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71–471 PDF 2011

S. HRG. 112–168 

THE POWER OF GOOGLE: SERVING CONSUMERS 

OR THREATENING COMPETITION? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ANTITRUST, 

COMPETITION POLICY AND CONSUMER RIGHTS 

OF THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

SEPTEMBER 21, 2011 

Serial No. J–112–43 

Printed for the use of the Committee on the Judiciary 

( 

(II) 

COMMITTEE ON THE JUDICIARY 

PATRICK J. LEAHY, Vermont, Chairman 

HERB KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

CHUCK SCHUMER, New York 

DICK DURBIN, Illinois 

SHELDON WHITEHOUSE, Rhode Island 

AMY KLOBUCHAR, Minnesota 

AL FRANKEN, Minnesota 

CHRISTOPHER A. COONS, Delaware 

RICHARD BLUMENTHAL, Connecticut 

CHUCK GRASSLEY, Iowa 

ORRIN G. HATCH, Utah 

JON KYL, Arizona 

JEFF SESSIONS, Alabama 

LINDSEY GRAHAM, South Carolina 

JOHN CORNYN, Texas 

MICHAEL S. LEE, Utah 

TOM COBURN, Oklahoma 

BRUCE A. COHEN, Chief Counsel and Staff Director 

KOLAN DAVIS, Republican Chief Counsel and Staff Director 

SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND CONSUMER RIGHTS

HERB KOHL, Wisconsin, Chairman 

CHUCK SCHUMER, New York 

AMY KLOBUCHAR, Minnesota 

AL FRANKEN, Minnesota 

RICHARD BLUMENTHAL, Connecticut 

MICHAEL S. LEE, Utah 

CHUCK GRASSLEY, Iowa 

JOHN CORNYN, Texas 

CAROLINE HOLLAND, Democratic Chief Counsel/Staff Director 

DAVID BARLOW, Republican General Counsel 

(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Feinstein, Hon. Dianne, a U.S. Senator from the State of California ................. 5 

Grassley, Hon. Charles, a U.S. Senator from the State of Iowa, prepared 

statement .............................................................................................................. 20 

Kohl, Herb, a U.S. Senator from the State of Wisconsin ..................................... 1 

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, prepared 

statement .............................................................................................................. 217 

Lee, Hon. Michael S., a U.S. Senator from the State of Utah ............................. 3 

charts ................................................................................................................. 219 

WITNESSES 

Barnett, Thomas O., Partner, Covington & Burling, LLP, Washington, DC ..... 33 

Creighton, Susan A., Partner, Wilson Sonsini Goodrich & Rosati, PC, Washington, DC ............................................................................................................. 38 

Katz, Jeff, Chief Executive Officer, Nextag, Inc., San Mateo, California ........... 35 

Schmidt, Eric, Executive Chairman, Google Inc., Mountain View, California ... 6 

Stoppelman, Jeremy, Co-founder and Chief Executive Officer, Yelp, Inc., San 

Francisco, California ............................................................................................ 36 

QUESTIONS AND ANSWERS 

Responses of Thomas O. Barnett to questions submitted by Senators Grassley, Kohl and Lee ................................................................................................. 53 

Responses of Susan A. Creighton to questions submitted by Senators Grassley 

and Kohl ................................................................................................................ 65 

Responses of Jeff Katz to questions submitted by Senators Grassley, Kohl 

and Lee ................................................................................................................. 84 

Responses of Eric Schmidt to questions submitted by Senators Blumenthal, 

Cornyn, Franken, Grassley, Kohl and Lee ......................................................... 102 

Responses of Jeremy Stoppelman to questions submitted by Senators Kohl, 

Grassley and Lee .................................................................................................. 170 

SUBMISSIONS FOR THE RECORD 

Alschuler, John, Chair, Friends of the High Line, New York, New York, 

September 14, 2011, letter .................................................................................. 178 

Barnett, Thomas O., Partner, Covington & Burling, LLP, Washington, DC, 

statement .............................................................................................................. 180 

Camara, Karim, New York State Assembly, 43rd District, Kings County, 

Albany, New York, July 26, 2011, letter ............................................................ 195 

Chiames, Chris, Vice President, Corporate Affairs, Orbitz Worldwide, Chicago, Illinois, statement ....................................................................................... 196 

Creighton, Susan A., Partner, Wilson Sonsini Goodrich & Rosati, PC, Washington, DC, statement .......................................................................................... 198 

Cumbo, Laurie A., MoCADA Founder & Executive Director, Brooklyn, New 

York, September 8, 2011, letter .......................................................................... 209 

Heastie, Carl, New York State Assembly, 83rd District, Bronx County, Albany, New York, August 15, 2011, letter ........................................................... 213 

Katz, Jeff, Chief Executive Officer, Nextag, Inc., San Mateo, California, statement ...................................................................................................................... 214 

New York Post, Garett Sloane, New York, New York, February 25, 2011, 

article .................................................................................................................... 223

Page

IV 

New York Times, Jonathan Vatner, New York, New York, April 19, 2011, 

article .................................................................................................................... 225

Rice, Arva R., President & CEO, New York Urban League, New York, New 

York, August 16, 2011, letter .............................................................................. 228 

Rudin, William C., Chairman, Abny, New York, New York, July 26, 2011, 

letter ...................................................................................................................... 230 

Sampson, John, New York State Senate, Albany, New York, July 27, 2011, 

letter ...................................................................................................................... 231 

Schmidt, Eric, Executive Chairman, Google Inc., Mountain View, California, 

statement .............................................................................................................. 232 

Simpson, John M., Consumer Advocate, Consumer Watchdog, Santa Monica, 

California, statement ........................................................................................... 240 

Stoppelman, Jeremy, Co-founder and Chief Executive Officer, Yelp, Inc., San 

Francisco, California, statement ......................................................................... 247 

Terry, Angela, Therapy Wine Bar, Brooklyn, New York, August 5, 2011, 

letter ...................................................................................................................... 274 

Titus, Michele, New York State Assembly 31st District, Queens County, Albany, New York, July 20, 2011, letter ................................................................ 276 

Tosney, Jason, Vice President, Centro, Chicago, Illinois, letter .......................... 278 

Wilshire, Albert, President Board Trustees, Brooklyn Music School, Brooklyn, 

New York, August 20, 2011, letter ..................................................................... 280 

Wright, Keith L.T., New York State Assembly 70th District, New York County, New York, New York, July 21, 2011, letter .................................................. 281 

Zaccaria, Gary, Salt Lake City, Utah, September 13, 2011, letter ...................... 283 

Zuckerman, Bob, Executive Director, New York, New York, August 18, 2011, 

letter ...................................................................................................................... 295 

(1) 

THE POWER OF GOOGLE: SERVING CONSUMERS OR THREATENING COMPETITION? 

WEDNESDAY, SEPTEMBER 21, 2011 

U.S. SENATE, 

SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY

AND CONSUMER RIGHTS, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC 

The Committee met, pursuant to notice, at 2 p.m., Room SD–226, 

Dirksen Senate Office Building, Hon. Herb Kohl, Chairman of the 

subcommittee, presiding. 

Present: Senators Feinstein, Schumer, Klobuchar, Franken, 

Blumenthal, Grassley, Cornyn, and Lee. 

OPENING STATEMENT OF HON. HERB KOHL, A U.S. SENATOR 

FROM THE STATE OF WISCONSIN 

Senator KOHL. Good afternoon. Today this Subcommittee meets 

to consider an issue that affects everyone who searches or does 

business over the internet—in other words, almost everybody. We 

will examine how the world’s dominant internet search engine, 

namely Google, presents its search results to consumers and treats 

the businesses it competes with. 

Our inquiry centers on whether Google biases these results in its 

favor, as its critics charge, or whether Google simply does its best 

to present results in a manner which best serves its consumers, as 

it claims. 

At the outset, I wish to stress that I come to this hearing with 

an entirely open mind, without any prejudgment of these issues. 

My goal is to provide both Google and its critics with a forum to 

air their views. In examining these issues, we recognize the incredible technological achievements of Google and the need to avoid stifling its creative energy. 

At the same time, we need to be mindful of the hundreds of thousands of businesses that depend on Google to grow and prosper. We 

also need to recognize that as a dominant firm in internet search, 

Google has special obligations under antitrust law not to deploy its 

market power to squelch competition. 

There can be no question of the astounding achievements of 

Google’s search engine. Through the magic of its search technology, 

Google, a company literally started in a garage by two Stanford 

students less than 15 years ago, has done nothing less than organize all the billions of internet web pages into an easily accessible 

listing on the computer screen. 

2 

Sixty-five to 70 percent of all U.S. internet searches on computers and 95 percent on mobile devices are done on Google’s 

search engine. Millions of people every day run Google searches to 

find out the answer to nearly every question imaginable, including 

for the best and cheapest products and services, from electronics, 

to clothing, to hotels, to restaurants, to give just a few examples. 

And businesses equally rely on Google to find customers. The 

search premise of Google at its founding was that it would build 

an unbiased search engine that consumers would see the most relevant search result first, and that the search results would not be 

influenced by the web page’s commercial relationship with Google. 

Its goal was to get the user off Google’s home page and onto the 

website it lists as soon as possible. As Google’s co-founder and current CEO Larry Page said in 2004, ‘‘We want you to come to 

Google and quickly find what you want, then we’re happy to send 

you to the other sites. In fact, that’s the point.’’ However, as internet searches become a major channel of e-commerce, Google has 

grown ever more dominant and powerful and it appears its mission 

may have changed. 

In the last 5 years or so, Google has been on an acquisition 

binge, acquiring dozens of internet-related businesses, culminating 

most recently with its proposed acquisitions of Motorola Mobility 

and Zagat’s. It now owns numerous internet businesses, including 

in health, finance, travel, and product comparison. 

This has transformed Google from a mere search engine into a 

major internet conglomerate, and these acquisitions raise a very 

fundamental question: is it possible for Google to be both an unbiased search engine and at the same time own a vast portfolio of 

web-based products and services? Does Google’s transformation create an inherent conflict of interest which threatens to stifle competition? 

In the last few years, internet businesses that compete with 

Google’s new products and services have complained that Google is 

now behaving in a way contrary to free and fair competition. They 

allege that Google is trying to leverage its dominance in internet 

search into key areas of internet commerce, where it stands to capture from its competitors billions of dollars in advertising revenue. 

Rather than fairly presenting search results, these critics claim 

that Google has begun to suddenly bias its search results in favor 

of its own services. This conduct has the potential to substantially 

harm competition for commerce on the internet and retard innovation by companies that fear the market power of Google. 

Antitrust scrutiny is not about picking winners and losers, but 

it is about fostering a fully competitive environment so that consumers can fairly pick winners and losers. As more and more of our 

commerce moves to the internet, it should be the highest priority 

of antitrust policymakers that the internet remain a bastion of 

open and free competition, as it has been since its founding. 

We need to protect the ability of the next Google to emerge, the 

next great website or application being developed in a garage in 

Silicon Valley or in Madison, Wisconsin. 

Senator Lee, we would like to hear what you have to say. 

3 

STATEMENT OF HON. MIKE LEE, A U.S. SENATOR FROM THE 

STATE OF UTAH 

Senator LEE. Thank you, Mr. Chairman. 

Internet search is critical to economic growth in the United 

States and Google has long been a dominant force in this arena. 

Indeed, Americans Google so frequently and ubiquitously that the 

company’s name has become a generic verb that means ‘‘to search 

the internet.’’ In the United States, Google controls somewhere between 65 and 70 percent of the general internet search arena and 

more than 75 percent of paid search advertising, and 95 percent of 

mobile search. 

Given its dominant position, most internet-based businesses rely 

on Google for a substantial share of their traffic in revenues. As a 

result, last year Google generated nearly $30 billion in search advertising revenues. Studies show what most of us know from experience, that the first few Google search results attract nearly 90 

percent of all user clicks. Google’s search ranking, therefore, has 

enormous power over the information users find, which websites 

receive traffic, and the amount businesses must pay to be found on 

the internet. 

A former Reagan administration antitrust chief recently suggested that this market power has essentially made Google ‘‘a monopoly gatekeeper to the internet.’’ Whether or not Google formally 

qualifies as a monopoly under our antitrust laws, one thing is 

clear: given its significant ability to steer e-commerce and the flow 

of online information, Google is in a position to help determine who 

will succeed and who will fail on the internet. In the words of the 

head of Google’s Search Ranking team, Google is ‘‘the biggest kingmaker on earth.’’ 

Google has used its substantial advertising revenues to branch 

out into a multitude of secondary internet businesses, largely by 

acquiring more than 100 different companies. Google now offers 

YouTube video, Gmail, Chrome internet browser, Google-Plus social 

networking, the Android mobile Smart Phone operating system, 

and a host of services, including Google Maps, News, Books, Shopping, Places, and Flight Search. 

With its recent purchase of Motorola Mobility, Google is now 

poised to get into the business of mobile handset manufacturing. 

With Google’s expansion into so many areas, a large number of 

businesses, advertisers, and consumer groups have raised concerns 

regarding Google’s activities, suggesting the company may be acting in deceptive and anti-competitive ways. As a result, Google is 

under investigation by antitrust authorities, both in the United 

States and abroad. This Subcommittee has oversight of antitrust 

enforcement and competition policy, and I appreciate Chairman 

Kohl’s leadership in calling a hearing to address this important 

topic. 

From its inception, Google’s stated goal was to have users leave 

its website as quickly as possible, but over time the company appears to have changed its approach, to steer users not to other 

businesses and sources of information, but to its own complement 

of competing services. 

Google has worked hard to cultivate the public perception that 

its searches are comprehensive and unbiased, but there is growing 

4 

concern that Google employs different search ranking algorithms 

and more attractive visual displays to advantage its own secondary 

sites and products, to the detriment of competing specialized search 

sites and to other disadvantaged businesses. 

There is also evidence that Google has taken information and reviews from competing specialized search sites like Yelp and Trip 

Advisor, used that data as part of its own services, and in the process demoted the search result rankings of the sites from which 

Google acquired that information. 

In addition, some reports suggest that Google has taken steps to 

impede competing search engines from crawling, indexing, and returning search results to its YouTube content and book scans. Access to these popular stores of content is crucial and critical to enabling other search engines to compete. 

There are also allegations that Google has achieved and sought 

to maintain its dominance in search by imposing exclusivity restrictions and dealings with advertising partners, perhaps in an effort 

to block competing search tools. This includes a broad array and 

a broad network of exclusive search syndication deals with 

websites like AOL and Ebay, exclusive arrangements for Google’s 

search box to appear on browsers like Mozilla Firefox and Safari, 

and agreements that Google be the exclusive default search provider on the I-Phone and on many Android models. 

Similarly, Google’s contracts with advertisers apparently impose 

limits on the advertiser’s ability to transfer data associated with 

Google’s advertising platform to any other advertising platform 

using third party tools that would make the process simple, or even 

automatic. 

Studies by a Harvard Business School professor concluded that 

the net effect of these restrictions is to reinforce the tendency of 

small-to medium-sized advertisers to use only Google Ad Words to 

the exclusion of competing platforms. Many observers are also concerned that Google may be seeking to prevent Smart Phone manufacturers and customers who wish to use the Android platform 

from using competitors’ services, for example, by tying Android to 

Google’s location program in order to exclude competing geo-location services. 

In assessing each of these concerns, the primary focus of our 

antitrust analysis should be consumer welfare. Growing complaints 

that Google is using its search dominance to favor its own offerings 

at the expense of competition deserves serious attention, especially 

if consumers are misled by Google’s self-rankings and preferential 

display. 

Such bias would deny user traffic and revenue to competing 

sites, depriving those sites of resources needed to develop more innovative content and offer better services to customers. When competing websites lose traffic, they are forced to increase their paid 

search advertising on Google, ultimately leading to increased prices 

for consumers. 

As a conservative Republican who favors free markets, I believe 

that ensuring robust competition in this critical area of our Nation’s economy will benefit consumers, it will spur innovation, and 

it will lead to job creation. In this instance I believe that preserving 

5 

competitive markets through antitrust principles can help forestall 

the imposition of burdensome government regulation. 

Thank you, Mr. Chairman. 

Senator KOHL. Thank you, Senator Lee. 

I would like, now, to introduce our first witness who will be Mr. 

Eric Schmidt. Mr. Schmidt has served as the executive Chairman 

of Google since April of this year, and from 2001 to 2011 was the 

chief executive officer of the company. 

We will introduce our second panel before they testify, but I 

would now turn to Senator Feinstein who would like to make remarks in order to introduce our witnesses from California. 

Senator Feinstein. 

STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR 

FROM THE STATE OF CALIFORNIA 

Senator FEINSTEIN. Thank you very much, Mr. Chairman. I really appreciate this very special privilege. 

The three gentlemen you are going to hear from today come right 

from the heart of the San Francisco Bay area. I have known the 

Chairman of Google for many years. I have always known him as 

a forthright man, filled with integrity. He has a long history in Silicon Valley, and at the helm of a number of America’s most innovative companies. He has been with Google since 2001. 

He has helped Google grow from less than 1,000 employees to 

28,000, 13,000 of whom are in California. That is a 45 percent 

growth in employment, even in the most difficult times of the past 

2 years, with 5,000 new hires in California in about that same 

time. Under his leadership, Google has been helping business 

throughout the Golden State, last year alone providing $15 billion 

in economic activity to nearly 300,000 small businesses, publishers, 

and nonprofits. 

Mr. Jeff Katz, the CEO of Nextag, is from San Francisco. This 

is a price comparison website company in San Mateo that allows 

people to search for products and see lists of available online prices 

for those products. Mr. Katz has extensive experience in the internet and travel industries, having held a variety of positions at 

American Airlines, serving as president and CEO of Swiss Air, 

being the Chairman and founding CEO of the well-known travel 

website Orbitz, and serving as president and CEO of Leapfrog Enterprises, a maker of technology-based learning products, among 

other endeavors. He holds a master of Science degree from my 

alma mater, Stanford, among other degrees. 

