Even if the Justice Dept. were to establish that Google is a monopoly, it would be hard for anyone to prove that the company’s free services have injured consumers
Much has been made of Google Chairman Eric Schmidtâ€™s admission on Wednesday that the Web giant might be a monopoly, which came during his testimony before a Senate hearing into Googleâ€™s market dominance and its effect on consumers and the marketplace. Despite howls of outrage at Googleâ€™s size and power in the search market, the fact remains thatâ€”for the purposes of U.S. antitrust law, at leastâ€”being a monopoly isnâ€™t illegal. What is illegal is either acquiring that monopoly by nefarious or anticompetitive means or using that dominant position in a way that harms the market for those services. The problem with applying this to Google is that even if you assume it has a monopoly and is behaving in an anticompetitive manner, itâ€™s not at all clear how that is bad for consumers.
As Stacey Higginbotham described in her post on the hearingâ€”which was convened by members of the Senate Judiciary Committee on Antitrust, Competition Policy Consumer Rights and entitled â€œThe Power of Google: Serving Consumers or Threatening Competition?â€â€”the committee heard from Schmidt as well as from a number of Google critics, including the co-founder and chief executive officer of Yelp, Jeremy Stoppelman. He said the search company took user reviews from his service without his permission and then threatened to remove Yelp altogether from the Google index.
The committee also heard from such antitrust experts as Thomas Barnett, the former assistant attorney general who for several years headed the Justice Dept.â€™s antitrust division. Barnett is now an adviser to Expedia, one of the companies most critical of Googleâ€™s entrance into new markets such as travel-information. In a statement filed with the committee and made available on Scribd, Barnett laid out the case against Google in some detail, but summed it up with these four points:
1. Search is the critical gateway by which users navigate the Web. As a Google executive has noted: â€œ[S]earch is critical. If you are not found, the rest cannot follow.â€
2. Google dominates search and search advertising.
3. Google is expanding its dominance into a broadening range of search-dependent products and services, which also protect and reinforce its search dominance.
4. As one company gains control over access to further products and services on the Internet, consumers can expect to face higher prices and reduced innovation.
No Question That Google Rules
The first three of Barnettâ€™s points are fairly obvious. Search is unquestionably the main interface for many people when it comes to the Web, although social networks and social media are growing rapidly as sources of traffic. While Barnett doesnâ€™t come out and say Google is a monopoly, he notes that the company clearly has a â€œdominant positionâ€ in search and search advertisingâ€”true, given a market share estimated at 65 percent for search and 80 percent for search advertising. Itâ€™s also true that Google is expanding into new products and services, although how â€œsearch dependentâ€ they are is debatable.
The hard part comes when Barnett says Googleâ€™s dominance in these areas affects consumers because they face higher prices and reduced innovation. This is the core of an antitrust case. (The Senate hearing isnâ€™t technically addressing antitrust, but an investigation is currently underway at the Federal Trade Commission and possibly the Justice Dept. as well, since both share responsibility for antitrust.) Itâ€™s not enough that a company such as Google has a dominant or even monopolistic market position. As Judge Learned Hand wrote: â€œThe successful competitor, having been urged to compete, must not be turned on when he wins.â€
Itâ€™s not even enough to argue that a company with a monopoly is using its position unfairly. It has to be proven that consumers or the marketplace as a whole are being harmed by that behavior, either through higher prices, reduced choice, or both.