Technology × Freedom

Google Antitrust Decision More Evidence That European Bureaucrats Don’t Know (or Care) What Consumers Want

June 28, 2017 nitsuj

Yesterday, the European Commission (EC) announced a record $2.7 billion fine against Alphabet, alleging that Google violated antitrust law by “abus[ing] its market dominance as a search engine by giving an illegal advantage to another Google product, its comparison shopping service.” As with their decision to outlaw cellular roaming fees, however, the EC’s action again shows their clear disregard for what consumers actually want.

This disregard starts with how the E.U. differs from the U.S. in how it determines violations of antitrust law. As Ben Thompson explains in his thoughtful take on the judgment:

The United States and European Union have, at least since the Reagan Administration, differed on this point: the U.S. is primarily concerned with consumer welfare, and the primary proxy is price. In other words, as long as prices do not increase — or even better, decrease — there is, by definition, no illegal behavior.

The European Commission, on the other hand, is explicitly focused on competition: monopolistic behavior is presumed to be illegal if it restricts competitors which, in the theoretical long run, hurts consumers by restricting innovation.

As TechFreedom’s Berin Szóka points out, this way of thinking leads to the protection of less successful companies from more successful ones. It’s not about protecting consumers, as "[t]he EC doesn’t say a word about consumers. It simply claims that Google has hurt its rivals, who will now reap a windfall from this fine."

Thompson continues this argument:

On the other hand, isn’t consumer welfare the entire point? Sure, a narrow focus on price is perhaps a bad proxy, but if dominant services are winning by being better — which is my argument in Aggregation Theory — why should regulators busy themselves with demanding worse alternatives be given the right to succeed?

This is a point where many of those focused on the antitrust ends go wrong: in their crusade against big companies, they fail to grapple with the reality that on the Internet being big comes from being the best, leaving their arguments vulnerable to the critique that they are, in fact, anti-consumer, or at a minimum, anti-competence. To put it another way, in contrast to the previous point, regulators are treating people like dummies, assuming they can’t figure out how to find a competitive service, when in fact the truth is they don’t want to.

Then there’s the question of what Google should return when a specific product is searched for, if not ads and results pertaining to the specific product. Thompson makes two great points on this front:

First, if I search for a specific product, why would I not want to be shown that specific product? It frankly seems bizarre to argue that I would prefer to see links to shopping comparison sites; if that is what I wanted I would search for “Shopping Comparison Sites”, a request that Google is more than happy to fulfill.

The European Commission is effectively arguing that Google is wrong by virtue of fulfilling my search request explicitly; apparently they should read my mind and serve up an answer (a shopping comparison site) that is in fact different from what I am requesting (a product)?

The second reason is even more problematic: “Google Shopping” is not actual a search product; it is an ad placement.

You can certainly argue that the tiny “Sponsored” label is bordering on dishonesty, but the fact remains that Google is being explicit about the fact that Google Shopping is a glorified ad unit. Does the European Commission honestly have a problem with that? The entire point of search advertising is to have the opportunity to put a result that might not otherwise rank in front of a user who has demonstrated intent.

The implications of saying this is monopolistic behavior goes to the very heart of Google’s business model: should Google not be allowed to sell advertising against search results for fear that it is ruining competition? Take travel sites: why shouldn’t Priceline sue Google for featuring ads for hotel booking sites above its own results? Why should Google be able to make any money at all?

Even if you believe Google is a monopoly that has engaged in anticompetitive behavior in the past – as Thompson does – there’s little in this decision by the EC that can be celebrated as a win for the people of Europe. But perhaps believing the EC or E.U. actually exists to benefit them is an assumption worth questioning.