Finally, Jeremy Stoppelman, co-founder and chief executive officer of Yelp. Joining Mr. Katz on the second panel will be Jeremy 

Stoppelman. He is co-founder and CEO of a small, innovative company from San Francisco whose website allows people to search for 

local businesses or types of businesses and find profiles of the businesses in its results, including customer reviews and rankings, photographs, and other similar businesses. He worked as the vice 

president of engineering at PayPal before dropping out of Harvard 

Business School to co-found Yelp with Russell Simmons. 

As you can see, Mr. Chairman, you have three very well-qualified 

Bay area citizens. I hope they tango rather than tangle. Thank you 

very much for this. 

6 

Senator KOHL. Thank you very much, Senator Feinstein. 

We again thank all witnesses who are appearing here today. I 

would like you all now to rise and step forward and raise your 

right hand and take the oath as I administer it. 

[Whereupon, the witnesses were duly sworn.] 

Senator KOHL. Thank you all. 

Mr. Schmidt, we would love to hear what you have to say. 

STATEMENT OF ERIC SCHMIDT, EXECUTIVE CHAIRMAN, 

GOOGLE, INC., MOUNTAIN VIEW, CALIFORNIA 

Mr. SCHMIDT. Well, good afternoon, Chairman Kohl, Ranking 

Member Lee, and members of the subcommittee. Thank you for inviting me here today. 

I want to start, first, by taking a step back. Twenty years ago, 

a large technology firm was setting the world on fire. Its software 

was on nearly every computer, and its name was synonymous with 

innovation, but that company lost sight of what mattered and 

Washington stepped in. I was an executive at Sun, and later at 

Novell, at the time. 

In the years since, many of us in Silicon Valley have absorbed 

the lessons of that era. So I am here today carrying a long history 

in the technology business—thank you, Senator—and a very short 

message about our company: we get it. By that I mean we get the 

lessons of our corporate predecessors. We also get that it’s natural 

for you to have questions about our business, and that’s certainly 

fine. 

What we ask is that you help us ensure that the Federal Trade 

Commission’s inquiry remains a focused and fair process, which I’m 

sure you’ll do, and that we can continue to create jobs and building 

products that delight our users. 

So before I talk about our perspective on the state of technology 

in general, I would like to start by explaining how we think about 

our own business and a few of the principles that guide the decisions, which I am sure you will want to talk about. 

First, always put consumers first. Last year alone we made more 

than 500 changes to improve search. It is not an easy task. Our 

challenge is to return the most relevant answers first. This means 

that not every website can come on top, it is a ranking problem. 

And there are definitely complaints from businesses who want to 

be first in rankings even when they are not the best match, as best 

we can tell for a user search. 

Second, focus on loyalty, not lock-in. We do not trap our users. 

If you do not like the answer that Google search provides you can 

switch to another engine with literally one click, and we have lots 

of evidence that people do this. If you want to leave other Google 

services, we make it easy for you to do so. You can even take your 

data with you without any hassle. We want consumers to stay with 

us because we are innovating and making our products better, not 

because they are locked in. 

Third, be open, not closed. Open technology includes both open 

source, meaning that we release and actively support code that 

helps grow the internet, and open standards, meaning that we adhere to accepted standards and, if none exist, we work to create the 

standards that can improve the entire internet. 

7 

Fourth, be transparent. We share more information about how 

our search engine and other products work than any of our competitors and we give advertisers detailed information about their 

performance and return on investment. 

Finally, the only constant is change. Ten years ago, no one would 

have guessed—certainly I, and I do not think anybody else—that 

the vocabulary in economics would look like it does today. No one 

knows what it will look like in 1 year, or 5 years. So despite what 

others say about the American economy, I think our future in 

America is very bright. There is no doubt that we’re facing difficult 

times. There has never been a more exciting time to be part of a 

technology business, as I think you will see from all of the companies represented this afternoon. 

While others have given up on the American economy, Google is 

certainly doubling down. We are investing in people. In 2002 we 

had fewer than 1,000 employees, and again, now we have more 

than 24,000 and we are hiring. Earlier this year we announced 

that 2011 would be our biggest hiring year yet, and we are clearly 

on target to meet, or even beat, that. 

We are investing in mobile, as was earlier suggested. Just look 

at our plans to acquire a great American company, Motorola Mobility. We believe that our proposed acquisition of Motorola, like many 

previous moves that we have made, is good for competition, innovation, and the American economy. It is a big bet, but we are confident that this acquisition will lead to growth and innovation in 

mobile technology, which is what we care about. 

We are also investing in local. Ninety-seven percent of the people 

look online for local goods and services, but only 63 percent of—actually, 63 percent of America’s small businesses do not have a 

website at all. This is a missed opportunity, in my view. So we 

started an initiative to help small businesses get online. We’ve 

partnered with Intuit and others to offer local businesses, et cetera. 

Last year alone, Google search and advertising tools provided $64 billion in economic activity to other companies, publishers, and 

nonprofits in the United States, and we are very, very proud of 

this. Of course, this year will be even greater. 

So without exaggeration, high-tech is the most dynamic part of 

the U.S. economy. Advertising-supported internet alone is 3.1 million jobs, according to the study I just read, and according to 

McKenzie, the internet was responsible for 15 percent of America’s 

GDP growth in the last 5 years. 

The internet is also home to some of America’s most successful 

companies—Amazon, Apple, Facebook, and Google. We compete 

hard against each other and we welcome that competition. It 

makes us better and it makes our competitors better, too. But most 

importantly it means better products for our users. 

So today it’s Google’s turn in the spotlight and we respect the 

rule that you all have, and the agency, of course, in this process. 

I do ask you to remember that not all companies are cut from the 

same cloth and that one company’s past need not be another’s future. We live in a different world today and the open internet is 

the ultimate level playing field. 

So if you keep that in mind, then we believe that the Federal 

Trade Commission’s inquiry will reveal an enthusiastic company 

8 

filled with people who believe that we have only scratched the surface of what’s possible. That passion to do better will not only serve 

our users well, but it will serve our Nation well by helping create 

new jobs and economic growth that our wonderful country needs. 

So, thank you very much for your time and for this hearing. 

[The prepared statement of Mr. Schmidt appears as a submission 

for the record.] 

Senator KOHL. Thank you very much, Mr. Schmidt. We appreciate what you just had to say. Now we will begin our inquiries of 

you individually. We will ask questions for a maximum of 7 minutes. 

Mr. Schmidt, many industry experts believe that the central mission of Google has fundamentally changed since its founding. At 

the outset, Google’s goal, according to CEO Larry Page, in 2004, 

was to get consumers off Google’s page ‘‘and send you to the other 

sites.’’ Since that time Google has acquired or expanded into internet businesses in many diverse areas, including travel, videos, and 

shopping. Now we hear you say you want to provide consumers answers to questions, not merely links to websites that provide those 

answers. 

What do you say to those who argue that there is a fundamental 

conflict of interest between only providing unbiased web links and 

now providing answers, when you own many of the services providing the answers? As a rational business trying to make the most 

profit, would we not expect Google to favor its products and services in providing these answers? 

Mr. SCHMIDT. I am not sure Google is a rational business trying 

to maximize its own profits, Senator. As we addressed in our 

founding of our—the IPO letter, in the founder’s letter. Google is 

run under a set of principles that are really quite profound within 

the company. One of the most important principles is, solve the 

problem that the consumer has. So 10 years ago, the best answer 

may have been the 10 links that we saw, but the best answer today 

may be that we can algorithmically compute an answer and do it 

quicker. Think of it as if you are looking for an answer, you want 

the answer quickly, and speed matters, especially at the scale that 

we are at. So if we can calculate an answer more quickly, that’s 

an improvement for the end user. 

Senator KOHL. I appreciate your response, but in a large—in 

measure, it’s another way of saying, trust us, that we are going to 

do, and we do do, and we will do ‘‘the right thing.’’ Is merely trusting Google to do the right thing really sufficient, given your clear 

business incentives to maximize the value of your company? 

Shouldn’t we be guided by the words of a great president, Ronald 

Reagan, who said, ‘‘Trust yes, but verify’’ ? 

Mr. SCHMIDT. Well, in fact, I completely agree with ‘‘trust but 

verify’’ and I hope that this is in the process that we’re going 

through right now. The ultimate correction against any mistakes 

that Google makes is how consumers behave. We live in great fear 

every day that consumers will switch extraordinarily quickly to 

other services. One of the consequences of the open internet is that 

people have choices that they did not have in previous generations. 

In every case, the site that was—is now lower ranked is still 

available if you just type their name into your browser and off you 

9 

go. In all cases, what we’re trying to do is, we’re saying that our 

customers want quick and accurate answers and, if you will, the 

guide or the way we correct ourselves is if they switch. We know 

that people like what we do because we have an extraordinarily extensive testing regime. 

It may be worth just describing briefly that we have some number of thousands of engineers who work on search. We think 

they’re the best in the world and we’re very proud of them, and 

they mathematically compute, with more than 200 signals, a whole 

bunch of insights of how to rank things. It’s one of the hardest 

problems known in science because of the scale of the internet. 

And because we do it so well, we think we have earned that position that you were describing, but nevertheless, what happens is 

that when we do that we actually get down to doing 1 percent testing, so that what happens is we actually know, we do side-by-side 

tests to know that our—that we are producing what customers 

want. 

Senator KOHL. During a conference in 2007, Marissa Meyer, one 

of Google’s top executives, discussed how Google placed its own 

products and services on its search results page. Speaking of the 

Google Finance service, she said that in the past Google ranked 

links ‘‘based on popularity. But when we rolled out Google Finance, 

we did put the Google link first. It seems only fair, isn’t that right? 

We do all the work for the research page and all these other things, 

so we do it—put it first. That has actually been our policy since 

then.’’ 

This is your employee. ‘‘So for Google Maps, again, it is the first 

link, so on and so forth. After that it’s ranked usually by popularity.’’ So when she made that comment back in 2007 she was 

speaking, in her mind, accurately. How do you measure what she 

said then and what you are telling us now? 

Mr. SCHMIDT. Well, again, I was not there, so maybe I should use 

my own voice on this question. There’s a category of queries which 

are not well-served by the 10 links answer. You mentioned in 

Marissa’s quote Maps. When people want a map, they actually 

want a map right then and there. So over a 6- or 7-year period, 

we not only acquired a set of companies but have also invested 

hundreds and hundreds of millions of dollars in producing what we 

think are technologically and, from an experience perspective, the 

best mapping products around. 

We surfaced those because all of our testing, plus our own intuition, is that when somebody types in an address they actually want 

to have a map and we show it to them very quickly. It would be 

very difficult to do that with the 10 links model. So again, if we 

were forced to stay within the 10 links model, we would not be able 

to do that kind of innovation. Furthermore, I should mention that 

all of our competitors have similar approaches and similar products 

to the Maps places, and other things. 

Senator KOHL. Let me just say once again, she said, ‘‘When we 

rolled out Google Finance we did put the Google link first. It seems 

only fair. We do all the work for the search page and all the other 

things, so we do put it first.’’ Now, you recognize, of course, if that’s 

company policy, that’s very contrary to what you’re telling us here 

today. 

10 

Mr. SCHMIDT. Well, again, I can speak for the policy of the company during my tenure, and I represent it as I implemented it and 

understood it. In our case we implemented it the way I described 

it. I’ll let Marissa speak for herself on her quote. 

If you take a look at Google Finance, we started off by presenting 

Google links, as you described, and then we decided that it would 

be better to have a simple, quick ‘‘stock quote,’’ if you will, tool and 

we licensed that technology from the Nasdaq, the NYSE, and others, and that’s the source of her answer. So again, we moved from 

the standard 10 links answer to this, what we call a simple answer. 

And then what happened after that, of course, is right below it 

you see all of the top engines. If you do the query today, not only 

will you see that we show all of the other competitors, and ideas, 

and great sources of information—about information, but we also 

have hot links, as they’re called, right below our answers, including, for example, Yahoo Finance, which is probably the most popular of them. 

Senator KOHL. But to be listed first is an advantage, isn’t it? 

Mr. SCHMIDT. In this particular we don’t actually list anybody 

first. We have an insertion which summarizes the answer, and 

typically the Yahoo answer comes right after our answer. It’s easier 

if I describe it. If you want a stock quote, we’ll just give you the 

stock quote, and then right after that we’ll show you links to, for 

example, Yahoo Finance and the others—the others right there. So 

I disagree with the characterization that somehow we were discriminating against the others. 

Senator KOHL. Thank you very much. 

Mr. Lee. 

Senator LEE. Thank you, Mr. Chairman. And thank you, Mr. 

Schmidt, for being with us. 

Let me get right to the point of one of my concerns. Are Google 

products and services offered by Google subject to the same search 

ranking algorithmic process as all other organic search results? 

Mr. SCHMIDT. They are—they are when they’re actually in ranking in the answers that you’re describing, but I think the core question that both of you addressed in your opening statements was 

this question of where we synthesize or we come up with an answer to a question. So again, I want to just repeat that if we know 

the answer, it is better for the consumer for us to answer that 

question so that they don’t have to click anywhere, and in that 

sense we tend to use data sources that are our own because we 

can’t engineer it any other way. 

Senator LEE. OK. OK. 

But I’m really not asking whether you’re giving the right information, whether you’re giving information that is—you know, that 

you regard as most helpful to the customer. I’m asking whether 

your own secondary services, services that Google itself offers, are 

they subject to the same test, to the same standard as all the other 

results of an organic algorithmic search? 

Mr. SCHMIDT. I believe so. As I understand your question, I believe the answer is yes. I’m not aware of any unnecessary or 

strange boosts or biases. So, for example, you’ll see everything is 

11 

intermixed in a way that often competitors’ links are in along with, 

for example, YouTube. 

Senator LEE. OK. 

I’d like to show a visual aid. Let’s bring up the first slide if we 

can, Mike. This is a chart that reflects the results of a study comparing the search rankings of three popular price comparison sites 

and those of Google Shopping. Now, the three popular price comparison sites’ results are depicted in various shades of green, and 

the Google results are depicted in red. 

These particular data points were gathered in April of this year 

and they represent the ranking results from 650 shopping-related 

key word searches. While Nextag, Price Grabber, and Shopper all 

show significant variation, ranking first for some and near 50th for 

others, Google has a very consistent rate of success. Google Shopping ranked 3rd in virtually every single instance. 

So to be clear, your testimony a moment ago was that these 

Google Shopping rankings almost exclusively in the third spot are 

in fact the result of the same algorithm as the rankings for the 

other comparison sites? 

Mr. SCHMIDT. There’s a conflation of two different things going 

on in this study, which I’ve not seen so I shouldn’t comment beyond 

that. There’s a difference between sites that do product comparison 

and sites that offer products themselves. 

Google Products search is about getting you to a product, and so 

we tend to look for the product as opposed to the product comparison in this particular case, which is why the product is more highly 

ranked than the result of a product comparison site. If you did the 

same study with all of the other product sites, you would find a 

very different result. 

Senator LEE. OK. OK. 

So if we called this a product search, if we called the result a 

Google product result, that is not subject to the same algorithmic 

search input that brings about the other organic algorithmic search 

results? 

Mr. SCHMIDT. Again, I’m—I’m—I’m sorry I may have confused 

you, and I apologize. We do product search ranking. Things like— 

the companies that are mentioned that are price comparison shopping. They’re different animals, if you will. They do different— 

they’re important, they do different things. Google Products search 

is about searching for specific products. In that sense, products 

search does something similar to what Price Grabber, Nextag, and 

Shopper do, which is why the confusion exists. It’s not a—it’s not 

a—it’s an apples-to-oranges comparison. 

Senator LEE. Why is it that they’re always 3rd? I mean, it seems 

to me that this is an uncanny—— 

Mr. SCHMIDT. Well, again, I—— 

Senator LEE [continuing]. Statistical coincidence, if we can call it 

that. Third every single time. I mean, there are a few outliers 

where you’re 1st, or you’re 3rd, or where you’re 4th. You’re also, 

interestingly enough, occasionally 11th. You’re never 12th. You’re 

certainly never 50th or anything close to it. And yet, every one of 

those others will find themselves everywhere along this spectrum, 

everywhere. You’re always 3rd—almost every time. How do you explain that? 

12 

Mr. SCHMIDT. Well, again, I’d have to look at—at the specific results because we ranked—— 

Senator LEE. Well, we’ve got the results right here. Just look 

at—— 

Mr. SCHMIDT. No, I’d need to see—I’d actually need to see the 

technical details to give you a direct answer. But in general, what’s 

happening here is you’re having product coparison sites and their 

results are being compared against Google answers, which are 

products, and the two cannot be properly compared. That’s why I 

think you’re seeing such a strange result. 

Senator LEE. OK. OK. 

It seems to me, for whatever it’s worth, when I see this, when 

I see you magically coming up 3rd every time, that seems to me 

that—I don’t know whether you call this a separate algorithm or 

whether you have reverse-engineered one algorithm, but either way 

you’ve cooked it so that you’re always 3rd. 

Mr. SCHMIDT. Senator—— 

Senator LEE. Let’s move on to the next slide. 

Mr. SCHMIDT. Senator, may I—may I simply say that I can assure you we’ve not cooked anything. 

Senator LEE. Well, OK. You have an uncanny ability and an uncanny natural attraction to the No. 3 in that instance. 

[Laughter.] 

Senator LEE. Let’s look at this search result. This one is the 

product of a search query. Here it’s a search query for a particular 

camera model when we bring up a Google Product listing. Now, it’s 

near the middle of the search screen result. You know from your 

research that the middle of the first screen is the area where users 

are most likely to focus. That’s the prime real estate online, correct? 

