Appellate Court Sides With Google Against TradeComet

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An appellate court has handed Google a victory on a procedural issue in an antitrust lawsuit brought by disgruntled search marketer TradeComet.com.

In a decision issued this week, the Second Circuit Court of Appeals ruled that the case should have been brought in Google's home state of California, rather than New York. Unless TradeComet successfully appeals that ruling, the company will have to go to California to litigate if it wants to pursue the case.

TradeComet is still evaluating whether to refile its lawsuit in that state or seek to appeal to the U.S. Supreme Court, says Joseph Bial, one of the company's lawyers with the firm Cadwalader, Wickersham & Taft.

The Second Circuit upheld a trial judge's decision that Google's AdWords contract with TradeComet required all disputes arising out of the agreement to be litigated in northern California. TradeComet had argued that its antitrust allegations were not covered by the AdWords contract, but the court rejected that position.

TradeComet alleged in its 2009 lawsuit against Google that the search company raised the minimum price per click it charged TradeComet's SourceTool.com division by 10,000%, from 5 to 10 cents per click to $5 to $10 per click. As a result, SourceTool, a business-to-business vertical search site, had to stop buying as many keywords. Visits to the site plummeted to the point where it only received 1% of its prior traffic.

Still, those allegations don't necessarily mean that Google violated antitrust law. Observers such as New York Law School professor James Grimmelmann have said that Google might have had valid reasons for increasing the cost per click of search ads. For instance, if Google personnel believed that searchers wouldn't find SearchTool's landing pages helpful, Google can argue that it raised the price to improve the quality of its own results.

The Cadwalader law firm also represents former search marketer myTriggers.com, which is pursuing its own antitrust lawsuit against Google. Cadwalader has represented Microsoft in antitrust matters and the lead attorney for TradeComet, Charles "Rick" Rule, lobbied against the nixed Google-Yahoo search pact.

myTriggers' lawsuit will not be affected by the court's decision in TradeComet because Google initiated proceedings against myTriggers in state court in Ohio. Google sued myTriggers in 2009 for allegedly failing to pay $335,000 in marketing fees. myTriggers filed a counterclaim alleging that Google violated Ohio's antitrust law by raising myTriggers' quality score, which caused the cost of its pay-per-click ads to spike by as much as 10,000%.

myTriggers alleged in its counterclaim that the cost hike was anti-competitive on the theory that Google raised prices because myTriggers' cost-per-action model threatened Google's business. But those allegations were undermined by the revelation that myTriggers had previously filed an insurance claim attributing the drop in its quality score to server crashes.

myTriggers recently filed papers with the court in Ohio calling attention to Google's acknowledgement that it is the subject of a Federal Trade Commission antitrust investigation. The effect of that probe is not yet clear.

Tags: google, legal
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