In my series of three posts (here, here and here) drawn from my empirical study on search bias I have examined whether search bias exists, and, if so, how frequently it occurs.  This, the final post in the series, assesses the results of the study (as well as the Edelman & Lockwood (E&L) study to which it responds) to determine whether the own-content bias I’ve identified is in fact consistent with anticompetitive foreclosure or is otherwise sufficient to warrant antitrust intervention.

As I’ve repeatedly emphasized, while I refer to differences among search engines’ rankings of their own or affiliated content as “bias,” without more these differences do not imply anticompetitive conduct.  It is wholly unsurprising and indeed consistent with vigorous competition among engines that differentiation emerges with respect to algorithms.  However, it is especially important to note that the theories of anticompetitive foreclosure raised by Google’s rivals involve very specific claims about these differences.  Properly articulated vertical foreclosure theories proffer both that bias is (1) sufficient in magnitude to exclude Google’s rivals from achieving efficient scale, and (2) actually directed at Google’s rivals.  Unfortunately for search engine critics, their theories fail on both counts.  The observed own-content bias appears neither to be extensive enough to prevent rivals from gaining access to distribution nor does it appear to target Google’s rivals; rather, it seems to be a natural result of intense competition between search engines and of significant benefit to consumers.

Vertical foreclosure arguments are premised upon the notion that rivals are excluded with sufficient frequency and intensity as to render their efforts to compete for distribution uneconomical.  Yet the empirical results simply do not indicate that market conditions are in fact conducive to the types of harmful exclusion contemplated by application of the antitrust laws.  Rather, the evidence indicates that (1) the absolute level of search engine “bias” is extremely low, and (2) “bias” is not a function of market power, but an effective strategy that has arisen as a result of serious competition and innovation between and by search engines.  The first finding undermines competitive foreclosure arguments on their own terms, that is, even if there were no pro-consumer justifications for the integration of Google content with Google search results.  The second finding, even more importantly, reveals that the evolution of consumer preferences for more sophisticated and useful search results has driven rival search engines to satisfy that demand.  Both Bing and Google have shifted toward these results, rendering the complained-of conduct equivalent to satisfying the standard of care in the industry–not restraining competition.

A significant lack of search bias emerges in the representative sample of queries.  This result is entirely unsurprising, given that bias is relatively infrequent even in E&L’s sample of queries specifically designed to identify maximum bias.  In the representative sample, the total percentage of queries for which Google references its own content when rivals do not is even lower—only about 8%—meaning that Google favors its own content far less often than critics have suggested.  This fact is crucial and highly problematic for search engine critics, as their burden in articulating a cognizable antitrust harm includes not only demonstrating that bias exists, but further that it is actually competitively harmful.  As I’ve discussed, bias alone is simply not sufficient to demonstrate any prima facie anticompetitive harm as it is far more often procompetitive or competitively neutral than actively harmful.  Moreover, given that bias occurs in less than 10% of queries run on Google, anticompetitive exclusion arguments appear unsustainable.

Indeed, theories of vertical foreclosure find virtually zero empirical support in the data.  Moreover, it appears that, rather than being a function of monopolistic abuse of power, search bias has emerged as an efficient competitive strategy, allowing search engines to differentiate their products in ways that benefit consumers.  I find that when search engines do reference their own content on their search results pages, it is generally unlikely that another engine will reference this same content.  However, the fact that both this percentage and the absolute level of own content inclusion is similar across engines indicates that this practice is not a function of market power (or its abuse), but is rather an industry standard.  In fact, despite conducting a much smaller percentage of total consumer searches, Bing is consistently more biased than Google, illustrating that the benefits search engines enjoy from integrating their own content into results is not necessarily a function of search engine size or volume of queries.  These results are consistent with a business practice that is efficient and at significant tension with arguments that such integration is designed to facilitate competitive foreclosure.