Mr. SCHMIDT. Actually, clicks go from the top to the bottom. 

Senator LEE. OK. 

Mr. SCHMIDT. So—— 

Senator LEE. But you want to be at or near the top of the list. 

That’s—— 

Mr. SCHMIDT. In general you want to be on the first page and 

among the first entries. 

Senator LEE. OK. 

Mr. SCHMIDT. Yes, that’s correct. 

Senator LEE. Now, among the natural search results the Google 

listing, the Google Products listing is the only result that includes 

the photo. We’ve highlighted it here in blue just to demonstrate 

here that it’s different, but there’s nothing online that actually differentiates it as necessarily a Google listing. There’s nothing that 

indicates that this is an advertisement, that it’s even Google, and 

it’s also the most prominent given its placement. 

Mr. SCHMIDT. So—so again, that’s not an ad. That is an organic 

search result which is triggered by a product search data base 

which we have gathered by searching and ranking offerings from 

many different vendors. If you actually click within that, you’ll see 

that you’ll actually go to the vendor that will then sell you the 

product. 

Senator LEE. OK. I’m going to want to follow up on that, but I 

see my time’s expired. 

13 

Thank you, Mr. Chairman. 

Senator KOHL. Thank you, Senator Lee. 

Senator Schumer. 

Senator SCHUMER. Thank you, Mr. Chairman. I want to thank 

you for holding this hearing. I want to thank Mr. Schmidt and the 

other witnesses for being here to testify. 

First, I share my colleague’s passion for maintaining free and 

fair competition in the marketplace, especially in the high-tech sector. Google and its competitors are building the infrastructure of 

the future economy and it’s critical that technological growth not 

be unfairly constrained. That’s how all markets work, but particularly in this area where innovation really matters and things 

change quickly. 

So I think that the FTC investigation will help get to the heart 

of the facts behind the kinds of allegations we’re hearing today, 

and that’s a good thing. So it is important we examine market 

dominance with a critical eye, especially in an industry that’s a 

foundation of our economic future. 

Now, I’ve been particularly passionate about the growth of the 

high-tech sector because it has been, and will be, critical to the future growth of New York. I realize that when most people hear 

about high-tech sectors in the United States they don’t necessarily 

think of New York, yet by many measures New York is No. 1 or 

two when it comes to employment or investment in the entire sector. We’re now the second-largest recipient of high-tech venture 

capital in the country. We’ve passed Boston this year and only trail 

Silicon Valley in the amount of high-tech venture capital invested. 

This is the statistic that is most amazing to me. 

By some measures the New York metropolitan area actually has 

more workers in the high-tech industry than any other region of 

the country: over 300,000 men and women, 22,000 firms that are 

classified as high-tech companies. That’s right, we have more than 

Silicon Valley, more than Boston, more than Washington. It’s sort 

of hidden by some of the other industries. J.P. Morgan, I’ve been 

told, has more computer programmers than companies like Google 

or Microsoft. So it’s very important to New York. 

Google, frankly, has been a very important part of that equation 

in New York. Last year Google bought the largest office building 

in Manhattan. Google employs around 3,000 people in New York, 

that’s double its employment rate from 2010, and in 2010 it provided $8.5 billion of economic activity for New York businesses, 

websites, publishers, and nonprofits, and I’d like to ask unanimous 

consent, Mr. Chairman, a number of letters I’ve received from 

members of the New York legislature, New York businesses, describing the significant role Google plays in New York’s economic 

development. 

Senator KOHL. Without objection. 

[The letters appear as a submission for the record.] 

Senator SCHUMER. But obviously with that great power Google 

has, as my previous colleagues have mentioned, great responsibility. So I wanted to get a sort of fix on this. Frankly, the future 

of New York’s high-tech is lots of little companies. There are hundreds of them that are burgeoning, one or two of whom might grow 

into a Google or a Facebook or one of the others. So if Google were 

14 

being rapacious and were shutting down the ability of these small 

companies to function, it would hurt New York. 

Every 6 months or so, I meet with some of the leading—the 

heads—the CEOs of the high-tech companies in New York, the 

growing—the little ones, and we talk about problems they face. We 

don’t have a good—you know, we don’t have enough engineers in 

New York, we’re trying to build an engineering school. Immigration 

is a huge problem to them. We need reform of H1–B visas, things 

like that, which we’re working on in the Immigration Committee. 

But without even prompting them—and I think this is important 

for my colleagues to hear—there are over a dozen companies at the 

table of different types, each of whom had 100, 200, 300 employees, 

and most of whom hadn’t existed a couple of years ago. And I 

asked them, what do you think of Google? It was off the record. Is 

Google rapacious? Are they competing with you, trying to steal 

what you do? I’ve been through this before in previous hearings 

where one of New York’s companies, Kodak, I thought was being 

very unfairly taken advantage of by another large high-tech company. 

Or are they—generally do they have a more positive attitude of 

being open, of encouraging, et cetera? Frankly, I expected them to 

attack Google. That would be the natural thing, you’d think. But 

they didn’t. Four-fifths of them said Google is a positive force, 

much more positive than most of the other large companies they 

deal with. They said ‘‘it helps us more than it hurts us’’, their 

words. The consensus was among them, Google is actually pretty 

good. We don’t see them as rapacious. It surprised me and it’s influenced me. 

And so I think my colleagues ought to hear that, that while it’s 

important of course that we pay attention to competition in the 

high-tech sector—I agree with you, Senator Lee, that that’s the 

best way to get growth—it’s also important we focus on growth and 

investment and jobs. And so I thought I’d just share that with my 

colleagues because I think it’s interesting to hear and it was not— 

you know, there was no—they had no idea I was going to ask about 

Google, it was off the record. They are very frank with me about 

a lot of things, including people’s politics and things like that. OK. 

Now, I have a question for you that’s specific for New York, and 

then a couple of general questions. Well, I don’t have too much timing remaining. But last year Google selected Kansas City as a site 

for your new ultra-high speed internet service. That really helped 

Kansas City. The Hudson Valley is very eager to be another test 

place for your network. We have IMB there, we have a lot of hightech industry. It’s growing, but it’s being hindered by a lack of 

internet capacity. Would you agree to consider the Hudson Valley 

as a future test site for your broad-band project? 

Mr. SCHMIDT. I think the answer is absolutely. I’ve been there 

and it’s both a great technology place and also a wonderful natural 

resource. What we’re doing in Kansas City is we’re actually experimenting with a new model for broad-band, different pricing, different speed, and so forth, and if it works I think it has an opportunity to really change the discussion of broad-band in this country. We want it to succeed first in Kansas City, so absolutely. 

15 

Senator SCHUMER. And last question: we’ve heard your answers 

here, but I’m sure you have to think about this because you’re always a growing and evolving company. What do you think Google 

could be doing better to foster competition that you’re not doing 

now that you could do to help all those little companies grow into 

big, successful companies? 

Mr. SCHMIDT. I’m always interested in creating greater platforms 

for innovation. If you take a look at Android today, 550,000 

phones—perhaps others will ask about this—the number of new 

platform opportunities for new companies to build mobile apps on 

Android is very exciting. We could invest a lot more money in developer support and platform support for the industry that will be 

built around the platforms that Google is building. I’ve always felt 

that that’s something we could invest even more in. 

Senator SCHUMER. My time’s up, Mr. Chairman. Thank you. 

Senator KOHL. Thank you very much, Senator Schumer. 

Senator Cornyn. 

Senator CORNYN. Thank you, Mr. Chairman. 

Welcome, Mr. Schmidt. 

Mr. SCHMIDT. Yes. Thanks, Senator. 

Senator CORNYN. Mr. Schmidt, I’m a frequent user of your product and I’ve had—learned a lot when I’ve had a chance to visit your 

facilities in California. It is a marvel of modern technology. I have 

to confess that when I read the non-prosecution agreement between 

Google and the U.S. Justice Department, it gave me some concerns 

and I just want to give you an opportunity to comment on that because, since the Chairman talked about trust, we quoted Ronald 

Reagan, talked about ‘‘trust and verify’’, I just want to know how 

you put this into the context of what I would regard generally as 

a very positive contribution to productivity and technology. 

But the non-prosecution agreement between Google and the Department of Justice, dated August the 19th, basically Google admits to helping online pharmacies illegally sell hundreds of millions of dollars of potentially counterfeit and tainted prescription 

drugs to U.S. consumers. And as a result, as you know, Google paid 

a—what is reported to be one of the largest criminal penalties levied in cooperation in U.S. history, $500 million. 

And just quoting: ‘‘As early as 2003, Google was on notice that 

online Canadian pharmacies were advertising prescription drugs to 

Google users in the United States through Google’s Ad Words advertising program. Although Google took steps to block pharmacies 

in countries other than Canada from advertising in the United 

States through Ad Words, Google continued to allow Canadian 

pharmacy advertisers to geo-target the United States in their Ad 

Words advertising campaigns. Google knew that U.S. consumers 

were making online purchases of prescription drugs from these Canadian online pharmacies.’’ 

In this document, Google admitted to knowing at the time that 

many of these Canadian online pharmacy advertisers distributed 

prescription drugs, including controlled substances, based on an online consultation rather than a valid prescription from a treating 

medical practitioner. And it was not until 2009 when Google became aware of the DOJ’s investigation of its advertising practices 

in the online pharmacy area that Google took a number of signifiVerDate Nov 24 2008 11:11 Dec 21, 2011 Jkt 071471 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\71471.TXT SJUD1 PsN: CMORC
16 

cant steps to prevent the unlawful sale of prescription drugs by online pharmacies to U.S. consumers. 

So I want to give you the opportunity, Mr. Schmidt, to put that 

in context so we can get a complete and accurate picture of Google 

as a corporate citizen, and I think it also speaks directly to the 

issue of trust. 

Mr. SCHMIDT. Well, Senator, thank you. And again, all of that is 

generally quite correct. We regret what happened and we entered 

into the agreement that you named and cited from. Unfortunately, 

as part of that agreement—and I’ve been advised very clearly by 

our lawyers—that we have an agreement with the Department of 

Justice, that we are not to speak about any of the details of it, so 

I’d have to ask you to speak to the Department of Justice for more 

of that. 

All I can—— 

Senator CORNYN. Is that—is that in the 15-page agreement? 

Mr. SCHMIDT. It’s in there somewhere. Yes, sir. And so in any 

case the important thing for me to say is that the conduct that was 

covered is not—has nothing to do with any of our current advertising practices or policies. In other words, it was a historical event. 

Senator CORNYN. Well, was it the result of oversight or inadvertence, or were there some employees in the company that were 

doing this without your knowledge or the—— 

Mr. SCHMIDT. Well, certainly not without my knowledge. Again, 

I’ve been advised—unfortunately I’m not allowed to go into any of 

the details, and I apologize, Senator, except to say that we’re very 

regretful and it was clearly a mistake. 

Senator CORNYN. My counsel advises me that, under the agreement, you’re not allowed to contradict the agreement, although you 

can comment on it. Is your understanding different? 

Mr. SCHMIDT. Let me ask my counsel. Again, I’m not allowed to 

go into the details or characterize it beyond the—beyond what has 

been cited in the agreement. We absolutely regret what happened. 

It was a mistake and we certainly apologize. 

Senator CORNYN. Well, do you disagree with the characterization 

that I gave, or the words—— 

Mr. SCHMIDT. I agree with you, Senator. Yeah. 

Senator CORNYN. And you’ve taken steps to make sure that that 

sort of thing never happens again? 

Mr. SCHMIDT. Absolutely. And again, I say that with great regret. 

Senator CORNYN. Mr. Schmidt, of course this is the Antitrust 

Subcommittee. Would you agree with me that at some point it becomes illegal under the antitrust laws to insist that customers of 

one product buy another separate product, generally called tying? 

Mr. SCHMIDT. Yes. I’m not an attorney, but my general understanding is that that’s correct. 

Senator CORNYN. Do you believe that your mobile Android operating system—your mobile operating system, Android, has reached 

that point? It’s about 40 percent of the market and growing fast, 

correct? 

Mr. SCHMIDT. As a bit of background, as I mentioned earlier, Android is on its way to becoming the most successful mobile platform. We’re extraordinarily proud of this. As I say, we have 

17 

550,000 activations and the Android operating system is, first and 

foremost, freely licensed. That is, there’s no fee whatsoever to use 

it. Speculating on the basis of your question, it turns out that it’s 

possible to use Google search along with Android, but it’s expressly 

also possible to not use Google search. So the answer is, that’s not 

an example of—of the—of the case you were describing. 

Senator CORNYN. Can Google design Android so that other applications cannot work as well as Google applications? For example, 

the Gmail application will always be faster than the Yahoo mail 

application. Is that possible? 

Mr. SCHMIDT. I’m sure that’s not true in general because under 

the rules of open source it’s possible for anyone to take open source 

and modify it in any way possible. So anything that we did, which 

we wouldn’t do, that would advantage our own apps would be reversible by somebody because we give them the source code. 

In other words, the—historically the problem in this case was 

that there was some hidden feature that a previous company would 

do that wasn’t visible. Because Android source is made available to 

everyone, you can see it and we can’t—we couldn’t choose that if 

we wanted to. 

Senator CORNYN. Thank you. My time’s up. 

Senator KOHL. Thank you very much, Senator Cornyn. 

Senator Klobuchar. 

Senator KLOBUCHAR. Thank you very much, Mr. Chairman, and 

thank you for holding this important hearing. We all know that 

Google is a big component of the internet. I was going my own research as people were talking here, comparing—Googling my 

name—which I’m sure no one on this panel, no Senator, has ever 

Googled their own name. But I Googled my name on Google and 

then I used Bing as well. 

I will note that Google, for a fourth entry, beating out my own 

Facebook page, featured a column that my dad wrote for an online 

newspaper on Sunday about the Viking game, in which he says, 

‘‘The laws of chance are basically silent on the odds of another football team matching the mind-bending performance of the Minnesota Vikings on Sunday.’’ 

[Laughter.] 

Senator KLOBUCHAR. So Bing, luckily, does not feature that article at all for the Vikings. But it was making me think about how 

you do these rankings. According to some remarks attributable to 

Google in the recent Minneapolis Star Tribune article, Google uses 

nearly 200 different factors to determine rankings. I know Senator 

Lee went through some of this with you, and Google changed its 

ranking formula, according to this article, about 500 times in 2010. 

Obviously these change have a big impact. For example, the difference between being ranked first and being ranked second is that 

the first-ranked result gets about 35 percent of the clicks, the second result I believe only gets about 11 percent, and when Google 

changes its formula, companies that were once first might end up 

being on the second page, or even further down the line. 

Businesses are constantly telling me how they want certainty, 

and I know the same time Google is innovating and changing its 

algorithm to improve its product. But do you think companies 

18 

should have a right to expect more certainty in how they’re being 

ranked? 

Mr. SCHMIDT. In the situation that you’re describing, I have a lot 

of sympathy for the business whose ranking has gone down. 

There’s no question that natural search results do drive revenue, 

traffic, popularity, and so forth, so when we make a change, there 

are ancillary or unintended consequences such as that. It’s important to know that at the same time company A is pushed down, 

another company goes to the top. And we are the business of ranking, and by definition those ranking decisions are not perfect. They 

could be—you could argue them one way or the other. 

Our algorithms are not specific to a specific company, so you can 

have a situation where the ranking has changed for no particularly 

good reason and the business feels upset. On the other hand, 

there’s another business that got, from their perspective, a surprising boost and they’re not the ones that are complaining. So 

from my perspective, I—we don’t know how to be more—more precise with respect to the rankings because, as our algorithms improve, we have to touch a billion people. We make a change roughly every 12 hours in our ranking. Most of them are relatively 

minor. In the article I think that you’re referring to—— 

Senator KLOBUCHAR. Yes. Actually there’s a small business that 

makes above-ground pools in Browns Valley and they had to—they 

said that they paid over $40,000 for an online advertisement to 

make up for the fact that they had been put down in the rankings. 

I think they freely admitted how important Google was to their 

business—— 

Mr. SCHMIDT. Yeah. And again—— 

Senator KLOBUCHAR [continuing]. But you could see the cost it 

was for them. 

Mr. SCHMIDT. No. There’s—there’s absolutely no question that 

it’s a cost. And again, we don’t know how to do it with more certainty, given that we’re always focused on improving our algorithms based on competition and the principles that I described 

earlier about user testing. We did make a large change approximately 6 months ago which touched a lot of firms which had to do 

with low-quality content farms, which this particular example is 

not, but that’s relatively rare when we make such a change. 

Senator KLOBUCHAR. One other issue that’s come up to my attention is there’s reports that Google and the associated websites participate as bidders in the auctions that Google holds for search advertisements. Does Google or its associated companies participate 

in those auctions? 

Mr. SCHMIDT. You’re referring to the auctions that Google runs? 

Senator KLOBUCHAR. Uh-huh. 

Mr. SCHMIDT. So we run an auction around advertising. We do 

occasionally show what are called house ads, and—but we—so in 

that sense we participate in the auctions but we try to limit that 

for obvious—for obvious reasons. It’s a very tiny number. 

Senator KLOBUCHAR. OK. 

One thing that I’ve been focused on is the stealing of intellectual 

property, books, movies, music, just the money that’s been going 

out of our country because of that. And, you know, what happens 

sometimes, if you type in a legitimate song or you type in a legitiVerDate Nov 24 2008 11:11 Dec 21, 2011 Jkt 071471 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\71471.TXT SJUD1 PsN: CMORC
19 

mate movie, you might be steered in some of the top rankings to 

an illegitimate site. And is there anything more that Google can be 

doing to take responsibility for this? This is obviously a different 

issue than some of the antitrust things, but I’m very curious about 

it. It’s a very important issue. 

