Upstart Loses Antitrust Claim Against Google
(CN) - An upstart Internet search engine lost its antitrust lawsuit against Google when a federal judge in Manhattan ruled that the claims belong in California, not New York. U.S. District Judge Sidney Stein said Google's decision to enforce a jurisdictional clause in its contract with TradeComet.com was "neither unreasonable nor unjust."
TradeComet accused Google of eliminating competition by reducing traffic to its rivals' Web sites, including TradeComet's search engine, SourceTool.com.
The plaintiff argued that Google violated the Sherman Act by increasing the cost advertisers must pay to use its AdWords program and by entering into exclusive search syndication agreements with a few popular sites, such as AOL, which allegedly squeezed out smaller competitors.
SourceTool bills itself as a specialized search engine that attracts "highly valued search traffic" in the business-to-business sales industry.
Google once named SourceTool "Site of the Week," but then allegedly tried to squash it when it became too successful in earning ad dollars, TradeComet claimed.
"TradeComet alleges that since its start in 2005, its Web site has experienced significant growth, in part based on the search traffic and advertising revenue that it generated as a result of placing advertisements for its Web site on Google's competing Web site," the ruling states.
TradeComet said it had been reinvesting 80 percent of its revenue by buying more than $500,000 per month in Google keywords.
This is when Google identified SourceTool as a competitive threat and "'drastically' increased the minimum price of the keywords that SourceTool.com had purchased through the AdWords program, thus making those keywords effectively unavailable to TradeComet and depriving its Web site of traffic that the use of those keywords would drive to the SourceTool.com Web site," according to the ruling.
AdWords is owned by Google and allows advertisers to buy terms, or "keywords," that, when entered, trigger a certain advertisement and link. Google's compensation is based on the number of times users click on the ad.
Google claimed it increased the price on TradeComet's "relevant keywords" due to its algorithm that adjusts prices to reflect the quality of the page to which an ad is linked.
The search giant, headquartered in Mountain View, Calif., sought dismissal on the grounds that TradeComet was required to bring claims in a court in Santa Clara County, Calif.
It also pointed to language in the agreement's "forum selection clause" that stated, "Google may modify the [AdWords] program or these terms at any time without liability and your use of the program after notice that terms have changed indicates acceptance of terms."
TradeComet argued that the forum selection clause was "unconscionable" because it forced the company to litigate its claims in Google's "backyard."
But Judge Stein decided to dismiss the suit instead of transferring it because "TradeComet offers neither evidence to support its allegations of selective prosecution nor legal authority indicating that such behavior - if true - would make a forum selection clause unconscionable and thus unenforceable," Judge Stein Wrote.
"Although litigating these claims in California rather than New York likely will be more burdensome for TradeComet, which has its principle place of business in New York, there is no suggestion that it would be so difficult as to deprive TradeComet of a fair opportunity to litigate its claims," Stein concluded.