Inclusion of own content accordingly appears to be just one dimension upon which search engines have endeavored to satisfy and anticipate heterogeneous and dynamic consumer preferences.  Consumers today likely make strategic decisions as to which engine to run their searches on, and certainly expect engines to return far more complex results than were available just a few years ago. For example, over the last few years, search engines have begun “personalizing” search results, tailoring results pages to individual searchers, and allowing users’ preferences to be reflected over time.  While the traditional “10 blue links” results page is simply not an effective competitive strategy today, it appears that own-content inclusion is.  By developing and offering their own products in search results, engines are better able to directly satisfy consumer desires.

Moreover, the purported bias does not involve attempts to prominently display Google’s own general or vertical search content over that of rivals.  Consider the few queries in Edelman & Lockwood’s small sample of terms for which Google returned Google content within the top three results but neither Bing nor Blekko referenced the same content anywhere on their first page of results.  For the query “voicemail,” for example, Google refers to both Google Voice and Google Talk; both instances appear unrelated to the grievances of general and vertical search rivals.  The query “movie” results in a OneBox with the next 3 organic results including movie.com, fandango.com, and yahoo.movies.com.  The single instance in Edelman & Lockwood’s sample for which Google ranks its own content in the Top 3 positions but this content is not referred to at all on Bing’s first page of results is a link to blogger.com in response to the query “blog.”  It is difficult to construct a story whereby this result impedes Bing’s competitive position.  In fact, none of these examples suggests that efforts to anticompetitively foreclose rivals are in play.  To the contrary, each seems to be a result of simple and expected procompetitive product differentiation.

Overall, the evidence reveals very little search engine bias, and no overwhelming or systematic biasing by Google against  search competitors.  Indeed, the data simply do not support claims that own-content bias is of the nature, quality, or magnitude to generate plausible antitrust concerns.  To the contrary, the results strongly suggest that own-content bias fosters natural and procompetitive product differentiation.  Accordingly, search bias is likely beneficial to consumers—and is clearly not indicative of harm to consumer welfare.

Antitrust regulators should proceed with caution when evaluating such claims given the overwhelmingly consistent economic learning concerning the competitive benefits generally of vertical integration for consumers.  Serious care must be taken in order not to deter vigorous competition between search engines and the natural competitive process between rivals constantly vying to best one another to serve consumers.

Filed under: advertising, antitrust, business, economics, exclusionary conduct, google, Internet search, law and economics, monopolization, technology Tagged: Bias, Bing, Blekko, Competition law, Edelman, google, microsoft, Web search engine

FTC Chairman Leibowitz recently gave a speech in which he took on a number of issues, but one in particular caught my eye.  In a portion of the speech describing how antitrust has updated its procedures in order to become more efficient and avoid the problem of having decade-long cases focused upon technologies that are obsolete by the time the case is resolved, Leibowitz offers the following example of Commission success:

The best, recent example of the need to move quickly in the high-tech area is our recent Intel case.11 Our investigation of Intel started out very slowly and went on for quite some time, but once the Commission issued process and then a complaint, the litigation proceeded with alacrity and ended with a consent less than a year later.

We think the remedies in the consent do much to protect consumers while still allowing Intel to innovate, develop, and sell new products. And I am proud of the relationship that we have been able to maintain with Intel since then. Still, we might have gained more for consumers: much was lost in the years between the start of the investigation and the litigation’s conclusion, and competition for CPUs and other components in personal computers might have been different had we moved faster initially. And moving quickly might have been fairer to Intel too.

As a result of what we have learned from Intel and other cases, the Commission is no longer bogged down in outmoded procedures. Much of what we’ve done at the Commission in recent years has been to make us better at getting to the bottom of investigations and resolving them faster to ensure that businesses get certainty and consumers get protection quickly. That was at the heart of the changes to our Part 3 rules, you get an antitrust trial, and it is implicit in every effort we make to learn more about industries and develop our internal expertise. We have also pushed to make “go/no go” decisions on investigations earlier so that they don’t linger on. All this reduces expenses and, I believe, allows us to act with a lighter hand.

There is a lot about this strikes me as misguided.