And again, we agree with—that there is a real problem here. We 

have taken the position that we have to represent the web as it is 

as opposed to the way we wish it to be. We try to avoid censoring 

or deleting things unless by color of law, if you will. In those particular cases—and I know this is before the Senate—we favor positions which involve following the money, people who really are 

stealing content to the degree that the money that they’re taking 

can be revoked from them, and so forth. We think that’s the best 

legislative approach. 

Senator KLOBUCHAR. So you follow the money. But still, there 

must be some way to figure out if these sites are illegitimate, if 

they still keep coming up. 

Mr. SCHMIDT. It’s difficult, and the reason is, assume that the 

site—let’s say, you know, I’m a stealing site.com. We can identify 

that because we can do some kind of a test for trademark violation. 

That company can then surface as another site—test, and then 

they surface as another site. So it’s a whack-a-mole problem. 

The other problem we have with copyright is it’s hard to know 

who owns the copyright. We have a very successful program on 

YouTube where content owners register their videos, if you will, 

and then if an illegally uploaded copy comes up we can actually do 

the comparison. We can’t do that in general because of the nature—broad nature of the web. 

Senator KLOBUCHAR. And are you continuing to work on this 

issue? Because I think it’s—— 

Mr. SCHMIDT. Oh, it has a huge issue and it has affected our 

business with the content companies on whom we critically depend. 

So we’re under great pressure to resolve this with a good technological solution. 

If I might add, the core problem is that you can look at a website 

and you can tell that’s copyright infringement just like that, absolutely. The problem is, a computer can’t. To do it systematically is 

a very hard computer science problem. 

Senator KLOBUCHAR. OK. 

Just two other things I wanted to add here. One is, Google did 

a very good event in Minnesota. They reached out to some of our 

small businesses and helped them to set up websites, which was 

helpful. So I know that there’s legitimate work being done with the 

small businesses, but again, I share their concerns about some of 

this ordering and how it affects them. 

Second, since Senator Schumer mentioned having the Google site 

in New York when it went to Kansas City, Senator Franken and 

I are still focused on Duluth and I don’t want you to forget that. 

Mr. SCHMIDT. Yes. Absolutely. 

Senator KLOBUCHAR. Thank you very much. 

Mr. SCHMIDT. And if I could—if I could add, I know there’s a concern about small businesses. One of the great things about Google 

is that small businesses can in fact be ranked higher than they 

would otherwise be because they can be very specific, and if we do 

20 

anything we probably show small businesses better than they 

would be in other approaches. 

Senator KOHL. Thank you, Senator Klobuchar. 

Senator Grassley. 

Senator GRASSLEY. Yes. Mr. Schmidt, I want to make a statement, but before I do Senator Klobuchar reminded me that one of 

those workshops is going to be held in Pella, Iowa next week. If we 

maintain our week-long recess from Washington, I’m going to go to 

that. 

Mr. SCHMIDT. OK. Thank you. 

Senator GRASSLEY. I’m going to have a short statement, and then 

I want to put a longer statement in the record, Mr. Chairman. 

STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S. SENATOR 

FROM THE STATE OF IOWA 

Senator GRASSLEY. I’ve heard both good and bad about Google 

from Iowans. Some are concerned that Google is unfairly using its 

market power to manipulate search and drive web traffic to its own 

sites to the detriment of small business and consumers. They’re 

frustrated by business practices that are not transparent. They believe Google is engaging in anti-competitive behavior, thwarting a 

competitive marketplace. 

Now, others are extremely supportive of Google’s products and 

services. They’re concerned that the Federal Government is being 

overly aggressive and will place burdensome regulations on a company that is creating good jobs and innovative consumer tools. We 

should not be penalizing successful companies that are innovating, 

providing cost-effective and productive services and creating jobs. 

But I also believe that companies should not take unfair advantage of their market power, engage in deceptive business practices 

that negatively impact the marketplace. The government should 

not be picking winners and losers. The antitrust laws have a role 

to play in ensuring that there’s a level playing field. All companies 

must play by the rules. Companies should employ open, fair, and 

transparent business practices that do not harm competition and 

impede consumer choice. 

[The prepared statement of Senator Grassley appears as a submission for the record.] 

Senator GRASSLEY. I go to my questions now, Mr. Schmidt, and 

I’m going to quote without attribution several communications I’ve 

had with Iowans on both sides. I’ll start out with, what do you say 

to Iowans who are concerned that Google ‘‘uses its power to manipulate consumers and drive traffic to itself and away from potential 

competitors for traffic and ad revenue? ’’ So kind of, how do you respond to that? An additional quote is, are you concerned that your 

company has been ‘‘exerting enormous power to direct internet traffic in ways that hurt many small rural businesses? ’’ 

Mr. SCHMIDT. So I’d like to return to the philosophy that we’ve 

had for some years, which is to focus on getting to the right answer. And we have a lot of systems inside the company—internal 

testing, external testing, 1 percent tests as they’re called—to really 

make sure that we’re producing the results. And that is the guide 

that we use. It’s really about consumers. As we discussed earlier, 

it’s perfectly possible that in the course of that, extremely good and 

21 

well-meaning small businesses move up and down in the rankings. 

But we are in the rankings business, and so for every loser there’s 

a winner, and so forth. 

I am satisfied that the vast majority of small businesses are extremely well-served by our approach, and as I said earlier to Senator Klobuchar, I do believe that, if anything, our system promotes 

and enhances small business over larger businesses because it 

gives them a hearing and a role that they would not otherwise 

have because of the nature of the way the algorithms work. 

Senator GRASSLEY. Here’s a quote from somebody that supports 

Google. How would you respond to the Iowan who wrote that, ‘‘Further restrictions on successful businesses like Google are the surest 

way to impede innovation, entrepreneurship, ultimately threatening any sustainable economic recovery? ’’ 

Mr. SCHMIDT. Well, again, we would like to be judged, and we’re 

happy to be reviewed and judged by you all and by all the other 

appropriate legal processes, based on the principles that we’ve set 

out, which are to focus on consumers and consumer choices. We are 

always worried about consumers being able to move from ourselves 

to our current largest competitor, which is Bing, and then the 

many new competitors that have emerged over the last few years. 

So we argue that we’re in a highly competitive market. We welcome the oversight, but we would ask that you understand the way 

we’re making the decisions is based on the principles. 

Senator GRASSLEY. You may want to say how you help small 

business beyond what we talked about here, these workshops that 

you have. But in addition to anything you want to say along that 

line, how can small businesses’ websites compete with large retailers and big box stores on Google? 

Mr. SCHMIDT. The historic—it’s interesting that Google was, first 

and foremost, a success in small businesses because small businesses were more nimble than the big businesses when it came to 

the internet. So we have a long history of promoting and helping 

small businesses, and we love this. Small businesses succeed precisely where the larger ones don’t. Small businesses succeed because of specialization. 

So what we try to do when we try to get companies online, is we 

try to get them to articulate the unique way in which they’re different. So in your case with your constituents, there’s something 

unique or special about the citizens and the view and the culture 

of your State. And if they can show off that, they’re going to, on 

the margin, both be ranked higher and also appeal to a broader audience. What’s great about it is that we can have local flavor with 

global impact, the local flavor seen on the website and global impact in terms of the market that you’re serving. 

Senator GRASSLEY. A question that would come from somebody 

who is not an admirer, complaints along the line that Google is directing internet users to Google-operated websites regardless of 

whether the organic results of the search would direct users to 

competing sites. Specifically, some of my constituents are concerned 

that small, local Iowa businesses are not treated in a fair and competitive manner and that the top search results to a query are 

often given to large national companies, even when a search designates a specific Iowa location in the query. So he obviously feels 

22 

small businesses are being cheated and consumers are being misled. Your response? 

Mr. SCHMIDT. It’s perfectly possible that you’re describing failures of our algorithm. A large company can masquerade as a small 

business in Iowa, and it may be difficult for us to detect it. We’re 

constantly making changes in testing to try to improve it. 

In the case that you are describing, part of the answer we would 

give is that hopefully you will have a mixture of larger companies 

and smaller businesses that reflect the best of Iowa in that particular scenario. But the precise ranking algorithms are so difficult 

to characterize, why am I first and another second, because there 

are so many different signals and it’s applied so broadly that it’s 

hard to reason from a specific case out to the general case. 

Senator GRASSLEY. Thank you, Mr. Chairman. 

Senator KOHL. Thank you, Senator Grassley. 

Senator Franken. 

Senator FRANKEN. Thank you, Mr. Chairman, for this extremely 

important hearing. 

First, I want to start out by saying that I love Google, and I said 

that the last time Google was here in front of my Subcommittee 

but I think it bears repeating. Google has utterly transformed the 

way we locate and use information. I have a feeling that Google is 

going to continue to be among those setting the standard for innovation in this country for decades to come. But in many ways 

Google’s unprecedented growth and success is also one of the reasons we need to pay attention to what you’re doing. 

As you get bigger and bigger and bigger, I worry about what that 

means for the next Larry Page or Serge Brin, who are struggling 

to build the next innovative product in a garage. I am admittedly 

skeptical of big companies that simultaneously control both information and the distribution channels to that information. For me, 

that is at the heart of the problem here. 

When you completely dominate how people search for information and you own separate products and services that you want to 

succeed, your incentives shift, your fiduciary duties to your shareholders shift, and people have reason to worry that you aren’t going 

to play fair. 

I was a little taken aback by an answer you gave when the 

Chairman brought up Marissa Mayer’s quote that, ‘‘When we rolled 

out Google Finance we did put the Google link first. It seems only 

fair, right? We do all the work for the search page, and all these 

other things, so we do put it first.’’ You answered that by saying 

that, well, you put a map out there. When someone wants a map 

to someplace, you just put a map out there and that’s what they 

want. I sort of understand that. Or a financial answer of stock 

price. But then the Ranking Member asked you, well, when that’s 

not the case—— 

Mr. SCHMIDT. Right. 

Senator FRANKEN [continuing]. When you’re not putting out the 

answer that people want, when you’re not doing that, do all your 

rankings reflect an unbiased algorithm? And you said, after a little 

hesitation, ‘‘I believe so.’’ That seemed like a pretty fuzzy answer 

to me, coming from the Chairman. If you don’t know, who does? 

That really bothers me because that’s the crux of this, isn’t it? And 

23 

you don’t know. So we’re trying to have a hearing here about 

whether you favor your own stuff and you’re asked that question, 

and you admittedly don’t know the answer. 

I want to talk about Yelp a little bit. I read through the testimony of Mr. Stoppelman, the co-founder and CEO of Yelp last 

night, and I have to say that I found his story to be quite compelling. It sounds to me that Google, first tried to license Yelp’s content and did, and then when Yelp terminated that contract, Google 

tried to buy Yelp. 

When Yelp refused, Google started taking Yelp’s reviews and 

showed them on Google’s page. We’re going to hear from Mr. 

Stoppelman soon, but I wanted to give you a chance to respond to 

some of the points in his testimony. Did you get a chance to read 

it and did you get a chance to look at the exhibits? 

Mr. SCHMIDT. In general terms, yes, not in specific. But I’m generally familiar with Yelp, so—— 

Senator FRANKEN. OK. 

First of all, Yelp contends that even now consumers cannot find 

links to Yelp in Google’s merged results. Mr. Stoppelman goes on 

to say that ‘‘it is impossible for any of Google’s competitors to be 

displayed as prominently as Google itself, even if Google’s own algorithm rates them higher.’’ Do you think that’s a fair characterization? 

Mr. SCHMIDT. I generally disagree with—— 

Senator FRANKEN. Generally? 

Mr. SCHMIDT. Again, with Mr. Stoppelman’s comments, and he’ll 

have an opportunity to say what he’d like in a minute. The background on Yelp is that they’ve been a partner and an important 

site on the web for many years, and they’ve been always relatively 

highly ranked in our search results. 

We’ve always had them part of our index. Some years ago we decided to start working on a project built around location, and the 

idea was to create, if you will, a hub of information around a place, 

so that would be a map and information about the things that are 

at that map, so a restaurant, a store, or what have you. 

And given that we search this information, we also took snippets 

of the results from Yelp, along with many others, and put those 

into those web results. Those became what are known as place 

pages today. I should say, by the way, that our competitors also 

have a similar offering. And if it’s—if there’s confusion as to why 

we need a place page, think about a mobile device. If you have a 

phone—so you have your phone here, it’s going to be very difficult 

for you to go through the 10 links, whereas if you have a map and 

you can sort of thumb around and move around, that all makes 

sense. 

So in the particular case of Yelp, I felt that Yelp would be very 

happy with us pointing to their site and then using a little bit of 

their reviews, because we had gotten those in the index, and then 

sending traffic to them. They were not happy with that. They sent 

us a letter to that effect and we took them out of the place pages. 

So if you look today you’ll see that they’re not in there. You have 

the Google reviews and a bunch of other stuff like that, and ultimately we bought a company called Zagat to try to do something 

similar. So this is not a case of generic ranking and so forth, it’s 

24 

about us trying to create these place pages and get information to 

solve a different problem. 

Senator FRANKEN. I’m out of time. I’d just like to ask one short 

question and then hopefully go to a second round if we can. Is 

Google still using Yelp’s content to drive business to Google Places? 

Mr. SCHMIDT. As far as I know, not. 

Senator FRANKEN. As far as you know? 

Mr. SCHMIDT. Well, again, I’ll have to look, but I’m not aware of 

any. 

Senator FRANKEN. OK. Maybe Mr. Stoppelman will help us on 

that. Thank you. 

Senator KOHL. Thank you very much. 

Senator Blumenthal. 

Senator BLUMENTHAL. Thank you, Mr. Chairman. And thank you 

to you and the Ranking Member for having this hearing which I 

think is very important. Thank you for being here, Mr. Schmidt. 

We welcome you here and I want to join my colleagues who have 

remarked on what a tremendous success story Google is, a great 

American success story, a great consumer success story. 

And I certainly have formed no conclusions whatsoever as to any 

of the questions you’ve been asked, or others that may relate to the 

concerns that have been expressed, those concerns focusing on the 

size and market power of Google and whether it is of a scope and 

scale that it invokes certain responsibilities under our law, and 

whether or not Google has complied with those responsibilities. 

But there’s no question about the fact that Google is really the 

behemoth in the search market these days and that it far outsizes 

its nearest competitor, which has less than 30 percent of the market as compared to Google’s 65 or 70 percent more in searches, and 

an even higher share in advertising revenue, and that the trend 

will be toward perhaps an even more sizable share on the part of 

Google in the search market. The reason I say it is your nearest 

competitor is losing $2 billion a year, and Google made $29 billion 

in 2010. 

I think that the dynamic here is best summarized by Jonathan 

Rosenberg, who is your own vice president of Product Management, 

who said—and I’m quoting. He said it in 2008. It’s not your voice, 

but I think it does speak to the dynamic in the market: ‘‘So more 

users, more information, more information, more users, more advertisers, more users, it’s a beautiful thing: lather, rinse, repeat. 

That’s what I do for a living. So that’s the engine that can’t be 

stopped.’’ 

The hearing and the testimony here, and a lot of what’s been 

written and said, has many allegations. They are only allegations— 

they haven’t been proven—about scraping content and co-opting 

that content. My colleague, Senator Franken, just raised Yelp’s allegations, the other kinds of claims about anti-competitive conduct. 

So my question to you is, drawing on the lessons that presumably you have learned as you very forthrightly acknowledge, can 

Google suggest measures to be taken voluntarily at this point to 

promote competition, to dispel those allegations, and perhaps dissipate some of the momentum toward government intervention? 

And I ask this question in the spirit of trying to avoid government 

regulation and intervention. 

25 

In my view, some of the companies who have occupied your chair 

before you have been their own worst enemy in that regard, and 

your very frank acknowledgement about Google’s responsibilities 

and its approach, I think, speaks an approach to, in effect, try to 

do voluntarily what’s in consumers’ best interest, because competition is in consumers’ best interests before there is intervention either by a government agency or by a court. 

Mr. SCHMIDT. My general answer would be that making the 

internet win guarantees very strong competition for all of us. I understand you were asking a more narrow question, but the fact of 

the matter is there are many, many new startups that are potential future competitors of Google and of others. For examples, there 

are sites now that are seeing more than half of their traffic coming 

from Facebook, and Google is a very small component of the traffic 

that they get. 

So there is every reason to believe that a broad strategy to promote the internet and promote competition and investment in companies, the IPO market is one of the hottest markets ever done, so 

I would argue that the levers are necessary—are necessary to guarantee the outcome you’re looking for are largely already in place. 

Senator BLUMENTHAL. Well, let me be more narrow in my question. Right now, as I understand it, certain Google properties— 

Maps, for example—— 

Mr. SCHMIDT. Sure. 

Senator BLUMENTHAL [continuing]. Are at the top of the search 

results—— 

Mr. SCHMIDT. Right. Sure. 

Senator BLUMENTHAL [continuing]. Regardless of the algorithm 

or the formula or the methodology. 

Mr. SCHMIDT. Sure. 

Senator BLUMENTHAL. They are at the top. Would, for example, 

eliminating that preference be a step in the right direction? 

Mr. SCHMIDT. Well, I would disagree for two reasons. First, I 

think it would be bad for consumers because consumers actually 

wanted a map, and now you’re—by virtue of such a rule you’re forcing people to do steps. The second, of course, is that it would allow 

the competitors to offer such that—but without Google being able 

to do it because competitors all have that as well. So what I’m worried about is, such a restriction would—would essentially prevent 

us from meeting our primary mission. 

Senator BLUMENTHAL. Are there other specific steps that you 

would suggest? I mean, if we were a court and liability were found 

and the question were remedied, what would you suggest? 

Mr. SCHMIDT. Well, again, I—— 

Senator BLUMENTHAL. And I don’t mean to put you in an unfair 

position. 

