What to do about an antitrust “problem” like Google?

When you dominate a marketplace, you can expect a fair amount of scrutiny. After all, popular wisdom says that mere size makes anticompetitive conduct more feasible. But size (access to human and financial capital, distribution processes, and an established customer base) makes new innovation and procompetitive behavior possible too. For the company that famously quipped that its corporate slogan was “don’t be evil,” its antitrust future may boil down to a simple question – is Google more evil than good? And perhaps the future of the Internet depends on whether antitrust authorities can tell the difference. Google certainly has its hands full with a slew of antitrust investigations across the globe. However, this is a symptom of more than mere market dominance. It is arguably because of Google’s unique and intricate position in the global Internet economy that Google’s activities are of particular concern to authorities. This is in part because much of the Internet is made up of interlocking network economies (a network economy is one where size matters – for example, the more consumers that use email, the more attractive the tool is to future consumers). In such economies, even relatively small levels of anticompetitive behavior launched against an incipient competitor might irrevocably destroy that competitor’s development. Great if you are the anticompetitive incumbent, potentially bad if you are a consumer. It is therefore understandable that antitrust authorities have Google in their sights for particular activities. Here are just a few examples from recent years.

Google search engine

• EU: The EU’s five-year inquiry cites objections to Google searches in which the US firm gave prominence to its own comparison shopping services, regardless of their relevance to the search query, which diverted traffic away from competitors.
• US FTC: The Federal Trade Commission had a multi-year investigation of Google based on suspicions that Google illegally took information from rival websites to bolster its own results and that it violated antitrust laws by placing heavy-handed restrictions on non-affiliated websites and advertisers. The FTC settled its investigation in 2013 when it concluded that the company had not manipulated its search results to hurt rivals.

• US DOJ: The Justice Department’s Antitrust Division threatened antitrust charges in a 2008 investigation of Google and Yahoo!. The parties abandoned their agreements.

Android and smartphones

• EU: The EU competition authorities recently opened an investigation into Google’s Android system to determine if “Google has illegally hindered the development and market access of rival mobile operating systems, mobile communication applications and services.”

• Russia: Russian officials recently determined that Google had abused its dominant market position with Android by giving preference to Google’s own services over those of rivals (one rival being Yandex, a Russian competitor).

Privacy

• US FTC: The FTC claimed that Google used deceptive tactics and violated its own privacy promises to consumers when it launched its social network, Google Buzz, in 2010. In a settlement, Google agreed to implement a comprehensive privacy program, and to submit to regular, independent privacy audits for the next 20 years.

Miscellaneous anticompetitive activities

• In 2010, Google and five other tech companies agreed to stop their mutual agreements to not solicit employees from each other. Such an agreement lessens competition in the tech employee labor market.
• In 2011, Google acknowledged responsibility for facilitating the improper conduct of its advertisers for allowing Canadian online pharmacies to target US consumers with prescription drug advertisements. Google agreed to forfeit $500 million.

The news is not all bad for Google antitrust attorneys. Just recently, in the approval of the Expedia-Orbitz merger, the DOJ stated that one reason they concluded the merger would not lessen competition was that Google had entered the market and was a viable (if nascent) competitor. These new branches of Google enterprise, Google Hotel Finder and Google Flight, themselves started with Google’s 2011 (DOJ-approved) acquisition of ITA Software. ITA Software is the company behind the flight-booking technology used by Kayak, Orbitz, and other travel sites. In a diligent review, the DOJ permitted Google to purchase ITA Software under several conditions that were to remain in place for five years (not the usual ten). This cautious approach by the DOJ demonstrated both the division’s concern that Google was purchasing a critical input to the industry and the division’s hesitation to interfere with innovations that enhance consumer welfare. It seems that in the Expedia-Orbitz merger, the division is confident consumers are reaping some of the benefits of that 2011 decision. An antitrust enforcement regime that is cautious in the face of potential, new innovations has its benefits. In other established and heavily networked areas – in the mobile operating system market, for example – more rigorous antitrust review is appropriate. Antitrust authorities across the globe are of course balancing the high risk of over-deterrence of procompetitive activities and the under-deterrence of anticompetitive ones. One thing seems certain: there is no lack of antitrust scrutiny when it comes to Google. If you care for more information on US antitrust investigations of Google, you can go to the DOJ and FTC websites or, you guessed it, Google it.

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