First, lets start broadly.  Striking quickly and striking accurately are two different things.  As John Wooden famously says “never mistake activity for achievement.”  Bill Kovacic has emphasized that case counts alone (nor win rates alone) are not very informative regarding agency performance.   Claims of agency success based upon activity levels in extracting settlements and such should be viewed skeptically without evidence that the activity prevented anticompetitive activity and improved consumer welfare.  Doing things faster doesn’t mean doing them any better.

Second, so what about accuracy?  If Intel is the “best example” the Chairman can come up with of antitrust enforcement in high-tech industries, this is not a good sign for the Commission.  I’ve written quite a bit about the Intel complaint and settlement — and so won’t belabor the point here — but suffice it to say that the evidence does not support the claim that the settlement improved consumer outcomes.  In fact, consumers are probably worse off in my view.  Reasonable minds may differ on these points but it is difficult to evaluate the evidence and come away confident that the settlement is as successful as claimed.  And that’s not even counting the peculiar endorsement it gives Lepage’s, which has been overwhelming condemned a standard which threatens pro-consumer conduct.

Third, the Chairman writes: “And I am proud of the relationship that we have been able to maintain with Intel since then.”  Ugh.  Developing longstanding relationships with Intel and other companies is not something for the Commission to be proud of.  Its just not.  In this case, the relationship derives from the product design elements of the Intel settlement.  Remember this language?

Respondent shall not make any engineering or design change to a Relevant Product if that change (1) degrades the performance of a Relevant Product sold by a competitor of Respondent and (2) does not provide an actual benefit to the Relevant Product sold by Respondent, including without limitation any improvement in performance, operation, cost, manufacturability, reliability, compatibility, or ability to operate or enhance the operation of another product; provided, however, that any degradation of the performance of a competing product shall not itself be deemed to be a benefit to the Relevant Product sold by Respondent. Respondent shall have the burden of demonstrating that any engineering or design change at issue complies with Section V. of this Order.

I’m sure Intel’s lawyers and engineers have a fine relationship with the FTC.  But lets not mistake that with agency success or something that consumers should celebrate.

Never mistake activity with achievement.

Filed under: antitrust, federal trade commission, technology

TOTM readers know that I’ve long been skeptical of claims that expansive use of Section 5 of the FTC Act will prove productive for consumers.  I’ve been critical of recent applications of Section 5 such as Intel and N-Data.  Now comes yet another FTC consent decree in PoolCorp.  I’m still skeptical.  Indeed, PoolCorp appears to provide ammunition for those (like me) who have criticized the Commission’s stance on expansive use of Section 5 precisely upon the grounds that it can and will be applied to conduct that is either competitively neutral or even procompetitive.

Commissioner Rosch’s dissent makes many of the key points.  Indeed his opening line gets straight to the point: “This case presents the novel situation of a company willing to enter into a consent decree notwithstanding a lack of evidence indicating that a violation has occurred.”

Before getting to specifics, the sharp disagreement between the majority and Commissioner Rosch on both the most basic of facts and economic principles is hard to miss, and gives the entire exchange a rather peculiar feel.  Here’s an example.  The majority describes the case as a standard application of a “Raising Rivals’ Costs” theory, citing Krattenmaker & Salop.  The allegation is that:

Specifically, the Complaint alleges that PoolCorp, which possesses monopoly power in many local distribution markets, threatened its suppliers (i.e., pool product manufacturers) that it would no longer distribute a manufacturer’s products on a nationwide basis if that manufacturer sold its products to a new distributor that was attempting to enter a local market.

The conditions that must be satisfied for an exclusionary theory are well known.  Substantial foreclosure of a critical input is one such necessary, but not sufficient, condition for the possibility of competitive harm.  The majority argues that PoolCorp “foreclosed new entrants from obtaining pool products from manufacturers representing more than 70 percent of sales.”  But standard antitrust analysis tells us that such foreclosure is not enough to support an inference of harm to competition.  First, we must ask whether the threatened refusals to deal actually had any impact on the allegedly impaired rivals or whether they were able to easily realign supply contracts?  Second, and most fundamentally, we must ask whether the conduct at issue had any impact on competition itself, or upon consumers in the form of higher prices, reduced output, lower quality, etc.?