Mr. SCHMIDT. No, no. I—— 

Senator BLUMENTHAL. It’s a very, very, very hypothetical question. 

Mr. SCHMIDT. I’ve actually spent a lot of time thinking about 

this. We had a long conversation some years ago about how Google 

would behave to avoid being evil when we were big. And we actually believe that we’ve made those changes, steps and so forth. A 

26 

classic example is, we created the Data Liberation Front so that we 

cannot capture or, if you will, hold your data. 

If you wish to flee Google to a competitor, Bing for example, or 

another one, we make it very easy for you to do that both for your 

personal data, as well as your advertising data. So we think we’ve 

done the things that would be appropriate to make sure we stay 

within an appropriate competitive box. We’re certainly open to suggestions as to additional steps. 

In a competitive market like we’re seeing with the extraordinary 

expansion of choices on the internet, ultimately the internet—the 

global playing field that is the internet is the real protection because of the combination of the one-click-away and the huge 

amounts of money that have been previously described going into 

these spaces. 

Senator BLUMENTHAL. My time has expired. I thank you for your 

responses, and I hope there will be a second round. 

Mr. SCHMIDT. Thank you, Senator. 

Senator BLUMENTHAL. But that’s up to the Chairman. 

Senator KOHL. All right. We’ll work on a second round of 3 minutes, then we’ll see if we want a third round. 

Mr. Schmidt, industry stats show that Google runs between 65 

and 70 percent of all internet searches in the U.S. done on computers and about 95 percent on mobile devices, and has over 75 

percent of all search advertising revenue in the United States. 

Under common antitrust standards, this kind of a market share 

is considered to constitute monopoly power. Does Google recognize 

that as a monopolist or a dominant power? Special rules apply that 

there is conduct that must be taken and conduct that must be refrained from. 

Mr. SCHMIDT. We certainly understand the role that we play in 

information and we also understand the proper role of government 

and your role and so forth to inspect what we’re doing. We’re satisfied today that the things that we’re doing are well within the both 

legal and philosophical bounds of what we’re trying to do because 

we answer the question based on—in a competitive market, we’re 

very focused on consumers. So the answer, Senator, is we very 

much understand the role that we have to play and we’re kept honest all the time, and not just by your good graces but also that of 

the press and the many other people who look at what we do. 

Senator KOHL. But you do recognize that in the words that are 

used in antitrust kind of oversight, your market share constitutes 

monopoly, dominant—special power, dominant firm, monopoly 

firm? Do you recognize you’re in that area? 

Mr. SCHMIDT. I would agree, Senator, that we’re in that area. 

Again, with apologies because I’m not a lawyer, my understanding 

of monopoly findings is it’s actually a judicial process, so I’d have 

to let the judges and so forth actually do such a finding. From our 

perspective we see ourselves as having a special responsibility to 

debate all the issues that you’re describing with us. Now we do understand it. 

Senator KOHL. Thank you. 

Our hearing so far has focused on issues of commerce and business competition, but even more importantly perhaps is the potential influence on news and information the American people reVerDate Nov 24 2008 11:11 Dec 21, 2011 Jkt 071471 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\71471.TXT SJUD1 PsN: CMORC
27 

ceive. This issue points out how important it is that we preserve 

competition. In the internet search market, right now Google is the 

primary way Americans search for news and information on the 

internet. If your only search engine competitor, which is Bing, were 

to go away, for example, Google would then be the only search engine citizens could use to find this kind of information. 

Given its dominant share of internet searches, Google is essentially a gatekeeper with enormous power to influence information 

and news coverage citizens find on the internet. For example, those 

searching the internet for information on today’s hearing could get 

links to my opening statement, or a testimony of your critics on the 

next panel as the first search result. More people searching for information on President Obama could get links to the White House 

office website or a critical column on the President, or in a weekly 

standard. 

You would argue, I suppose, that Google simply returns the most 

relevant results first for any news or information query free of any 

political bias, but is this really possible? There must be some decision as to whether my opening statement or your testimony at this 

hearing is at the top of the information results. Is it really possible 

to have truly unbiased search results for news and information 

queries? Should we be troubled by any one company, however wellintended like yours, having huge, huge influence over news and information citizens find on the internet? And doesn’t this demonstrate the absolute need for competition, and real competition, in 

this area? 

Mr. SCHMIDT. Well, as I said earlier, we’re very strongly in favor 

of competition. There’s a lot of evidence that much of the online 

news is now being consumed and generated within the social networks, and so we would want to add that into the framework, Senator, that you proposed. 

With respect to the question of ranking algorithms and bias, 

it’s—it’s ultimately a judgment, what comes first or second. And in 

our case, because we have so many things to rank, it would not be 

possible for me to explain to your satisfaction or to my own why 

one link about this testimony was one higher or lower. It’s a complex formula involving influence, and who points to whom, and the 

way in which it’s expressed and so forth using a proprietary algorithm that Google has developed, which we’re very, very proud of. 

It’s the best that we can do, and I want to say right up front that 

we do occasionally make mistakes. 

Senator KOHL. All right. 

Now we turn to Senator Lee. 

Senator LEE. Mr. Schmidt, I just want to make clear and get a 

statement on the record under oath: does Google give any preference to its own listings—places, or shopping results, et cetera, in 

its own natural search ranking results? 

Mr. SCHMIDT. Again, the reason I was a little confused by your 

earlier question is the word ‘‘preference.’’ We have a product called 

Universal Search. Universal Search chooses how to organize the 

page and so that decision includes many components in the natural 

search. It will, for example, when we think you’re looking for a 

product, we will pop out this product search, essentially insert, that 

you showed earlier. 

28 

If you go through that product one—that product search thing 

that we put out, it actually, as I pointed out, takes you to other 

sites that actually then want to sell products. So the answer is, we 

give preference but we give preference in the context of our best 

judgment as to the sum of what the person wants to do. Did I help 

answer your question? I apologize for not answering it earlier. 

Senator LEE. Yes. Yes. I think that helps answer the question. 

So it does give preference to those lead—perhaps in the case of the 

camera, not to your own camera sales port, but to another page 

where you’re maybe not selling cameras, but you’re selling advertisements, and if anyone clicks on that you get advertising. 

Mr. SCHMIDT. In that case I don’t actually think there’s any advertising component into that decision, but I take your point. 

Senator LEE. OK. 

In preparing for this hearing I was uncertain as to what might 

be the full extent of my concerns regarding Google’s current practices, but some of my fears, I have to say, have been confirmed as 

a result of our conversation. I’d just like to summarize, Mr. 

Schmidt, what some of those concerns are. I am troubled by some 

of Google’s practices, its practice of inserting its own offerings, in 

the midst of natural algorithmic search results, usually in the most 

prominent position of the page and with the most eye-catching display. 

My concerns related to this are really three-fold. First, this practice seems to me to leverage Google’s primary search dominance to 

give its own secondary services and listings an unnatural and an 

extraordinary advantage. No other specialized business or search 

site can hope to compete on anything close to a level playing field 

when Google uses its significant market power to disadvantage online competitors. 

Second, this same practice that I described presents a clear and 

inherent conflict of interest. Rather than acting as an honest 

broker of information, Google now has a strong financial incentive 

to channel users through its own listings, regardless of their quality. As Google vice president Marissa Mayer noted, ‘‘To the degree 

that we’’, meaning Google, ‘‘host content we ultimately have a monetary incentive to drive people to those pages, if those pages have 

ads on them.’’ 

Finally, I worry that this practice harms consumers. Manipulating algorithmic search results violates consumers’ legitimate expectations, and by unfairly disadvantaging competing services it 

may ultimately reduce consumer choice and stifle innovation. 

Again, Mr. Schmidt, I am troubled by what we’ve learned today 

about Google’s practices and I hope that you will take swift action 

necessary to resolve these concerns. Thank you very much. 

Thank you, Mr. Chairman. 

Senator KOHL. Mr. Franken. 

Senator FRANKEN. Thank you. I think I’m the Chairman now for 

a while. 

[Laughter.] 

Senator FRANKEN. Then the Chairman will be back. 

Mr. Schmidt, let’s shift to talk about mobile search because clearly the direction of growth of the Internet is going to mobile, and 

searches will be going to mobile. I understand you control about 97 

29 

percent of mobile search. You are the default search engine on all 

Apple phones. Is that true? 

Mr. SCHMIDT. That is correct. 

Senator FRANKEN. OK. 

And you also own Android, which is the largest mobile operating 

system. This type of dominance ultimately means that you control 

what consumers use when they purchase an Android phone. 

Nielsen released a study last week that stated that five of the six 

dominant apps on the Android device are owned by Google. Only 

Facebook made it into the top six. I have no doubt that part of the 

reason for that is that Google often creates superior products. 

But that isn’t the only reason. What comes pre-loaded on a phone 

impacts what apps win—which ones win or lose in the battle for 

consumers’ attention. Do all Android devices come pre-loaded with 

apps for Google Maps, Google Places, Gmail, and now Google Plus? 

Mr. SCHMIDT. They do not. 

Senator FRANKEN. They do not. Do many of them? Do a large—— 

Mr. SCHMIDT. My—my—— 

Senator FRANKEN [continuing]. Majority of them? 

Mr. SCHMIDT. My not-too-precise estimate is that a slight majority come with it. I would estimate on the order of two-thirds come 

with it, pre-loaded. 

Senator FRANKEN. So if an equipment manufacturer that makes 

Android phones for you doesn’t want to pre-load Google apps on its 

devices, can they do that? 

Mr. SCHMIDT. Absolutely. 

Senator FRANKEN. OK. 

If I am a customer and want to use Yelp instead of Google 

Places, is it easy for me to delete Google Places on my phone and 

upload Yelp? 

Mr. SCHMIDT. Well, Google Places is essentially a result from 

search results, so if you simply used—if you didn’t use Google 

search you wouldn’t have Google Places at all and Yelp is available 

through all the browsers that are available on Android, so Yelp is 

always available independent of that. 

Senator FRANKEN. I’m talking about as an app. 

Mr. SCHMIDT. It’s not an app. Google Places is not an application 

on Android, it’s a result from a search. 

Senator FRANKEN. OK. 

Mr. SCHMIDT. OK. 

Senator FRANKEN. So what apps—what Google apps are there? 

Mr. SCHMIDT. Gmail, chat applications, those sorts of things. 

Senator FRANKEN. OK. 

Mr. SCHMIDT. And again, to help, I think what you’re—if I may, 

I think what you’re getting at is—— 

Senator FRANKEN. Sure. 

Mr. SCHMIDT. I think what you’re getting at is—— 

Senator FRANKEN. Tell me what I’m thinking. 

[Laughter.] 

Mr. SCHMIDT. No, I was just trying to be helpful. 

Senator FRANKEN. Yes, I know. Thank you. 

Mr. SCHMIDT. Many Android partners combine Google search, 

Gmail, chat, and a few other apps into a package. And I believe 

30 

what you are referring to is the fact that in that case we do a revenue share with them on the Google search. 

Senator FRANKEN. Well, thank you. My time is up. 

Senator Blumenthal. 

Senator BLUMENTHAL. Thank you. Again, I want to emphasize to 

you, I’ve reached no conclusions and I will be submitting other 

questions in writing because—— 

Mr. SCHMIDT. Sure. Yes. 

Senator BLUMENTHAL [continuing]. We may not have time for a 

third round, and I’m sure that you will be happy to be relieved of 

that spot. 

[The questions appear under questions and answers.] 

Senator BLUMENTHAL. But, you know, I’ve been trying to think 

of the analogy here to what the ordinary consumer can understand 

as what Google does, and as I sat here, you know, the racetrack 

analogy. You run the racetrack, you own the racetrack. For a long 

time you had no horses. Now you have horses and you have control 

over where those horses are placed, and your horses seem to be 

winning. 

And, you know, I think what a lot of these questions raise is the 

potential conflict of interest, to use a sort of pejorative, but not necessarily to be critical, because you may have great products and 

you put them first and you may regard that placement as a service 

to consumers, but inevitably that will stimulate the kind of criticism that has brought you here today. 

Mr. SCHMIDT. So it won’t surprise you, Senator, to say that I disagree with your analogy completely. 

Senator BLUMENTHAL. And I invite your disagreement. 

Mr. SCHMIDT. So—OK. So I prefer to think of the internet as the 

platform. You can think of Google as a GPS, right? It’s a way of 

getting there. One of the most important things to say here is— 

again, with respect to all the complaints, and comments, and so 

forth, Google does nothing to block access to any of the competitors 

and other sources of information, we encourage it. Indeed, in all 

the cases that have been used where we come to an answer, we 

also show all the other possible answers. We try to be as inclusive 

as possible. 

So from my perspective, when I net it out, we need to be able 

to—to be free to get to what we think algorithmically is the best 

answer to the query that the person has done, and if we can do 

that with no clicks, zero—literally zero click and we can compute 

it algorithmically, that’s better for the consumer. I really genuinely 

believe that. 

Senator BLUMENTHAL. But to return to my analogy, there’s no allegation that you necessarily exclude those other horses. To use 

your analogy, there’s no allegation that you would necessarily misguide a consumer to go in the wrong direction on the Internet, but 

there is something different when you own a place and the directions happen to put the consumer at the place you own as opposed 

to some other place that, in appearance, objectively, might result 

in that consumer going to another place. You know, I realize that 

we’re over simplifying a very difficult and complex area, but again, 

I invite your comments and disagreement. 

31 

Mr. SCHMIDT. Again, I think that the most important thing for 

us to do is to come up with the quickest answer the best, and this 

is the best we know of how to do that. We do, in fact, have the concerns that you’re describing in our minds as we make these decisions, but we are—and we’ve said this for years—we really, really 

do test this stuff and we really do believe that this is the best 

choice for consumers and we run the company for the benefit of the 

consumers, frankly not for the other websites. 

Senator BLUMENTHAL. My time has expired, but I thank the acting Chairman. 

Senator FRANKEN. Thank you. And to carry your analogy just one 

step further, you might have been saying that you think Google 

might be doping the horses. 

[Laughter.] 

Senator FRANKEN. Is that what you’re saying? 

Mr. SCHMIDT. I didn’t say that. 

Senator FRANKEN. Oh, OK. 

[Laughter.] 

Senator FRANKEN. I guess I misunderstood. 

Senator Klobuchar. 

Senator KLOBUCHAR. Thank you very much. 

I was thinking of—what a lot of the questions have been focused 

on is just this—how the searches work and how you end up at one 

or how you end up on the next page suddenly in 1 day. Have you 

thought about how more transparency—and if there’s other things 

that you could do to explain to people why this happening and 

when there’s going to be a change? 

Mr. SCHMIDT. I think this is, again, an excellent point. We do a 

lot of tools for websites so that they can understand how they’re 

ranked and the changes that we have made. We don’t, in my view, 

do enough, so I agree with your question there. There’s a limit to 

how much transparency we can provide, for two reasons. One is 

that our algorithms, the actual ranking algorithms, are viewed as 

quite proprietary. They’re viewed as our innovation, if you will, by 

our great scientists at Google. 

The second is that if we’re completely transparent as to how the 

algorithms work, they will be heavily gamed by sites that try to 

spam us. We’ve had experiences where people will latch onto some 

behavior and then essentially manipulate the index to produce a 

really false answer, which often is the butt of jokes, and so forth 

and so on. So there’s a limit to how transparent we wish to be with 

respect to our actual ranking algorithm. I do agree with you that 

we can do a better job of describing the change and so forth. I think 

that’s exactly right. 

Senator KLOBUCHAR. OK. 

Just one last question here. You know, you—online users are in 

many ways your customers, but then also the businesses that advertise are your customers. So does Google need to be careful that 

the privacy and protection of the web users doesn’t come into conflict with the business interests of those that are advertising on the 

web, and how do you resolve that conflict? 

Mr. SCHMIDT. We debate this quite a bit. We have a very detailed 

privacy policy about how we behave with users’ data, and there 

have been a number of businesses suggested to us over the years 

32 

that would use—that would, in our view, misuse people’s private 

data, search histories, and so forth, and we’ve said no to those. It’s 

very, very important that the history of people’s searches, where 

they are, what they do is not used without their permission in 

these advertising products. I think you’ll find that Google will be 

one of the exemplars of that principle. And as this becomes a bigger thing for many, many companies, a lot of people will face this 

question. 

Senator KLOBUCHAR. Thank you very much. 

Senator FRANKEN. Well, we are now going to transition to the 

second panel. We thank you, Mr. Schmidt, for being here and for 

your testimony. I’m glad that my colleague from Minnesota brought 

up privacy. I am the Chairman of the Subcommittee on Privacy, 

Technology and the Law, and I would probably like to—we’ll be 

keeping the record open for 10 days. 

Senator KLOBUCHAR. One day. 

Senator FRANKEN. Twenty days? 

Senator KLOBUCHAR. One day. 

Senator FRANKEN. Oh, one day. 

[Laughter.] 

Senator FRANKEN. One week. OK. It’s either 10 days, one week, 

or 20 days. 

[Laughter.] 

Senator KLOBUCHAR. One week. 

Senator FRANKEN. I’m the Chairman right now and—— 

[Laughter.] 

Senator FRANKEN [continuing]. And I think we’ll do 1 week, 

which I think is actually the proper answer. 

Chairman Kohl apologizes for not being here for the conclusion 

of your testimony, but was needed for votes in the Appropriations 

Committee. 

So we thank you. Since we’re open for I think a week, I also plan 

to submit a few questions on privacy and intellectual property 

theft. But I really thank you, and I’d like to call the second panel 

now. 

Mr. SCHMIDT. And Senator, thank you. Thank you for giving me 

the opportunity to appear before your—your panel here. We will be 

happy to answer any other questions, Senator, and so forth, and 

clarify any of—any of the questions that require further clarification. So, thank you very much. 

