Google's Most Recent Algorithm Change Raises New Antitrust Questions for Government Enforcement Agencies Investigating Google

May.09.2011

By Jay Jurata and Lauren Parker

In February and April of this year, search engine giant Google rolled out a significant change to its search algorithm in the United States and internationally (for sites in English). Initial news reports suggest that Google's algorithm change shuffles search-result rankings in a manner that demotes the website rankings of its competitors while raising the rankings of Google-affiliated websites. If true, this would be the latest claim of a strategy by Google to dampen actual and potential competition in internet search and advertising.

Press reports state that the change, code-named "Panda" by Google, is designed to improve the quality of Google search results by demoting sites that contain "thin" or "low-quality" content. Few details are reported, however, as to how the algorithm change accomplishes that objective.

While any algorithm change leaves behind "winner" and "loser" sites, Panda's results are dramatic. News reports state that Panda is one of Google's most significant changes ever made to its algorithm. Google announced that Panda will affect 12% of all search queries. Initial reports further indicate that some sites have seen traffic increase or decrease by as much as 90%, with a corresponding impact on their advertising revenues.

From an antitrust perspective, perhaps the most significant issue arising from these news reports is the claim that the Panda update affects Google competitors disproportionately. Trade press articles on the change report that many of the "loser" sites are "vertical search" sites that compete with Google offerings in markets adjacent to general search—for example, sites that compete with YouTube, Google Product Search, Google Places, and Google Knol. The same reports indicate that many of the "winner" sites are Google-affiliated products that compete against demoted sites.

If such claims are true, these initial results suggest that Google-affiliated sites were either exempt from Panda, or that Panda was implemented in a way that did not hurt Google-affiliated sites. If so, Google's algorithm change likely will attract scrutiny from antitrust authorities around the globe. Over the last year, the European Commission, U.S. Federal Trade Commission and numerous State Attorneys General opened antitrust investigations into Google's possible abuse of its market power in Internet search and advertising. News reports indicate that these authorities are engaged in confidential discussions with companies to obtain first-hand information about Google's business practices, including allegations that Google manipulates its search results to foreclose competitors and preference its own services.

Several clients have approached Orrick to discuss the competitive implications of Google's recent algorithm change. If you have any questions about the implications of Google's algorithm update for your business, please contact your relationship partner.