Here is where things get, well, weird.

Did PoolCorp’s actions actually disadvantage any rivals?  The majority concedes that “Some of PoolCorp’s targets were able to survive by purchasing pool products from other distributors rather than directly from the
manufacturers.” Well, that doesn’t sound too bad for the Commission.  If a few firms survived but others were excluded (surely the implication of the sentence), we should continue our analysis.  But was there actually any foreclosure?

Here’s Commissioner Rosch in dissent:

“The investigation revealed that PoolCorp’s demands were not honored by manufacturers.”

What about those potential entrants that were excluded — the ones that were not so lucky as the surviving targets the majority mentions?

“Another problem with this case is that no entrants were actually excluded.”

Yikes.  One gets the impression that the Commissioners are not talking about the same case.  The majority is full of broad generalizations and assertions but no real discussion of facts.  Commissioner Rosch’s dissent offers a bit more on the exclusion claim:

“The only claim to the contrary is in Paragraph 28 of the complaint, which alleges that in Baton Rouge, “the new entrant’s business ultimately failed in 2005” because of the lack of “direct access to the manufacturers’ pool products.” The complaint neglects to mention that this entrant was able to secure supplies from other sources and later sold itself to an established out-of-state distributor. Since then, that distributor, which has had full access to supplies, has been a highly effective rival to PoolCorp. Thus, to the extent PoolCorp’s threats had an effect in Baton Rouge, they may have led to more, not less, competition.”

Not good for the Commission majority.  But injury to rivals isn’t our primary concern.  What about injury to competition?  Here, things get even murkier.  The majority plainly asserts “the harm to consumers that occurred as a result was substantial” and “consumers had fewer choices and were forced to pay higher prices for pool products.”  Sounds relatively straightforward.  Once again, Commissioner Rosch’s dissent exposes disagreement over the most basic of antitrust-relevant facts (emphasis added):

“A third problem with this case is that there was no consumer injury. The investigation did not uncover price increases, service degradation, or other anticompetitive effects in any local markets.”

Rosch goes on:

The basis for the majority statement’s claim that there was “substantial” consumer harm resulting from the alleged conduct of Respondent is a mystery. The complaint contains no factual allegations of any harm to consumers, much less “substantial” harm. Likewise, there are no factual allegations in the complaint corroborating the majority’s claim that consumers “had fewer choices and were forced to pay higher prices for pool products.”

This is a real mess.  Proponents of an expanded application of Section 5 (including Commissioner Rosch) frequently argue that it is capable of being applied with certain limiting principles, including demonstration of consumer injury.  To his credit, Commissioner Rosch is sticking to his guns on consumer injury as a limiting principle here.  But the evidence that the Section 5 is too enticing a tool for the Commission in cases lacking consumer injury is mounting.  The public disagreement over basic facts — is there harm to consumers or not?  was there foreclosure or not?  if so, how much? — also does not inspire confidence that the Commission’s discretion in applying Section 5 in cases where the conduct lies outside the scope of the Sherman Act for technical reasons will be applied in a manner consistent with the consumer welfare goals of antitrust.

Those are general problems with Section 5.  As applied here, the majority opinion is also analytically incoherent.   The Commission majority must deal with the fact that there appears to be no real foreclosure as a result of PoolCorp’s conduct — recall that what the majority described as a few successful surviving firms turns out to be no actual exclusion whatsoever.  Despite the fact that absence of foreclosure or injury to rivals in a case like this is typically the end of the line for the plaintiff, the Commission doesn’t appear to be bothered at all by the lack of evidence of harm to rivals or consumers.  Responding to the fact of no foreclosure, the Commission writes:

“However, we assess consumer harm relative to market conditions that would have existed but for the respondent’s allegedly unlawful conduct. Here, PoolCorp’s strategy significantly increased a new entrant’s costs of obtaining pool products. Conduct by a monopolist that raises rivals’ costs can harm competition by creating an artificial price floor or deterring investments in quality, service and innovation.”