Senator FRANKEN. You’re very welcome. You’ll have that opportunity because the record will be open for a week. 

We now call the second panel. You know what? We’re going to 

take a brief recess. So if you want to sit there, get used to that 

place, you can do that, or if you want to just mill around and chat 

idly, you can do that as well. We’re going to take a brief recess, and 

I believe the Chairman—the real Chairman—will be back any moment. So, recess. 

[Whereupon, at 3:41 p.m. the hearing was recessed.] 

AFTER RECESS [3:44 p.m.] 

Senator KOHL. We’ll now be—the hearing is resumed. We’ll now 

be moving to our second panel. 

First on this panel will be Mr. Thomas Barnett. Mr. Barnett is 

a partner at Covington & Burling and co-chair of the firm’s AntiVerDate Nov 24 2008 11:11 Dec 21, 2011 Jkt 071471 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\71471.TXT SJUD1 PsN: CMORC
33 

trust and Consumer Law Practice Group. Mr. Barnett served as 

the Assistant Attorney General for Antitrust in the U.S. Justice 

Department from 2005 to 2008, and he represents Expedia, a member of the Fair Search Coalition. 

Next, we’ll be hearing from Jeff Katz, CEO of Nextag. Mr. Katz 

joined Nextag in March of 2010 after serving as president and CEO 

of Leapfrog Enterprises, and was the Chairman and founding CEO 

of Orbitz from 2000 to 2004. 

Next, we’ll be hearing from Jeremy Stoppelman. Mr. Stoppelman 

is the co-founder and CEO of Yelp, a position he has held since 

2004. 

Finally, we’ll be hearing from Susan Creighton. Ms. Creighton is 

a partner at Wilson Sonsini Goodrich & Rosati, where she does 

serve as co-chair of the firm’s Antitrust Practice. She served as Director of the FTC Bureau of Competition from 2003 to 2005, and 

she represents Google on antitrust matters. 

We’re happy to have you all here today. Mr. Barnett, we’ll start 

with you, for 5 minutes. 

STATEMENT OF THOMAS O. BARNETT, PARTNER, COVINGTON 

& BURLING, LLP, WASHINGTON, DC 

Mr. BARNETT. Thank you, Chairman Kohl. It’s good to see you 

again. And thank you, Ranking Member Lee and Senators, for 

holding this important hearing. 

I would like to start with a general observation. I was heartened 

initially by the statement that—from Chairman Schmidt that 

Google ‘‘gets it.’’ But to be frank with you, based on my experience 

both in the private sector and the government, Google doesn’t get 

it. Companies that get it will step up to the plate, admit to reality, 

and focus on what are the real issues. Google won’t even admit to 

reality. 

Let me tell you what I’m talking about. The first element of a 

Section 2 monopolization claim is, is Google a dominant company? 

Do they have monopoly power? I think as this Committee recognizes, undoubtedly Google has monopoly power in search and paid 

search advertising. 

You don’t have to take my word for it, you all heard it. Both the 

Department of Justice and the Federal Trade Commission have 

conducted extensive investigations in this area, and both of them, 

the expert agencies, reached factual determinations that show that 

Google has monopoly power. There’s a Federal judge who believes 

that they are dominant. 

But don’t take my word for it or their word for it, take the word 

of Chairman Schmidt. If Kelly could put up the first chart. In 2003, 

in a moment of candor, Chairman Schmidt acknowledged that 

‘‘managing search at our scale is a very serious barrier to entry.’’ 

If you have an 80 percent share of the market with barriers to 

entry, you have monopoly power. 

Those barriers don’t come from the supposed cost of switching or 

clicking to another site. The barriers come from building an effective search engine. You need the scale, the volume of traffic that 

Google has to tune the engine, and it’s an ongoing process. Nobody 

else is going to catch Google, even if you had access to their algorithm today. They have market power. 

34 

Second, is that market power expanding? Absolutely, their dominance is expanding into maps, into video, and finance, and product. 

Mobile is an important area where they’re expanding. I think Senator Franken pointed out, 97 percent of searches on a mobile device 

and 98 percent of paid search advertising served to a mobile device 

is from Google. Moreover, their Android operating system, which is 

on more than 50 percent of every Smart Phone shipped in the 

United States today, is rapidly becoming the dominant mobile operating system. 

So from a Sherman Act monopolization/monopoly maintenance 

perspective, is there a problem? Yes, there is a problem if Google 

is engaging in any improper conduct to maintain or to expand its 

dominance. And the question is not, does Google do anything that 

is good. Google does lots of things that are good and they want to 

point you to that. But what they don’t do is step up to the plate 

and acknowledge there are some things that are highly problematic. 

If Kelly could put up the second chart, similar to the screen shot 

that Senator Lee put up there. Marissa Mayer, in her quote that 

we’ve talked about, acknowledged that Google places links above 

the natural search results. The blue are the natural search results. 

The other, the orange, are the paid search ads that are labeled as 

ads because they have an economic interest in that. 

What’s in the middle? Well, what’s in the middle is not algorithmic. Does Google ever tell the user it’s not algorithmic? Absolutely not. There are multiple links on this page that, when you 

click on it, will take you to a Google Places page. And on that 

Google Places page, Google will advertise and they will earn 

money. Google has a direct financial interest in placing that link 

above the natural search results. By failing to disclose what they’re 

doing to users, they can mislead them into going to a site that they 

think, because we’re all conditioned to think, well, what’s at the top 

of the page, the algorithm has told us, is the most relevant to our 

queries. It’s not an algorithmic result and they haven’t disclosed 

that fact. 

In the Android operating system there’s already indication that 

they’re using compatibility as a club to force handset manufacturers to do things to help Google and harm competitors. You will 

hear further, from Yelp and from Nextag, about some of the other 

conduct that Google has engaged in that I would suggest to you is 

improper and, to the extent that it has advanced Google’s position 

in the marketplace, a problem. 

Antitrust enforcement can and should play a role. It is, in fact, 

I agree with Senator Lee, very important that it play a role because, if Google continues to expand and control more and more of 

the internet, there will be increasing pressure for more direct government regulation that may be more burdensome, more difficult. 

The right answer is appropriate antitrust enforcement. 

Thank you. 

Senator KOHL. Thank you, Mr. Barnett. 

[The prepared statement of Mr. Barnett appears as a submission 

for the record.] 

Senator KOHL. Mr. Katz. 

35 

STATEMENT OF JEFF KATZ, CHIEF EXECUTIVE OFFICER, 

NEXTAG, INC., SAN MATEO, CALIFORNIA 

Mr. KATZ. Mr. Chairman and Committee members, thank you for 

the opportunity to be here today to discuss what I think are very 

important issues to the future of our e-commerce industry. 

First, a note about us. Nextag is an internet comparison shopping company. Tens of thousands of merchants list their products 

on our site and our visitors use our content and features to find 

the right products and to compare prices and services for many 

merchants. About 70 percent of our partners are small merchants 

who you’ve never heard of, like Crafty Corner in Oshkosh, Wisconsin. 

About 30 million shoppers a month in the U.S. use our site, and we send over $1 billion of sales to our merchant partners every 

year. Google has been a principle partner and an outstanding partner to us for many years, but I am here today what must be said 

about the Google of today to ensure that e-commerce remains competitive and vibrant. 

It was 10 years or so ago when I first worked with a small company that no one had heard of with a funny name from the world 

of mathematics: Google. At that time they were the only company 

who would let me, as founding CEO of another small company 

called Orbitz, advertise. Google’s approach to letting the small 

thrive through an innovative bidding process that enabled all to get 

access to ads and a ranking process that let all websites be visible 

based on their relevance to consumers was brilliant and it was 

open. It created massive growth in our digital economy for all. 

Back in 2002, this openness and competitive aspect of the internet was also available to the founders of my company, Nextag. 

They began to invest around Google’s ideas and technology and 

words. They believed when—they believed it when Google said it 

would treat others fairly, that natural results would be unbiased, 

and that advertisers could not get locked out of top advertising 

spots. These approaches let Google stand out from other search engines back when search was actually competitive, and Nextag and 

others built around those ideas. They believed that Google would 

live up to its end of the bargain. 

But Google abandoned those core principles when they started 

interfering with profit growth. Today, Google doesn’t play fair. 

Google rigs its results, biasing in favor of Google Shopping and 

against competitors like us. Google says that competition is just 

one click away, but that’s not even the question. The question is, 

should Google be able to use its market power to make it difficult 

for users to find us? We believed them when they’d said they’d 

treat all sites fairly and we built our business around that, but 

that is not what they do. 

Our technology means we can help little companies who cannot 

possibly invest in the tools or the head-numbing statistical methods 

required to be profitably successful with Google to sell their products, from cameras, to apparel, to home and garden goods, to jewelry. Try it out sometime. Nextag will surprise you with what a 

good site it is. 

Consider, for example, a merchant in Hastings, Minnesota, 

Boatingstore.com. For about 50 cents, this merchant gets a cusVerDate Nov 24 2008 11:11 Dec 21, 2011 Jkt 071471 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\71471.TXT SJUD1 PsN: CMORC
36 

tomer from Nextag directly to their store’s website that is highly 

likely to buy the trailer jack that customer was searching for. For 

that same price, there is virtually no way for that merchant to put 

an ad in a local newspaper or to get that customer, nor to get that 

same customer from Google on their own. It’s a good deal for the 

merchant. 

We are pleased to have helped Google grow their business and 

we are appreciative they helped us grow ours. Now, however, they 

are not innovating. They helped us grow our business, but they are 

copping our business after we invested hundreds of millions of dollars to perfect it, and they are very politely, deftly, and assuredly 

moving us aside. 

Today, honorable Committee members, when you search for a 

product like running shoes or washing machines, Google is not a 

search engine anymore. A search engine organizes and presents information that is hard to find in an unbiased way. But Google of 

today doesn’t present the information that users want, it presents 

the information that Google wants you to see based on its commercial interests. 

The company that dominates the information highway controls 

all of the digital billboards and off-ramps, doesn’t even tell the consumer this search favors Google’s preferred vendors, preferred advertisers, and some beneficial results may be excluded or obscured. 

A company that dominates a marketplace at least has the responsibility to provide fair access. I hope this Committee, and 

Google itself, will act to balance the forces that enable competition 

to persist. This is a very big deal. We should get it right and we 

should make it right. 

Mr. Chairman and members of the Committee, thank you very 

much for your time and attention. 

Senator KOHL. Thank you, Mr. Katz. 

[The prepared statement of Mr. Katz appears as a submission for 

the record.] 

Senator KOHL. Now we’ll hear from Mr. Stoppelman. 

STATEMENT OF JEREMY STOPPELMAN, CO-FOUNDER AND 

CHIEF EXECUTIVE OFFICER, YELP, INC., SAN FRANCISCO, 

CALIFORNIA 

Mr. STOPPELMAN. Thank you, Mr. Chairman and distinguished 

members of the Committee. I appreciate your interest and invitation to appear today. My name is Jeremy Stoppelman and I’m the 

CEO of Yelp, a company I co-founded in 2004 with my former colleague from PayPal, Russell Simmons. 

At Yelp our mission is to connect people with great local businesses. The site allows people throughout the country to share detailed and passionate reviews about businesses in their neighborhood. In turn, businesses that provide great value and good service 

are able to establish and promote themselves online. 

Today, Yelp employs more than 800 people throughout the country. More than 60 million consumers use Yelp every month to decide how and where to spend their hard-earned money. And on the 

flip side, job growth in this country relies on small, but fast-growing and successful businesses. Yelp helps them reach new customers by amplifying their positive word-of-mouth online. 

37 

This hearing is important because it examines issues that go to 

the heart of innovation: whether new ideas can compete fairly 

against expanding monopolies. In our case, I wonder if we would 

have been able to start Yelp today given Google’s recent actions. 

Let’s be clear. Google is no longer in the business of sending people to the best sources of information on the web. It now hopes to 

be a destination site itself for one vertical market after another, including news, shopping, travel, and now local business reviews. 

It would be one thing if these efforts were conducted on a level 

playing field, but the reality is they’re not. The experience in my 

industry is telling. Google forces review websites to provide their 

content for free to benefit Google’s own competing product, not consumers. Google then gives its own product preferential treatment 

in Google search results. 

Google first began taking our content without permission a year 

ago. Despite public and private protests, Google gave the ultimatum that only a monopolist can give: in order to appear in web 

search you must allow us to use your content to compete against 

you. As everyone in this room knows, not being in Google is equivalent to not existing on the internet. We had no choice. 

Recently, Google has inexplicably softened its stance. What 

changed? Well, the FTC announced an antitrust investigation, the 

State Attorneys General took notice, and this Committee proposed 

this hearing. Was this an admission of anti-competitive conduct? 

Perhaps, but questionable practices remain. Websites and Google 

search results now take a backseat to Google’s own competing products. This is typically accomplished by calling special attention to 

Google-owned properties through larger text, bright graphics, isolated placement, and pushing objectively ranked websites down the 

page. 

What we’re most concerned about is that Google is no longer satisfied with pointing users at the best content anywhere on the web 

it can be found. Instead, it seems they prefer to send users to the 

most profitable content on the web, which is naturally their own. 

Is a consumer—or a small business, for that matter—well served 

when Google artificially promotes its own properties, regardless of 

merit? This has little to do with helping consumers get to the best 

information. It has everything to do with generating more revenue. 

So where is the harm? I live and work in San Francisco, which 

sits on the border of Silicon Valley, a place that has participated 

in the development of some of the most amazing products and services over the last few decades, including Google. Today represents 

a rare opportunity for the government to protect innovation. Allowing a search engine with monopoly market share to exploit and extend its dominance hampers entrepreneurial activity. 

Ensuring open and equal competition will sustain and foster innovation and job growth. It will also ensure that the price of internet advertising paid by small businesses will not—will be set by 

the market and not solely by a monopolist. When one company controls the market it ultimately controls consumer choice. 

If competition really were just a click away as Google suggests, 

why have they invested so heavily to be the default choice in web 

browsers and mobile phones? Clearly they’re not taking any 

38 

chances. So again, I thank the Committee for its time and interest, 

and I look forward to assisting in any way that I can. Thank you. 

Senator KOHL. Thank you, Mr. Stoppelman. 

[The prepared statement of Mr. Stoppelman appears as a submission for the record.] 

Senator KOHL. Ms. Creighton. 

STATEMENT OF SUSAN A. CREIGHTON, PARTNER, WILSON 

SONSINI GOODRICH & ROSATI, PC, WASHINGTON, DC 

Ms. CREIGHTON. Thank you, Senator. Before I begin my remarks, 

Mr. Schmidt asked me to clarify for the record that Google Places 

and Yelp are both applications, or apps—mobile apps. 

Senator KOHL. I’m sorry? 

Ms. CREIGHTON. Mr. Schmidt asked me to clarify that both 

Places—Google Places and Yelp are mobile apps. 

Senator KOHL. Oh. In response to my question? 

Ms. CREIGHTON. In response to—that’s correct. 

Senator KOHL. All right. Thank you. 

Ms. CREIGHTON. Thank you, Chairman Kohl, Ranking Member 

Lee, and members of the subcommittee. 

From 2001 through 2005, I had the privilege of serving as the 

Deputy Director, and then Director of the Bureau of Competition 

at the Federal Trade Commission, serving as the chief antitrust enforcer at the FTC. During my tenure we brought more monopolization cases to put a stop to anti-consumer conduct than during any 

comparable period at the FTC, going back to the late 1970s. 

As this strong enforcement record reflects, I firmly believe there 

is an important role for government in enforcing our antitrust laws. 

The same experience, however, underscored for me the need for the 

government to exercise extreme caution before acting against a 

company for its day-to-day business decisions. 

These unilateral business decisions are the heart of the competition and innovation underlying our free market system. Because of 

the very real risk of deterring innovation and other beneficial activities, extraordinary care must be taken to ensure that government intervention in the market is truly essential, otherwise, such 

action is much more likely to harm consumers than to help them. 

As an attorney based in Silicon Valley who has worked with 

high-tech companies for more than 20 years, I believe that the danger of harmful intervention is especially acute in the high-tech sector. In Silicon Valley, disruptive innovations are the rule and not 

the exception, and companies can watch their market positions disappear overnight. 

For example, just 4 years ago My Space had a 72 percent share 

in social networking; today it is a fraction of 1 percent. We all 

know what happened. In the same length of time, Facebook grew 

to become the most popular destination on the internet, with 750 

million registered users. 

In this sector the only constant has been changed. The pace of 

technological innovation has been extraordinary, competition is robust, and the competitive landscape is constantly evolving. We 

have seen the incredible benefits to consumers that this vibrant 

competition has delivered, developments that were nearly unimaginable when I started in Silicon Valley 20 years ago. 

39 

Search technologies have been an important part of this American success story. Indeed, Google’s founders changed the nature of 

search when they invented the page rank system 13 years ago. 

Rather than count how many times a key word appears on a page, 

page rank is based on the idea that the best way to rank information is based on consumers’ assessment of its relevance. So, really 

the core of Google’s success has been that the best search results 

are the ones that give consumers what they want. 

Today Google continues to innovate to better satisfy those same 

users, competing against ever-growing competition, not just from 

other general search engines but also from social networks like 

Facebook, specialized search engines like Amazon, Expedia and 

Yelp, mobile apps for Smart Phones and tablets, and a host of others. Because it is free and easy to try different alternatives, users 

are quick to switch to the sources of information on the internet 

that they find most accurate, the easiest to use, and the most responsive. 

Importantly, there is no single right answer to what information 

is most responsive to a consumer’s question. Indeed, the essence of 

the competition among search services is to make judgments about 

how best to answer the billions of queries that they receive every 

day. 

