Google, Its Competitors, and Competition Law

There is an inherent difficulty in determining when a company's competitive actions might merely harm less effective competitors (that's a good thing) and when it might harmand the market in general.
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The Federal Trade Commission (FTC) is reportedly considering suing Google for antitrust violations. There is an inherent difficulty in determining when a company's competitive actions might merely harm less effective competitors (that's a good thing) and when it might harm consumers and the market in general. Because of this inherent difficulty, antitrust law punishes aggressive competition only under a narrow set of circumstances and not in most others. If a company is not a monopoly, then the law assumes market competition can restrain the company's actions. No problem. If a monopoly exists but the monopoly does not engage in acts designed to destroy competition, then we can assume that it earned and is keeping its monopoly the pro-consumer way: by out-innovating its competitors.

That means, by law, in this case or any other, the FTC would have to prove both that Google is a "monopoly" and that Google engages in acts that don't merely harm some competitors, but that stifle "competition" generally. We don't have all the evidence that the FTC has. But we know what Google's competitors have been arguing.

And their case is not persuasive on either argument.

Which monopoly, exactly?

Google's competitors have been muddled in attempts to demonstrate that Google is a monopoly. They throw out some impressive numbers about Google's market share in the "general search" markets -- 66.8 percent of the desktop market in the U.S., 84.4 percent globally, and 98 percent of the U.S. mobile search market. These are high numbers but they don't account for many of Google's real competitors; the figures show that Google's complaining competitors have defined the relevant markets too narrowly. It would be like accusing Apple of a monopoly in "iPad Minis," or Amazon a monopoly in Kindle Fires, without recognizing the competition these devices face from one another.

Google faces obvious competition from Microsoft's Bing, Yahoo! and new entrants such as DuckDuckGo. It also faces less obvious competition. Within the past two months, Facebook CEO Mark Zuckerberg announced from a stage in San Francisco that search is an "obvious thing" for Facebook to move into, considering the strength of its social network. He noted that Facebook's search feature already receives a billion queries a day without even trying, and that Facebook will soon start trying. Apple has also moved increasingly into the search market through its voice recognition tool Siri -- something that more likely characterizes the future of search than a paid product-listing site like Nextag.

And those are just competitors regarding "general" search engines. Even though Google receives much of its revenue from ads appearing next to product searches, more consumers now start their product searches at Amazon than at Google, which shows Amazon is an important competitor. Kayak still receives many more travel queries than Google. Many users on mobile devices rely on apps for searches, including Yelp for local searches. Despite this competitive landscape, the companies complaining about Google have done little to explain the economics of this competition from "specialized" providers, from apps, and from such formidable rivals as Microsoft, Amazon, Apple, and Facebook.

Which bad acts, exactly?

Even if Google were a monopoly, Google's competitors fail to demonstrate that Google's actions stifle competition, rather than reflect pro-consumer innovations. We can review three of the competitors' many allegations.

First, competitors argue that Google rigs its search algorithms to demote listings for competing search engines. Many of the allegations of demotion come generally from sites of pretty questionable quality, such as Nextag and Foundem. Some of Google's primary competitors in "specialized search" clearly place well in search results -- Amazon and Yelp. Nonetheless, to the extent Google might demote results from some search engines hoping to get free traffic from Google, Google's actions appear pro-consumer. As Google notes, users do not come to a search engine to receive lists of links to other search engines. They come increasingly for answers, something that both Microsoft and Facebook acknowledge.

Second, Google's competitors argue that Google designs its search display to promote Google "products" like Google Maps, Google Places, and Google Shopping, ahead of competitors like MapQuest, Yelp, and product-search sites. Again, Google argues that users want answers and this way of categorizing search results is just as prevalent on Microsoft and Yahoo. Moreover, Google argues these are not separate "products" but merely a useful way to display information -- specialized results for news, images, or products. A Brazilian court adopted this argument when it recently dismissed a private antitrust suit against Google. Plus, Google integrated these specialized results into its search display back in 2007.

To paraphrase a recurring campaign slogan: are your search results better off now than they were 5 years ago?

Third, Yelp claims that Google "steals" competitors' content by crawling the web and displaying snippets of content in search results. But Google relies on a copyright doctrine called "fair use," which is required by the American Constitution's First Amendment. Under the fair use doctrine, we all have the right to quote copyrighted content under particular circumstances. No legal decision has ever questioned the right of even a monopolist to engage in fair use. No antitrust court can change the Constitution and eliminate fair use. But, if Google is somehow violating copyright by "stealing" any company's content, that company can bring claims under our very aggressive copyright statutes to punish Google. But the complaining competitors haven't brought such claims, because Google is breaking no law. It is also definitely not harming consumers by exercising fair use rights.

Google's competitors make other arguments -- focused on competitors being able to access information about Google's advertisers and under what conditions Google makes its Android software available to device-makers. But these have not been their core arguments, so we have little reason to think that the facts on these issues are any stronger here than they are for the competitors' lead arguments. The competitors seem to have turned increasingly to these arguments as their initial arguments flounder. But turning to argument after argument suggests more of a competitor-witch-hunt than a justified antitrust claim based on principled legal analysis.

If antitrust law turned merely on harm to competitors, then maybe Google's competitors would have an easier case. Instead, antitrust authorities and judges have the difficult task of separating out actions that, while harming competitors, might actually benefit consumers. Under the established standards of the law, and the facts as we know them through the press, there isn't a strong case for thinking Google has harmed us.
Disclosure: In addition to being a Bernard L. Schwartz Fellow at the New America Foundation, Ammori heads a small law firm in Washington DC advising clients including Google and other technology companies. The views expressed here are his own and should not be attributed to Google or any other institution.
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