This doesn’t make any sense.  If there is no foreclosure, there is no risk of consumer harm.  Period.  Indeed, while the majority asserts it, there appears to be no actual evidence of consumer harm.  At a minimum, its up for serious debate.  If it were true that PoolCorp’s strategy “increased a few entrant’s cost of obtaining pool products” in practice, and that there were sufficient exclusion to create additional market power, two things would be true: (1) one would observe harm to the rival, and (2) there would be harm to competition in the form of higher prices or reduced output.  Apparently, the Commission could must neither — even when challenged by Commissioner Rosch’s dissent to do so.

One last observation.  Commissioner Rosch’s dissent hints that economic analysis in the case demonstrated that “even if” PoolCorp fully foreclosed its rivals the harm to consumers would be minimal and a waste of Commission resources.   Query: what role are agency economists playing in the Commission’s Section5 agenda?  Unfortunately, it does not appear to be a significant one.

Filed under: antitrust, economics, exclusionary conduct, federal trade commission, monopolization

My last two posts on search bias (here and here) have analyzed and critiqued Edelman & Lockwood’s small study on search bias.  This post extends this same methodology and analysis to a random sample of 1,000 Google queries (released by AOL in 2006), to develop a more comprehensive understanding of own-content bias.  As I’ve stressed, these analyses provide useful—but importantly limited—glimpses into the nature of the search engine environment.  While these studies are descriptively helpful, actual harm to consumer welfare must always be demonstrated before cognizable antitrust injuries arise.  And naked identifications of own-content bias simply do not inherently translate to negative effects on consumers (see, e.g., here and here for more comprehensive discussion).

Now that’s settled, let’s jump into the results of the 1,000 random search query study.

How Do Search Engines Rank Their Own Content?

Consistent with our earlier analysis, a starting off point for thinking about measuring differentiation among search engines with respect to placing their own content is to compare how a search engine ranks its own content relative to how other engines place that same content (e.g. to compare how Google ranks “Google Maps” relative to how Bing or Blekko rank it).   Restricting attention exclusively to the first or “top” position, I find that Google simply does not refer to its own content in over 90% of queries.  Similarly, Bing does not reference Microsoft content in 85.4% of queries.  Google refers to its own content in the first position when other search engines do not in only 6.7% of queries; while Bing does so over twice as often, referencing Microsoft content that no other engine references in the first position in 14.3% of queries.  The following two charts illustrate the percentage of Google or Bing first position results, respectively, dedicated to own content across search engines.

The most striking aspect of these results is the small fraction of queries for which placement of own-content is relevant.  The results are similar when I expand consideration to the entire first page of results; interestingly, however, while the levels of own-content bias are similar considering the entire first page of results, Bing is far more likely than Google to reference its own content in its very first results position.

Examining Search Engine “Bias” on Google

Two distinct differences between the results of this larger study and my replication of Edelman & Lockwood emerge: (1) Google and Bing refer to their own content in a significantly smaller percentage of cases here than in the non-random sample; and (2) in general, when Google or Bing does rank its own content highly, rival engines are unlikely to similarly rank that same content.

The following table reports the percentages of queries for which Google’s ranking of its own content and its rivals’ rankings of that same content differ significantly. When Google refers to its own content within its Top 5 results, at least one other engine similarly ranks this content for only about 5% of queries.

The following table presents the likelihood that Google content will appear in a Google search, relative to searches conducted on rival engines (reported in odds ratios).

