An ethics watchdog thinks that the FTC may have misled Congress about how it protected Google, and highlights how the White House went into panic mode to limit the damage to the giant ad slinger over a newspaper report last year.

Last March, Google learned that the Wall Street Journal was about to publish details of how the Federal Trade Commission shut down an investigation into Google – contradicting some of the recommendations of its own investigators. The information had arrived by accident: a confidential report had been mistakenly included in a huge bundle of documents passed to the Journal, with every other page redacted.

The half-readable report nevertheless showed that staff had conducted an investigation of Google’s behaviour, similar to the one conducted by the EU*, which began in 2010. The report concluded Google was anti-competitive and recommended the FTC press charges.

FTC staff concluded that Google had violated the Sherman antitrust act in three areas, and continuing its behaviour would have “lasting negative effects on consumer welfare.” But their recommendations were overruled by the FTC’s high priesthood, the Commissioners, who are political appointees. Instead they shut down the probe and allowed Google to make some modest “voluntary” pledges, saying at the time these would deliver “more relief for American consumers faster than any other option.”

On March 18 last year, with publication imminent, a private meeting was hastily arranged between President Obama and Google chairman Eric Schmidt. The meeting was scheduled at 2:11pm for a meeting 24 hours later, on March 19. The meeting and the publication of the WSJ’s explosive story took place the next day.

Schmidt and Google lobbyist Johanna Shelton met three more times in the next six days. Shelton emailed the FTC's head of staff complaining that the FTC’s silence on the WSJ story left her “deeply troubled” and “puzzled”. The email was among several which emerged in response to a public records request.

“A public statement standing by the FTC’s ability to make a final decision after assessing differing internal views would go far in the international space to restore the reputation of the FTC, especially on due process,” Shelton wrote (PDF, page 11 of 119).

Two days later, the FTC issued a statement echoing Shelton’s words, and apologised for the accidental disclosure to the WSJ that had embarrassed Google.

Amazingly, according to the documents, FTC chair Edith Ramirez, an Obama appointee, then shared a draft speech she was due to make in Germany that month with Google’s general counsel Kent Walker and Google’s European director of competition, Julia Holtz, before she made the speech.

“Several aspects of this timeline should be of concern to anyone who believes that law enforcement should be free from influence by the White House or one of its principal corporate supporters,” said ethics watchdog the National Legal and Policy Center.

“It appears that FTC officials operate much like employees of Google, and that Google calls the shots about its own oversight. This is the most extreme example of ‘regulatory capture’ we have seen in Washington in recent years,” it claims.

Ramirez’s account of these events a year ago before Congress is now also under scrutiny.

Salon notes that to counter the FTC investigation, Google turned to academic Joshua Wright, “the author of many pro-Google studies”, showering his department at George Mason University with $762,000 in donations. Wright was later appointed an FTC commissioner. (He resigned from the FTC last year.)

In 2010, the FTC approved Google’s acquisition of the No.1 mobile advertiser Admob, without conditions.

The FTC isn’t the only agency with close ties to Google. Telco watchdog the FCC succumbed to intense White House pressure to reclassify internet services as Title II services, designed to regulate the Bell telephone monopoly in the 1930s, which Congress had intended to be kept away from internet companies. The FCC was created as an independent agency but for now seemingly allows Google to control regulation via proxy.

Key former Googlers in the Obama administration include Megan Smith – “Chief Technology Officer” and Assistant to the President (Google 2003-2014), her deputy Alex MacGillivray (Google 2003-2009), Michelle Lee, head of the patents office (Google 2003-2012), and the top two antitrust officers. Antitrust chief and her deputy Renata Hesse and David Gelfand had key roles working for Google at external firms. ®

* The FTC investigation covered the same ground as the EU's investigation into search behaviour, the effects of which are detailed here.