FTC Antitrust Probe of Twitter

July 01, 2011, 2:58 PM EDT By Jeff Bliss and Brian Womack

(Updates with Gavil comment in eighth paragraph and software consultant comment in 13th paragraph.)

July 1 (Bloomberg) -- The U.S. Federal Trade Commission has begun contacting software makers as part of a preliminary inquiry into whether Twitter Inc.’s business practices harm competition, two people familiar with the matter said.

The agency is responding to complaints that Twitter is making it harder for some software developers to design applications that run in concert with the company’s service, said one of the people, who asked not to be identified because the matter hasn’t been made public.

The agency has been taking a more active role in examining the behavior of large Internet companies in recent months. Last week, Google Inc., the world’s biggest Internet-search provider, said it had received a subpoena from the FTC regarding a broad antitrust probe into its dominance.

Peter Kaplan, an FTC spokesman, declined to comment, as did Sean Garrett, a spokesman for San Francisco-based Twitter.

Twitter, which allows people to communicate in 140- character messages, has seen its usage surge since the company was founded four years ago. The website is now used by 13 percent of U.S. adults online, up from 8 percent in November, as more older Americans embrace the service, according to a report last month by the Pew Research Center in Washington.

Twitter, competing with social-networking service Facebook Inc., is trying to improve its products and attract more users and advertisers. Last year, the company added more features that matched what independent Twitter developers were already doing, such as applications for smartphones.

Nature of Accusations

Considering the nature of the accusations and the lack of strong legal precedent, the FTC would be on the boundaries of the law if the agency decided to bring a case against Twitter, one person familiar with the matter said.

Still, the complaints “sound a lot like some of the allegations that were leveled at Microsoft,” said Andrew Gavil, a Howard University law professor in Washington. Microsoft Corp. eventually signed a 10-year agreement allowing the government to monitor its business.

One developer, UberMedia, said in an e-mailed statement yesterday that “we have been contacted by the FTC and we intend to fully comply with their request for information.”

The Pasadena, California-based company didn’t say that the probe was targeting Twitter.

Independent Developer

On its website, UberMedia describes itself as the leading independent developer of applications that help users find and communicate with one another on Twitter.

In February, UberMedia Chief Executive Officer Bill Gross said in a blog posting that Twitter had temporarily shut off the access of several UberMedia applications to the Twitter service, accusing the developer of violating a contract.

“It was enough of a shot across the bow, so it got the attention of not only UberMedia but the entire developer community,” said Mark Evans, a Toronto-based social-media strategist whose clients include independent Twitter software developers.

Twitter has a legitimate goal of wanting to generate revenue by expanding its product’s features, Evans said. The trick will be that in doing so, it doesn’t “kill that developer ecosystem” drawing users to Twitter, he said.

Business Insider reported on the FTC inquiry earlier yesterday.

--With assistance from Sara Forden in Washington. Editors: Leslie Hoffecker, Laurie Asseo

To contact the reporters on this story: Jeff Bliss in Washington at jbliss@bloomberg.net; Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editors responsible for this story: Mark Silva at msilva34@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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America Movil Antitrust Reversal Isn’t Done Deal, Officials Say

July 01, 2011, 10:27 AM EDT By Crayton Harrison

July 1 (Bloomberg) -- America Movil SAB, the wireless carrier controlled by Carlos Slim, doesn’t have a guaranteed victory in its bid to overturn a $1 billion fine for anticompetitive practices after a legal development in its favor this week, two antitrust commissioners said.

Luis Alberto Ibarra Pardo and Miguel Flores Bernes, who both voted against the fine in April, said they won’t necessarily vote the same way when considering America Movil’s appeal. Banco Santander SA said this week the two commissioners are making a reversal of the record fine more likely.

“Each case is reviewed on its own merits,” Ibarra Pardo said yesterday in an interview in the antitrust agency’s office in Mexico City. “There are arguments, from the economic point of view and the legal point of view, that could be contradictory.”

Ibarra Pardo and Flores Bernes both voted this week to bar Eduardo Perez Motta, Mexico’s antitrust chief, from the vote on America Movil’s appeal, saying he had shown bias on the matter in radio and TV interviews in May. That recusal made a vote to overturn the fine more likely, Gregorio Tomassi, a Santander analyst, said in a research note dated yesterday.

America Movil, based in Mexico City, fell 10 centavos to 15.70 pesos at 9:55 a.m. New York time in Mexico City trading. The shares had dropped 11 percent this year before today. Tomassi, based in Mexico City, recommends buying the shares.

Perez Motta and another commissioner, Rodrigo Morales Elcoro, voted in favor of the fine in April. The result was a 2- 2 tie because the fifth commissioner, Agustin Navarro Gergely, had recused himself because of a conflict of interest. As president, Perez Motta’s vote broke the tie.

Anticompetition Practices?

America Movil, which controls 70 percent of Mexico’s wireless market, committed anticompetitive practices in the market for fees charged to connect calls from rivals’ networks, the commission concluded with that vote.

With Navarro Gergely recused and Perez Motta unable to participate, the remaining three commissioners would overturn the fine if their votes remain the same as before. Morales Elcoro and Perez Motta declined to comment yesterday.

“It’s very unfortunate. I don’t like being in this situation, and I wish all of my colleagues could participate in the vote,” Flores Bernes said yesterday in a phone interview. “But the law is the law.”

In a dissenting opinion to the decision exempting Perez Motta from the appeal vote, Morales Elcoro said the recusal didn’t have a solid legal foundation.

“They’re taking this incident as a way to control the public communication of the commission,” he wrote. “They’re converting the incident as a way to censor a technical opinion.”

Public Comments

The opinion issued by Ibarra Pardo and Flores Bernes cited examples of TV and radio interviews in which Perez Motta argued against America Movil’s claims that the amount of the fine couldn’t be based on previous antitrust violations by the company, a concept known as “reincidence,” because the alleged violations were different in nature.

“You don’t have to re-commit the same infraction for it to be considered reincidence,” Perez Motta said in a May 10 interview on TV Azteca SAB’s network, according to the opinion. “That’s an abuse of dominance.”

Perez Motta’s removal from the appeal process won’t have a chilling effect on antitrust officials’ ability to express their opinions, Ibarra Pardo said. While commissioners should be transparent about their opinions after a vote, they can’t express their views on pending matters, he said.

Slim’s Wealth

Part of Perez Motta’s duties include representing the antitrust agency in public, and his comments to news media in the past generally won’t affect his ability to participate in future votes, Flores Bernes said.

“This decision was made based on specific declarations about a specific company when we were in the process of resolving an appeal,” he said.

Slim, 71, was declared the world’s richest man in March for a second year by Forbes magazine. America Movil represents about 62 percent of his $72.6 billion in publicly disclosed holdings, according to data compiled by Bloomberg.

--Editors: Peter Elstrom, James Callan

To contact the reporter on this story: Crayton Harrison in Mexico City at tharrison5@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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