The first and third columns report results indicating that Google affiliated content is more likely to appear in a search executed on Google rather than rival engines.  Google is approximately 16 times more likely to refer to its own content on its first page as is any other engine.  Bing and Blekko are both significantly less likely to refer to Google content in their first result or on their first page than Google is to refer to Google content within these same parameters.  In each iteration, Bing is more likely to refer to Google content than is Blekko, and in the case of the first result, Bing is much more likely to do so.  Again, to be clear, the fact that Bing is more likely to rank its own content is not suggestive that the practice is problematic.  Quite the contrary, the demonstration that firms both with and without market power in search (to the extent that is a relevant antitrust market) engage in similar conduct the correct inference is that there must be efficiency explanations for the practice.  The standard response, of course, is that the competitive implications of a practice are different when a firm with market power does it.  That’s not exactly right.  It is true that firms with market power can engage in conduct that gives rise to potential antitrust problems when the same conduct from a firm without market power would not; however, when firms without market power engage in the same business practice it demands that antitrust analysts seriously consider the efficiency implications of the practice.  In other words, there is nothing in the mantra that things are “different” when larger firms do them that undercut potential efficiency explanations.

Examining Search Engine “Bias” on Bing

For queries within the larger sample, Bing refers to Microsoft content within its Top 1 and 3 results when no other engine similarly references this content for a slightly smaller percentage of queries than in my Edelman & Lockwood replication.  Yet Bing continues to exhibit a strong tendency to rank Microsoft content more prominently than rival engines.  For example, when Bing refers to Microsoft content within its Top 5 results, other engines agree with this ranking for less than 2% of queries; and Bing refers to Microsoft content that no other engine does within its Top 3 results for 99.2% of queries:

Regression analysis further illustrates Bing’s propensity to reference Microsoft content that rivals do not.  The following table reports the likelihood that Microsoft content is referred to in a Bing search as compared to searches on rival engines (again reported in odds ratios).

Bing refers to Microsoft content in its first results position about 56 times more often than rival engines refer to Microsoft content in this same position.  Across the entire first page, Microsoft content appears on a Bing search about 25 times more often than it does on any other engine.  Both Google and Blekko are accordingly significantly less likely to reference Microsoft content.  Notice further that, contrary to the findings in the smaller study, Google is slightly less likely to return Microsoft content than is Blekko, both in its first results position and across its entire first page.

A Closer Look at Google v. Bing

 Consistent with the smaller sample, I find again that Bing is more biased than Google using these metrics.  In other words, Bing ranks its own content significantly more highly than its rivals do more frequently then Google does, although the discrepancy between the two engines is smaller here than in the study of Edelman & Lockwood’s queries.  As noted above, Bing is over twice as likely to refer to own content in first results position than is Google.

Figures 7 and 8 present the same data reported above, but with Blekko removed, to allow for a direct visual comparison of own-content bias between Google and Bing.

Consistent with my earlier results, Bing appears to consistently rank Microsoft content higher than Google ranks the same (Microsoft) content more frequently than Google ranks Google content more prominently than Bing ranks the same (Google) content.

This result is particularly interesting given the strength of the accusations condemning Google for behaving in precisely this way.  That Bing references Microsoft content just as often as—and frequently even more often than!—Google references its own content strongly suggests that this behavior is a function of procompetitive product differentiation, and not abuse of market power.  But I’ll save an in-depth analysis of this issue for my next post, where I’ll also discuss whether any of the results reported in this series of posts support anticompetitive foreclosure theories or otherwise suggest antitrust intervention is warranted.

Filed under: antitrust, economics, google, Internet search, law and economics, technology Tagged: Bias, Bing, Blekko, google, microsoft, Web search engine

Economists are all quite familiar with the “holdup problem,” i.e. one contracting partner exploiting the other after asset specific investments have been made.  One classic law school textbook example is Alaska Packers v. Domenico in which the Alaska Packers’ Association hired Domenico for the salmon season for $50 plus 2 cents per salmon caught, but after leaving the dock and arriving in Alaskan waters for the short salmon season, the workers demanded an increase in their pay.  The defendant agreed, but upon return to San Francisco, refused to pay.  The seaman sued and lost on the theory that the exchange did not involve fresh consideration.  This, Judge Posner has argued, was the right economic result on the grounds that it discourages holdup.  Many of our readers will also be familiar with the famous Fisher Body / GM example of vertical integration solving the holdup problem, and the subsequent debate between Benjamin Klein and Ronald Coase over that particular example.

