Google is the economy standard for search engines and “if you can’t rely on it to be absolutely neutral in terms of [search result] placement, there might very well be an argument for predatory behavior,” he said. Reich suggested such claims might be more likely to arise as Federal Trade Commission (FTC), rather than Sherman or Clayton Antitrust Act, claims. The FTC legislation is much broader and courts in this era have been particularly reluctant to blaze new trails in antitrust, Reich said. Goldman also warned that Google must be careful. If it is a runaway success “they may run into antitrust supervision even if it is done cleanly. It could be a victim of its own success.” But he found that possibility remote. Goldman said Google has been disingenuous about the way it markets itself as a neutral provider of technology. “It is doing more than that,” he said, again comparing it to a media company. He did acknowledge the company has a “significant issue about transparency.” KinderStart and others have said they don’t know why their rankings tanked or how to improve their sites to get back in Google’s good graces. “You don’t know what’s going on under the hood,” Goldman said of Google’s blocking practices.

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