For the government to dictate how Google should make those 

judgments, whether to rank the New York Post above the New York 

Times or the Washington Post above the Washington Times would 

be to turn Google’s search service into a regulated utility. This 

would inevitably make Google less responsive to its users and put 

the company at a disadvantage as it competes every day to provide 

the best, fastest, and most responsive answers to users’ requests 

for information. 

It has often been the case in the high-tech industry that competitors have sought to invoke the antitrust laws to freeze technology 

in place to prevent what they believe to be unfair competition. In 

the late 1970s, several independent disk drive manufacturers 

brought antitrust suits against IBM, arguing that IBM’s physical 

integration of hard drives with CPUs, a major innovation, would 

cut into their sales of disk drives. Courts recognize that even if 

IBM’s innovations seemed hard on competitors, it was good for consumers, and in fact this paved the way for lower costs, better products for consumers, and ultimately the IBM PC. 

The core premise of our antitrust laws for more than 100 years 

has been that, whereas here there are no artificial restraints that 

prevent consumers from being able to make choices in the marketplace, the best way to benefit and protect consumers is to allow 

competition to flourish. If consumers are free to choose, acting to 

protect competitors actually has the effect of short-circuiting competition and innovation and harming the individuals the law was 

designed to protect. As the courts have repeatedly emphasized, the 

antitrust laws are meant to protect the competitive process, not 

competitors. We would be wise to remember that lesson. 

Thank you very much, Chairman. 

Senator KOHL. Thank you, Ms. Creighton. 

[The prepared statement of Ms. Creighton appears as a submission for the record.] 

40 

Senator KOHL. We’ll have a 5-minute round. 

Mr. Barnett, do you consider Google a monopoly, or at least a 

dominant firm in internet search under antitrust standards as you 

know them? Why, if so, and why not, if so? 

Mr. BARNETT. Thank you, Mr. Chairman. Yes, I consider Google 

to be a dominant company with monopoly power, at least in search 

and search advertising, likely in other markets, its mobile search, 

mobile advertising, mobile operating systems, it’s quickly moving in 

that direction, maps, and a number of other areas. And I think that 

they are—have monopoly power both because there are expert 

agencies who have looked into this and concluded that, but I take 

the words of Mr. Schmidt: there are huge barriers to entry to getting into search. They are a dominant company there because they 

got there first, they have a great algorithm, and it is very difficult, 

if not impossible, for anybody else to catch up with them. 

Senator KOHL. If Google, Mr. Barnett, is a monopoly or dominant, what are the consequences, in your opinion? Is there conduct 

that it may not engage in in order to maintain its market dominance? 

Mr. BARNETT. There is no doubt that a dominant company with 

monopoly power can harm competition in a way that a company 

without that monopoly power cannot. That puts a special responsibility on the company to engage in fair competition on the merits 

and not to exclude competitors. I’ll give you a specific example, because I was, frankly, somewhat offended by one of the things that 

Chairman Schmidt said. He talked about the issue of scraping content from Yelp and putting it on a Places page. The way he described it was, well, we did that, we thought it would be good, and 

then we got a letter and we took it down. That is not what happened. 

My client, Trip Advisor, which has 45 million reviews on it, had 

a very similar problem where its content, its user reviews were 

being placed on Places and the CEO of Trip Advisor went to Google 

last year and said we don’t want to appear, just take our content 

off Places and Google said no. The only way we will take that down 

is if you will never appear anywhere in our dominant search engine 

results. 

That was a coercive tactic that was designed to enable Google to 

take their content, use it against them. I think that is exactly the 

type of behavior that a dominant company should not be able to engage in, and I completely agree with Mr. Stoppelman. The only reason that changed at all, because they said no last year, was this 

year, after the FTC opened up an investigation, there were presentations made to the National State Attorneys General, and within 

weeks if not days, Google started to back down. 

Senator KOHL. Ms. Creighton, what’s your view? If Google is considered to be a monopoly or a dominant firm in internet search, is 

there conduct that it may not engage in in order to maintain its 

market dominance? 

Ms. CREIGHTON. Senator, respectfully, I do not believe that 

Google has monopoly power, and I’d like to explain why. So what 

we’re looking for in the antitrust laws in terms of whether or not 

a company is a monopoly is really whether it has monopoly power. 

41 

The way we look at that is whether or not the company, if it 

were to raise price or exclude competitors, is there something that 

would cause consumers to be unable to switch and so the company 

basically can get away with that? We sometimes can use market 

shares as an indicia of whether or not there’s monopoly power, but 

the real question is, is there this ability to foreclose competition or 

to raise prices? 

When I was at the FTC, what I would be looking for was not only 

very high market share as sustained over a very long period of 

time, usually in the 80s, high 80s, I’d also be looking for it to have 

been over many years and I’d be looking for indication the consumers—there’s some structural problem that causes consumers to 

be unable to switch. 

Here, instead, what we actually see—and I thought Senator Klobuchar—I’m sorry she’s not here, but she—her sort of testing of 

how Google and Bing ranked her name while she did the quick 

search just while we were here is really the key to why, in my 

view, Google does not have monopoly power. Each of you right now 

can test whether or not you like Google’s results, and if you don’t 

like them it’s free and instantaneous to try someone else’s results. 

So if you were to enter Yelp and Google didn’t return Yelp at the 

top of the search results, I doubt you’d ever come back to Google 

again, you’d be so mad. So it’s—when we’re—when we’re looking 

for whether or not a company has monopoly power, I—you know, 

respectfully, as an antitrust enforcer, and I’m sort of wearing an 

antitrust enforcer has as opposed to my sort of, you know, representing Google hat, I wouldn’t say that you should trust Google. 

I think the question is whether you can trust the market or whether there are some kinds of impediments to the way that the market 

is working that cause consumers to be unable to switch. 

Senator KOHL. Thank you. 

Senator Lee. 

Senator LEE. Thank you, Mr. Chairman. 

I have a couple of questions for Mr. Barnett. Sir, in your written 

testimony you make a statement that I find compelling. You say, 

‘‘Google already possesses unprecedented power to steer users and 

to stifle competition. If for some reason antitrust enforcement is 

not able to address these concerns, there will be pressure to reign 

in Google’s power through more direct government regulation that 

is likely to be more rigid and burdensome and that itself would 

pose a threat to innovation and economic growth on the internet.’’ 

Can you tell us more about what you see as a threat, that without Google taking action to resolve these antitrust issues may 

cause significant elements of the internet to become subject to intrusive regulation by government? 

Mr. BARNETT. Thank you, Senator. You know, one of the experiences I had when I was the Assistant Attorney General was talking 

with a number of other jurisdictions, such as former Eastern bloc 

countries, countries in Asia, China in particular, about moving 

from a centrally planned economy to a market-based economy. 

One of the tools for doing that was to introduce an antitrust regime. You don’t need the government to dictate everything that 

happens. You can let the market work subject to the antitrust 

rules. That’s part of the way we got to deregulation of airlines, deVerDate Nov 24 2008 11:11 Dec 21, 2011 Jkt 071471 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\71471.TXT SJUD1 PsN: CMORC
42 

regulation of trucking, a lot of deregulation in the country which 

has produced enormous benefits. 

It works the other way, too. If Google continues to expand and 

is dominant not only in search and search advertising but in all 

these other areas and continues to control more and more of these 

search-dependent products and services, you will see pressure— 

there is already pressure to give the FCC authority to regulate the 

internet. Then you could have people, not market participants but 

bureaucrats, with respect, making decisions that I think can be 

harmful. 

Senator LEE. So it sounds like you see that pressure building 

rather than abating, unless there’s some voluntary change in action. It’s significant to me because my real interest as a free market conservative Republican is in seeing that actors like Google 

take voluntary action so that there’s no need for antitrust enforcement in the first place, and certainly so that there’s no place for, 

or cause for, or push for intrusive government regulation on the 

internet, which up to this point has remained a relatively government-free trade zone. 

What can Google do, in your opinion, on a voluntary basis to resolve these concerns so as to forestall that kind of unfortunate result? 

Mr. BARNETT. Well, the first thing they can do is live up to 

Chairman Schmidt’s words and ‘‘get it.’’ I mean, they can acknowledge that they are a dominant company and they have a special 

responsibility. The second thing they can do, is they can act on 

that. They can ensure that the way that they display the search 

results, particularly non-algorithmic search results, are clearly labeled and not misleading or deceptive to consumers. They can 

avoid and refrain from using content from other sites without their 

permission or authorization. 

They can ensure that their algorithm really is based on objective 

criteria and not penalizing sites because they’re competitors. If 

they take steps like that, I think they would go a long ways toward 

gaining credibility and, as you all were discussing, give people who 

were trusting, but verifying, comfort that they should be trusted. 

Senator LEE. And some basis for verification. 

Mr. BARNETT. Yes. 

Senator LEE. We learned from Robert Bork that the animating 

principle of antitrust justice ought to be consumer welfare. My 

principal concern with Google’s current practices is that they may 

not, and may not in the future, result in harm to the consumer. 

They may not in the future take those actions that will forestall 

this harm to the consumer. 

Can you explain to the Committee the particular ways in which 

you think that Google’s actions may cause harm to the consumer? 

Mr. BARNETT. Two examples. First of all, remember, they are an 

advertising company. They made $30 billion last year in advertising. Given that they’re dominant in advertising, a good portion 

of that is already monopoly rents. To the extent that they’re maintaining or enhancing that power, that’s money that advertisers 

have to spend that ultimately consumers pay for because it’s going 

to flow through in the cost of the goods and services you buy. 

43 

The more fundamental problem is, if Google is the only company 

that is innovating in these important areas, we lose the benefit of 

competition in innovation, and that’s really what’s going to drive 

and promote consumer welfare in the longer run. That’s why preserving competition here is so critical, so that companies like 

Nextag and Yelp have the environment and the circumstances 

where they’re willing to make the investment, take the risk, and 

develop the next great application. 

Senator LEE. Thank you, Mr. Barnett. 

Mr. Chairman? 

Senator KOHL. Mr. Franken. 

Senator FRANKEN. Thank you, Mr. Chairman. 

Mr. Stoppelman, I’d like to ask you and Mr. Katz a question, a 

hypothetical. Let’s assume Nextag and Yelp were not in existence 

today. Would either of you attempt a launch of your company in 

today’s market, given the competition in local search and product 

search? 

Mr. STOPPELMAN. As I laid out, I personally wouldn’t. I wouldn’t. 

I would find something else to do. When we began, there was really 

actually a level playing field in our space, in the local business review space. I mean, I started the company because I actually that 

summer had done a search looking for a doctor in San Francisco, 

and in fact found no relevant information. I wanted to know, who’s 

a great doctor, not just, you know, what’s the nearest one, which 

one, you know, accepts my insurance. 

So that’s why we started the business. And as it got going, we 

found that traffic was coming in and it was bringing more users 

to write more reviews. Now with Google taking up so much of the 

real estate, there’s no way I would start fresh. I mean, fortunately 

we’ve been working for 7 years and we’ve got a brand and a lot of 

traction and so we’re not going anywhere, but absolutely I wouldn’t 

even consider it these days. 

Senator FRANKEN. Mr. Katz. 

Mr. KATZ. I don’t think we could do it. Our business requires 

merchants to want to participate in Nextag because we have a lot 

of shoppers on our site. Sixty-five percent of our shoppers come to 

us from Google today either through natural search or paid search, 

so we simply couldn’t do it with the Google that exists today, where 

roughly the top half of the page is dominated by Google-related 

product interests and the right half of the page where paid advertisers compete is beginning to be dominated by unique ad placements which competitors such as ourselves can’t even purchase. It 

would be very difficult. I think it would be impossible to get the 

merchants to participate in Nextag today. 

Senator FRANKEN. Thank you. 

Mr. Stoppelman, I was a little confused by Mr. Schmidt’s testimony regarding the history between your two companies. Was his 

depiction correct? 

Mr. STOPPELMAN. No. I’d be happy to share the time line quickly, 

if that would be helpful. 

Senator FRANKEN. Yes, sure, if you could do it quick. 

Mr. STOPPELMAN. Sure. So in 2005, Google came to us looking— 

looking at our content and saying they wanted to include it in a 

page, as Chairman Schmidt mentioned, and we initially said, OK, 

44 

we’ll try it out, maybe we’ll get traffic from it. And very quickly we 

realized that it wasn’t helping, it wasn’t sending us a lot of traffic, 

and in fact it was creating a potential competitor, and so we 

dropped out of that. 

From 2007 to 2009, we sort of lived on our own and we did our 

thing and Google tried to do theirs. Then there was rumors of a 

potential attempted acquisition. We decided to stay independent, 

and immediately after that our content, which had been out of 

Google’s Places property, or local property, whatever you wanted to 

call it, suddenly found its way back in without permission. 

So before there was actually a written, signed license for that 

content, and then in 2010 it was just there. We immediately registered our complaint and, you know, there was a lot of back-andforth dialog—we understand your concerns, we understand your 

concerns—but in the end nothing happened until finally there was 

some interest on it from the government side and Google—— 

Senator FRANKEN. OK. So this is scraping, right? Is that the definition of scraping? 

Mr. STOPPELMAN. Yes. In 2010 they essentially took our information that they were using for web search—— 

Senator FRANKEN. Right. 

Mr. STOPPELMAN [continuing]. And they go out and they pulled 

in all the web pages from the internet, including ours. They took 

that information from that core business, their dominant web 

search business, and used it in a totally separate property, Google 

Places. 

Senator FRANKEN. Right. 

And speaking of Google Places, Ms. Creighton, when I asked Mr. 

Schmidt whether it was an app he said it wasn’t, now he’s corrected himself. 

Ms. CREIGHTON. That’s correct. 

Senator FRANKEN. You said a monopoly is something that is over 

80 percent. But on mobile, isn’t the concentration 97 percent for 

Google? 

Ms. CREIGHTON. Senator, with that number—there’s a couple of 

big problems with that number. 

Senator FRANKEN. You brought up the number. 

Ms. CREIGHTON. I don’t remember talking about mobile, but I 

think—— 

Senator FRANKEN. No, you didn’t bring—say—no, the number 

was 80 percent. 

Ms. CREIGHTON. Oh, I’m sorry. What that excludes is that most 

consumers today, and if you have Smart Phones you may find this 

is your own experience, that number completely excludes apps, 

which is how most people find information on their phones today. 

So if—so first you have to—— 

Senator FRANKEN. But did Google spend money to be the default 

search engine on Apple. Did it spend money on that? 

Ms. CREIGHTON. So Google and Bing, and I’m not sure whether 

or not Yahoo, all competed with Apple to be the—to be the search 

provider on the I-Phone and the I-Pad. In fact, about two-thirds of 

that number that you cited actually comes from the fact that 

Google prevailed in that contract. But Senator, if we step back and 

think about—— 

45 

Senator FRANKEN. Could you answer my question? 

Ms. CREIGHTON. Did Google pay? The answer is—— 

Senator FRANKEN. Did Google pay Apple to be the default search 

engine on mobile? 

Ms. CREIGHTON. Google certainly entered into—Google certainly 

entered into a deal with Apple and prevailed against Bing. But the 

question is, the—— 

Senator FRANKEN. Did they pay money in that deal? 

Ms. CREIGHTON. I—I don’t know. 

Senator FRANKEN. You don’t know. Would it surprise you if they 

did? 

Ms. CREIGHTON. It would not surprise me if there was a revenue—— 

Senator FRANKEN. And why do you think they would pay money 

for something that wasn’t worth that much, or worth anything? 

Ms. CREIGHTON. Senator, what I was—first, it was a default, not 

an exclusive. So if you go on your I-Phone, I think it’ll probably 

take you about 20 seconds to download another app or a different 

search engine. But the real question I think from a competition 

perspective is—— 

Senator FRANKEN. OK. Keep going. I’m out of my time, but you 

continue as long as you would like. I’m sorry. Forgive me. 

Ms. CREIGHTON. Is—is whether—is—we actually want Apple to 

be able to have companies like Bing and Google competing to be 

the best search engine. There’s no reason to think that Apple didn’t 

pick that based on what they thought was the best product. Now, 

having picked Google, Bing and Yahoo are going to compete that 

much harder the next time. So when you have that kind of a contestable market, that you have someone who’s a stand-in for consumers, because Apple is not going to take the worst search engine. 

Senator FRANKEN. Thank you. 

Ms. CREIGHTON. Thank you, Senator. 

Senator FRANKEN. Thank you. And I apologize for interrupting. 

Mr. Chairman? 

Senator KOHL. Senator Blumenthal. 

Senator BLUMENTHAL. Thank you, Mr. Chairman. 

Has Google ever scraped or co-opted content? 

Ms. CREIGHTON. Senator, Google has—if we—I don’t know if it 

shows on—on the—Mr. Barnett’s chart or not, but what—if you run 

a Google search what you’ll typically see is there will be a line or 

two that—that tells you something about the site. The purpose of 

run—of having that line—— 

Senator BLUMENTHAL. Well, you know what I mean when I say 

co-opted or scraped content. 

Ms. CREIGHTON. Respectfully, Senator, what I was trying to get 

to is the purpose of that is to enable you as a consumer to tell 

whether that’s a site you want to click through. So Google has not 

ever unlawfully taken content that is not permitted. It has—— 

Senator BLUMENTHAL. Well, let’s leave out the unlawfully part. 

Has it ever scraped or co-opted content? 

Ms. CREIGHTON. It—— 

Senator BLUMENTHAL. You’ve just heard Mr. Stoppelman’s testimony here, it’s under oath, and it’s really a question of whether 

you deny his testimony. 

46 

Ms. CREIGHTON. Senator, to the best of my knowledge, what 

Google has done and what Mr. Stoppelman is describing is, he did 

not—he wanted to have—Google’s experience has been that people 

like having a line or two written about them because that’s what 

drives traffic to their sites. What Mr. Stoppelman was talking 

about is micromanaging whether or not Google shows those results, 

the natural search results, but not in other parts of its site, and 

was asking for Google to engage in some extra engineering to be 

able to make that possible. 