Now comes another example of the holdup problem at work.  In fact, it is difficult to imagine a better example.  Apparently, half way through a flight from India to Birmingham, England, an airline took advantage of the asset specific investments made by its passengers to alter the terms of the deal:

Passengers aboard two chartered jetliners from India to Britain were hit up for about $200 each, in cash, to continue their trip this week in what one flier compared to a hostage situation.  The charter company, Austria-based Comtel Air, and the Spanish company that owns the planes pointed fingers at each other over the situation Thursday. But Lal Dadrah, a passenger on one of the flights who recorded the crew passing the hat, called the situation “a complete, utter sham.”

Comtel Air passengers on a Tuesday flight to Birmingham, England, from the Indian city of Amritsar were hit up for 130 pounds — about $200 each — during a layover in Vienna. They were allowed off the aircraft to take the money from teller machines, a process that took about seven hours. There were varying accounts of what the money was to pay for, ranging from fuel to fees.

The NY Times story provides a few more details:

Britain’s Channel 4 news broadcast video showing a Comtel cabin crew member telling passengers: “We need some money to pay the fuel, to pay the airport, to pay everything we need. If you want to go to Birmingham, you have to pay.”

Some passengers said they were sent off the plane to cash machines in Vienna to raise the money.

“We all got together, took our money out of purses — 130 pounds ($205),” said Reena Rindi, who was aboard with her daughter. “Children under two went free, my little one went free because she’s under two. If we didn’t have the money, they were making us go one by one outside, in Vienna, to get the cash out.”

The economics don’t stop there.  There is potential for an agency problem as well:

Bhupinder Kandra, the airline’s majority shareholder, told the Associated Press from Vienna that travel agents had taken the passengers’ money before the planes left but had not passed it on to the airline.  “This is not my problem,” he said. “The problem is with the agents.”

A great example for the classroom.

 

Filed under: contracts

Herb Hovenkamp has posted his new casebook on Innovation and Competition Policy to SSRN, where one can download the chapters individually.  This is a very nice development for students; and the book seems perfectly fit for a course on Innovation and Competition Policy — for which it was designed — but also appropriate for a variety of similarly-themed seminar courses.

Professor Hovenkamp describes the aims of the book here:

This is not an “IP/antitrust” casebook.  There are already excellent books in that field.  Only about half of the principal cases printed in this book are antitrust decisions.  I use this book to present issues of innovation and competition policy to students in a broader context, examining not only antitrust but also the intellectual property laws and including shorter examination of several other topics, such as telecommunications, net neutrality, and competition issues raised by the DMCA.  Brief attention is also given to the industrial organization literature on innovation.

This casebook begins with a chapter on patent scope and its implications for innovation, with brief coverage of the Schumpeter-Arrow literature and the problem of sequential innovation.  Then it looks in some detail at the problem of complementary relationships, addressed in antitrust mainly through the law of tying arrangements.  After that is a chapter on remedies issues, followed by chapters on the patent system, copyright, practices that restrain innovation, and intellectual property misuse.  Another chapter covers exclusionary practices and another a wide variety of collaborative arrangements, including pooling, standard setting, blanket licenses, and the like.  The final chapter focuses on vertical restraints and the post-sale (exhaustion) doctrine.

I hope to keep this book up to date on a regular basis and welcome any suggestions for revision or inclusion.  My overall goal, however, is to hold the book somewhere in the range of its current length.

 

Filed under: antitrust

Source.

Filed under: behavioral economics

Here’s the link to the conference, and the program, which covers all angles of social media and the law.  Predictably, my interest here is competition policy — I’ll be on the 10:45 panel discussing those issues along with: Michael Altschul (CTIA), Nicolas Economides (NYU), Adam Thierer (GMU), and Moderator Steve Wildman (MSU).

The link to the webcast is here.  If you’re there, please come and say hello after the panel.

Filed under: antitrust, technology

In my last post, I discussed Edelman & Lockwood’s (E&L’s) attempt to catch search engines in the act of biasing their results—as well as their failure to actually do so.  In this post, I present my own results from replicating their study.  Unlike E&L, I find that Bing is consistently more biased than Google, for reasons discussed further below, although neither engine references its own content as frequently as E&L suggest.

