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Why the FTC Needs to Chill Over the 1-800 Contacts Bidding Agreements

The latest buzz in the world of search marketing is about how the Federal Trade Commission has sued 1-800 Contacts for allegedly pursuing anti-competitive agreements with with it’s rivals. The online retailer is being accused of entering agreements with it’s competitors which prevent them from placing ads on search results for each other’s brand names. In its role as the government body responsible for leveling the playing field and encouraging competition within ever industry, I think the FTC’s pursuit of 1-800 Contact is a bit misguided.

Why the FTC Needs to Chill Over the 1-800 Contacts Bidding Agreements

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For starters, the results pages on search engines like Google are not a marketplace. Products are not being bought and sold on Google, they are only being promoted. Google.com is no more than a website, a piece of digital real estate which happens to be extremely powerful. If a brand agrees to refrain from placing ads on specific searches, they are not withholding their products and services from potential customers. Customers may still enter the site and purchase with no limitations. The off-line version of this would be if Walmart agrees to not place billboard ads directly adjacent to billboard ads placed by Target. This is in no-way harmful to consumers as they are free to purchase from either store.

Another thing to consider is when users search for a brand, such as 1-800 Contacts, they simply wish to reach that brand’s website. When competitors bid on each other’s trademarks, the users may end up unknowingly visiting the wrong website simply because they were able to place an ad in the search results for a competing brand. In the example below, I ran search a search for the keyword Visa. If a user were to specifically try to reach Visa’s official website, you could see how he/she might easily end up reaching a different website. In this example, Visa presumably has a partnership with the other advertisers bidding on this keyword, but that does not matter to the customer trying to reach Visa.com. Such a customer could be mislead to signing up with on another website. Therefore, encouraging advertisers to bid on one another’s brand terms does not necessarily protect the consumer.


Also, allowing brands to protect their trademarks is not an evil thing from the perspective of the consumer. Large brands tend to be high-profile and therefore need to be more transparent about their business practices. Because they operate in the spotlight, they tend to be extra-cautious about doing anything that may endanger their reputations. Case-in-point, the only company mentioned the news headlines about this lawsuit is 1-800 Contacts, the only well-known company involved in this scandal. The FTC should therefore encourage companies to protect their brands and try to “build a moat” around them by preventing others from standing in-between themselves and the customers that are clearly seeking them out.

While I understand that the FTC sensed an anti-competitive practice in the case of 1-800 Contacts, the issue here is clearly not that simple. Actions that limit competition and provide customers with less options can be dangerous, which is why the FTC plays such a vital role in sustaining a fair, free market system. But that’s not the case when it comes paid search advertising. When advertisers place ads on the branded terms of rivals, they are not increasing competition, rather just hurting the long-term interests of the consumer.

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