Senator BLUMENTHAL. Let me move on to your contention, as I 

understand it, that Google is not dominant to the point that it has 

a responsibility under the Sherman Act or other antitrust laws, is 

that correct? 

Ms. CREIGHTON. What I—I think what Mr. Schmidt said was— 

I’m not trying to address the question of what Google thinks or its 

responsibilities. I was just addressing the question of whether or 

not, under the antitrust laws, I believe that it has monopoly power, 

and the answer is that I do not believe that it has monopoly power. 

Senator BLUMENTHAL. Because its share of internet searches and 

advertising is not in excess of 80 percent? 

Ms. CREIGHTON. To begin with, Senator, because I don’t believe 

that the market is properly limited to general search—to general 

search engines, so—— 

Senator BLUMENTHAL. You think that the market definition—— 

Ms. CREIGHTON. Is too narrow. 

Senator BLUMENTHAL [continuing]. Should be beyond search. 

Ms. CREIGHTON. I believe that it should be beyond general 

search. So, for example, when I was at the—— 

Senator BLUMENTHAL. So let’s say a court were to disagree with 

you and found liability and also found co-opting, scraping, whatever other anti-competitive allegations have been made. What 

would your remedy be? What would you recommend to the court? 

Ms. CREIGHTON. So I think it would depend on what the alleged 

wrongdoing was that the court found, Senator. 

Senator BLUMENTHAL. Well, anti-competitive conduct, such as excluding competing sites or placing them lower on the search analysis, or co-opting, or scraping, whatever term you want to use. 

Would it be injunctive relief against those practices or would you 

advise some kind of structural remedy? 

Ms. CREIGHTON. Senator, I’m afraid that that probably has so 

many hypotheticals in it, I wouldn’t be able to answer. 

Senator BLUMENTHAL. Well, let me ask you this. 

Ms. CREIGHTON. But let me give you—let me give you—— 

Senator BLUMENTHAL. In order to avoid a continuing potential 

series of government interventions, which none of us really would 

favor as a first choice, and again I in no way prejudge whether 

there should be, but what would you suggest in the way of voluntary action by Google, or would you simply say that Google 

should proceed with its current course of action and change it in 

no way? 

Ms. CREIGHTON. So, Senator, I think—so for example, I represented Netscape back many years ago when it was challenging 

some of Microsoft’s conduct, some of the conduct that was at issue 

there. And this really gets to the question of, are there impediVerDate Nov 24 2008 11:11 Dec 21, 2011 Jkt 071471 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\71471.TXT SJUD1 PsN: CMORC
47 

ments to the ability of consumers to choose. So if someone found, 

for example, that as Microsoft did there, that Microsoft was intimidating OEMs from being able to offer rival product so that it never 

got to market, then I would want to have relief that went to those 

provisions that were preventing consumer choice. 

Senator BLUMENTHAL. And so far as monopoly power is concerned, you don’t think it’s relevant that its nearest competitor has 

less than 30 percent, is losing money and consumers—I understand 

the contention that competition is only a click away, but there are 

very strong barriers to entry, are there not? 

Ms. CREIGHTON. Senator, I think, first—so Google’s—I think if 

you just limited it to the most narrow market you’d say it’s at 65 

percent and declining. The fact that it’s declining is a big red flag 

to a finding of monopoly power. So—but even beyond that, if you 

step back and think—one of the markets that I had to look at when 

I was at the FTC was whether or not general department stores 

constitute a separate market. That was an empirical question. Did 

those general department stores compete with the boutiques in the 

mall? 

So, for example—and we concluded that in fact—even though 

there were only two that looked the same, there was only a Nordstrom’s and a Macy’s, that in fact what was constraining price were 

all those boutiques on the mall. So, for example, Senator, I think— 

if you think about, where would you go if you were looking to buy 

a product, I’d be really surprised if you didn’t think about going to 

Amazon. Amazon is a special search engine that actually has three 

times the number of product searches conducted on it that Google 

does. 

Similarly, I think when—if you talked to local advertisers, it’s interesting that Mr. Barnett used the example of Milwaukee doctors, 

because what local advertisers tell you today is the number-one 

place you have to be is Facebook. That’s where most local advertising is happening. And I think Mr. Katz actually even mentioned 

that the platforms of the future for local—for shopping are going 

to be Facebook and Twitter. So when I think you look at, what is 

the relevant market and what are the constraints on Google, you 

don’t want to just look at, what are the other general search engines. You want to look at whether or not there are other competitors like the boutiques in the mall that are constraining it. 

Senator BLUMENTHAL. I very much appreciate your answers, and 

my time has expired. I may have some more in writing, particularly as to the market definition and your analysis. But I appreciate your being here today, and thank you for your answers. 

Ms. CREIGHTON. Thank you. 

Senator KOHL. One more round of 3 minutes. 

Mr. Katz, according to Google consumers can go directly to 

Nextag simply by entering www.nextag.com into their web browser, 

so why should it matter how you’re being treated by Google’s 

search engine? 

Mr. KATZ. Well, when people shop, and this is something we’ve 

studied and they’ve studied, what people do is they type in ‘‘washing machine.’’ They don’t type in Amazon or Nextag, they don’t 

type in Google Products, they type in ‘‘washing machine.’’ From 

there, the rest takes place. 

48 

When you type in ‘‘washing machine’’ the Google—first half of 

the Google page begins to lay out and, as we’ve discussed, begins 

to preference advertisers or products that have a preferential or 

preferential advertising relationship with Google. If they did type 

in Nextag.com, first we would bless the Lord above, and then they 

would go directly to Nextag.com. 

Senator KOHL. What would happen to your business in the 

United States if you no longer appeared near the top of Google’s 

search results? 

Mr. KATZ. About 65 percent of our search referrals come through 

Google today, so our business would be severely impaired. We are 

probably one of the most successful internet companies in the 

United States that nobody has ever heard of because we have really perfected the marketing and use of the Google platform, as Eric 

mentioned it earlier. The down side of that is, people haven’t heard 

of us. So if we could not utilize that platform, which I’ve described 

I think is happening, we’ve certainly seen the benefits, that would 

severely impair our business. 

Senator KOHL. Mr. Stoppelman, what would happen to your business if you lost access? 

Mr. STOPPELMAN. Thank you, Mr. Chairman. About 75 percent— 

I believe that’s the right number—of our traffic overall is sourced 

through Google one way or another. About 50 percent of that is 

traffic coming for people sort of generally searching, starting their 

search on Google, and eventually finding their way to Yelp. And 

then the other 25 percent of that 75 percent number is people that 

are qualifying, they want to go to go to Yelp so they’re adding that 

key word in one way or another. So, needless to say, if we were not 

in Google it would be completely devastating to the business. 

Senator KOHL. All right. 

Ms. Creighton, would you argue that it is completely permissible 

under antitrust law for Google to favor its own products and services on its results page? 

Ms. CREIGHTON. Senator, I think the question is whether or not 

Google has the ability to provide the answers that it—that consumers want, so I think what Google in fact does is it—it is constrained because consumers can switch away to be providing the 

answer it thinks is best for consumers, and it’s not doing that for 

charitable reason, it’s doing that because unless it does people are 

going to be going somewhere else. 

So if Google thinks that it has the best answer, then it will be 

displaying that. But if consumers aren’t picking on it—picking 

that—that site, then it’s going to drift down over time because 

Google is going to be ranking higher the things that consumers are 

actually clicking on. 

Senator KOHL. All right. 

Senator Lee. 

Senator LEE. Thank you, Mr. Chairman. I just have a couple of 

questions I wanted to ask of Mr. Stoppelman and Mr. Katz. As a 

prelude to that, I want to reemphasize that I’m a firm believer in 

the free market. I’m also an almost life-long fan of Robert Bork. In 

high school I once drove across town just to hear him speak. It 

therefore shouldn’t be surprising I’m focused on consumer welfare. 

49 

That was always his emphasis in antitrust law, was consumer welfare. 

My question to both of you is this: what, in your view, does 

Google currently do that most harms consumers, and what can 

Google do by way of voluntary action to help alleviate any problems 

that they might have caused in that regard, starting with you, Mr. 

Stoppelman. 

Mr. STOPPELMAN. Yes. Thank you, Mr. Senator. 

So what can Google do? I think the key would be separating out 

distribution from its own properties. For us that’s—that’s the most 

important issue. Your chart, I think, very definitively showed that 

Google is preferencing itself on a regular basis over a wide variety 

of queries, and often Yelp has the best content when users are 

doing local searches. And if it’s not surfacing that toward the top 

but instead is taking out most of the real estate with its own property that it only recently decided, you know, was the most relevant, 

than that’s—that’s a big problem. 

Senator LEE. Mr. Katz. 

Mr. KATZ. I would say, you know, the guiding principle is really 

a level playing field. If that were happening I wouldn’t be here 

today. There is a few things that Google could address if they really wanted to. I would argue its in their interests. They clearly don’t 

agree with that. One simple premise. If they’re going to create a 

placement or a link anywhere on their page, it should be Nextag’s 

easy ability, without changing our business, without becoming 

something we aren’t, that we can get access to that link or that add 

unit. Today that’s not the case for roughly the top half of the page, 

and for the best ad unit they sell on the page, we can’t even compete for it. 

Second, they would label more clearly. Those units that you 

pulled out that are top dead center on the page, those aren’t labeled as commercially preferential to Google. Not everybody can be 

there and consumers really don’t know what’s behind the scenes. 

They’ll never find the benefits of Nextag or another site because 

the first half of the page is where everything happens. And last, 

I think back, I just emphasized level playing field, level playing 

field, level playing field. Simple principle. If they get it, they make 

it happen. 

Senator LEE. Thank you both very much. 

Thank you, Mr. Chairman. 

Senator KOHL. Thank you. 

Senator Franken. 

Senator FRANKEN. Thank you, Mr. Chairman. 

Ms. Creighton, you worked very closely on the Microsoft case 

over 10 years ago. There are many parallels between that case and 

what Google is doing today. You may not agree with that, but I 

think you would agree that it isn’t enough for Google to just say 

trust us. In fact, I think you said that. 

Ms. CREIGHTON. Yes. 

Senator FRANKEN. They need to explain to businesses and consumers what they are doing and why. In the Microsoft case, a technical Committee was created to help monitor and enforce the obligations in the final court order. To be clear, DOJ hasn’t filed suit 

against Google, and I’m not suggesting that they should, but I do 

50 

see some merit in Google taking the initiative to create a Committee of technologists and other small businesses that could review algorithm tweaks and help provide some assurances that 

Google is treating everyone equally. What do you think of that 

idea? 

Ms. CREIGHTON. Senator, I’d have to defer to the company in 

terms of whether that’s a good business idea. As a former antitrust 

enforcer and an antitrust attorney, I’d be extremely concerned 

about—that—that’s just another word for regulation. So, you know, 

I don’t know if you had a chance to see Mr. Barnett’s—I think it’s 

in his written testimony. He had to search for Milwaukee doctors 

and he shows a big Places page at the top on the Google search 

results. I’d encourage you to run that same search on Yahoo. It 

looks exactly the same. 

Now, it looks different on—and Bing, and I think the real question that we have is whether or not—there’s research that both 

Microsoft and Google have done, and it’s public, that 58 percent of 

all users actually want an answer returned. And one of the things 

you’ve probably heard, Microsoft advertises it everywhere, that 

Google only returns links, Microsoft returns answers. So I think 

really the question we have to ask is whether or not we want to 

say that Google can’t compete or it’s going to have to go through 

a regulatory Committee before it can be responsive to that demand. 

The consumer—— 

Senator FRANKEN. I guess I was suggesting something voluntary. 

Ms. CREIGHTON. I think, Senator, that Google—because consumers can switch, their incentive is to do exactly what you’re describing today. They have no incentive. They have an incentive—— 

Senator FRANKEN. To do what I just described today, or what? 

Ms. CREIGHTON. They have an incentive to be—to be returning 

what consumers want, not to be biased in favor of their own content. So, for example, I think there may be a misunderstanding as 

to what happens, for example, if you click on one of those Places 

pages. So Google is actually—is—is deflecting advertising revenue 

away from those pink ads onto a Places page, but that Places page 

is itself a set of natural search results. 

Where consumers go on that Places, two-thirds of the time they 

actually click through to the website of the company that they’re 

searching for, another quarter of the time they go to review sites. 

So, they only click 7 percent of the time on the actual Google ad, 

so Google is actually losing money with that in the short term. But 

the long term, the reason it does that, is it’s competing with Yahoo, 

and Bing, and everyone else because it’s trying to provide—the way 

you get a consumer back and you make more money over the long 

term is by providing those answers. 

Senator FRANKEN. OK. So you’re saying that doing this voluntarily, to maybe—— 

Ms. CREIGHTON. Is—is what—is what they do today. 

Senator FRANKEN. No. I said—— 

Ms. CREIGHTON. I’m sorry 

Senator FRANKEN [continuing]. That they would do—I’m sorry to 

go over time, but there’s just some misunderstanding here, Mr. 

Chairman. To create a technical Committee to review what they do, 

51 

is what the Microsoft case did, which you worked on. That’s what 

I was—— 

Ms. CREIGHTON. Yes, Senator. I—what I—I’m sorry. What I 

meant to say was that they actually, as Mr. Schmidt I think explained a little bit, they actually run live tests with us as their 

guinea pigs, like 1 percent of the traffic. They’ll do side-by-sides: 

do you like this, or like this? And so I think—I think that I’m not 

sure I understand how—— 

Senator FRANKEN. OK. You worked on Microsoft and you 

know—— 

Ms. CREIGHTON. Yes. 

Senator FRANKEN [continuing]. That they—as part of the settlement to comply with the settlement, that they formed a technical 

Committee to review this. You said that would be regulation and 

I said, what if they did it voluntarily? Then after that we kind of 

lost the strain of what we were talking about, I think. 

Ms. CREIGHTON. I’m sorry, Senator. I’m sure that was my confusion. Let me try again. In short, I think Google already changes its 

algorithm 500 times a year. I think a technical Committee would 

be too slow to be able to keep up with the changes in the market. 

Senator FRANKEN. Thank you. 

Thank you, Mr. Chairman. 

Senator KOHL. Senator Blumenthal. 

Senator BLUMENTHAL. Thank you, Mr. Chairman. 

Just in fairness to Mr. Schmidt, I understood his testimony actually to be that he felt Google did have a special responsibility by 

virtue of its size and I want to just express my appreciation for his 

acknowledgement, and I hope also his receptivity to suggestions to 

do better, which I think would distinguish him from the experience 

in Microsoft. 

Mr. Barnett, you have had very significant antitrust enforcement 

experience comparable to Ms. Creighton’s—yours at the Department of Justice as head of the Antitrust Division. And I wonder if 

you could tell us whether you think—and you have no responsibility to answer this question, but if you were in that position now 

whether you would bring a case, or at least begin an investigation. 

Mr. BARNETT. Thank you, Senator. I guess I would start by saying, you know, in that regard Ms. Creighton referred to her background. I don’t think anyone would accuse me of having been overly aggressive or prematurely pulling the trigger on bringing monopolization cases, but there was a case that we looked at. 

And while I won’t go into the details, that had to do with Google, 

who wanted to enter into a transaction with Yahoo! Where the Department looked specifically at the search and paid search advertising markets and Google abandoned that transaction in the face 

of a representation from the Department that we were about to file 

a suit to challenge it in court. So I can tell you that, based on my 

experience, there’s at least one instance where I think they had 

crossed the line. 

Earlier this year they acquired ITA, which is an online travel 

search asset. That’s another issue which I won’t go into, but I will 

say that I think the Department was right to challenge that, which 

they did. In this context I am more than willing to say that I would 

certainly open an investigation, and indeed that’s—that’s a really 

52 

important point here. A lot of the hard questions—many of the 

things we’re talking about having to do with deceptive display and 

all that have nothing to do with the search algorithm, but there 

have been a lot of questions raised about, what does Google do with 

its search algorithm? 

To the best of my knowledge, nobody has ever actually—nobody 

outside Google has ever actually looked at it to determine what’s 

going on. And I’m not talking about posting the algorithm on the 

internet. I’m talking about, in a confidential investigation, enabling 

a responsible antitrust enforcement agency to gather the facts. And 

I would certainly want to gather the facts, and based on what I’ve 

seen, I would be very concerned that there is harm to consumers. 

Senator BLUMENTHAL. I want to thank you for your testimony. 

I invite any of the witnesses to comment on the market analysis, 

market definition, related questions, but most especially on the 

question that has been raised by myself and others as to what 

Google might voluntarily do, because certainly enforcement actions, 

as both you and Ms. Creighton know, are costly, time consuming, 

cumbersome, blunt, and inexact instruments of protecting competition, and far better to have voluntary actions that can avoid even 

the appearance or complaints about antitrust violations. And again, 

to emphasize, I have formed no conclusions myself, whatever that’s 

worth, about the merits or the issues of fact and law here. So, 

thank you for being here and thank you for sharing your perspectives and views. 

Senator KOHL. Thank you, Senator Blumenthal. 

Today’s hearing demonstrates the importance of vibrant and 

open competition on the internet. The actions of Google as a dominant internet search firm has profound effects on the ability of 

businesses to prosper and to compete, as well as on the ability of 

consumers to find the best products and services at the best prices. 

We need to continue to consider whether Google merely does its 

best to serve consumers’ interests as it claims, or biases its search 

results so as to distort competition in its favor as its critics argue. 

We will continue to examine these issues. We very much appreciate 

your being here. You have added much information and light to 

this very important topic, and this hearing is now closed. 

[Whereupon, at 4:50 p.m. the hearing was concluded.] 

[Questions and answers and submissions for the record follow.] 

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