I ran searches for E&L’s original 32 non-random queries using three different search engines—Google, Bing, and Blekko—between June 23 and July 5 of this year.  This replication is useful, as search technology has changed dramatically since E&L recorded their results in August 2010.  Bing now powers Yahoo, and Blekko has had more time to mature and enhance its results.  Blekko serves as a helpful “control” engine in my study, as it is totally independent of Google and Microsoft, and so has no incentive to refer to Google or Microsoft content unless it is actually relevant to users.  In addition, because Blekko’s model is significantly different than Google and Microsoft’s, if results on all three engines agree that specific content is highly relevant to the user query, it lends significant credibility to the notion that the content places well on the merits rather than being attributable to bias or other factors.

How Do Search Engines Rank Their Own Content?

Focusing solely upon the first position, Google refers to its own products or services when no other search engine does in 21.9% of queries; in another 21.9% of queries, both Google and at least one other search engine rival (i.e. Bing or Blekko) refer to the same Google content with their first links.

But restricting focus upon the first position is too narrow.  Assuming that all instances in which Google or Bing rank their own content first and rivals do not amounts to bias would be a mistake; such a restrictive definition would include cases in which all three search engines rank the same content prominently—agreeing that it is highly relevant—although not all in the first position. 

The entire first page of results provides a more informative comparison.  I find that Google and at least one other engine return Google content on the first page of results in 7% of the queries.  Google refers to its own content on the first page of results without agreement from either rival search engine in only 7.9% of the queries.  Meanwhile, Bing and at least one other engine refer to Microsoft content in 3.2% of the queries.  Bing references Microsoft content without agreement from either Google or Blekko in 13.2% of the queries:

This evidence indicates that Google’s ranking of its own content differs significantly from its rivals in only 7.9% of queries, and that when Google ranks its own content prominently it is generally perceived as relevant.  Further, these results suggest that Bing’s organic search results are significantly more biased in favor of Microsoft content than Google’s search results are in favor of Google’s content.

Examining Search Engine “Bias” on Google

The following table presents the percentages of queries for which Google’s ranking of its own content differs significantly from its rivals’ ranking of that same content.

Note that percentages below 50 in this table indicate that rival search engines generally see the referenced Google content as relevant and independently believe that it should be ranked similarly.

So when Google ranks its own content highly, at least one rival engine typically agrees with this ranking; for example, when Google places its own content in its Top 3 results, at least one rival agrees with this ranking in over 70% of queries.  Bing especially agrees with Google’s rankings of Google content within its Top 3 and 5 results, failing to include Google content that Google ranks similarly in only a little more than a third of queries.

Examining Search Engine “Bias” on Bing

Bing refers to Microsoft content in its search results far more frequently than its rivals reference the same Microsoft content.  For example, Bing’s top result references Microsoft content for 5 queries, while neither Google nor Blekko ever rank Microsoft content in the first position:

This table illustrates the significant discrepancies between Bing’s treatment of its own Microsoft content relative to Google and Blekko.  Neither rival engine refers to Microsoft content Bing ranks within its Top 3 results; Google and Blekko do not include any Microsoft content Bing refers to on the first page of results in nearly 80% of queries.

Moreover, Bing frequently ranks Microsoft content highly even when rival engines do not refer to the same content at all in the first page of results.  For example, of the 5 queries for which Bing ranks Microsoft content in its top result, Google refers to only one of these 5 within its first page of results, while Blekko refers to none.  Even when comparing results across each engine’s full page of results, Google and Blekko only agree with Bing’s referral of Microsoft content in 20.4% of queries.

Although there are not enough Bing data to test results in the first position in E&L’s sample, Microsoft content appears as results on the first page of a Bing search about 7 times more often than Microsoft content appears on the first page of rival engines.  Also, Google is much more likely to refer to Microsoft content than Blekko, though both refer to significantly less Microsoft content than Bing.

A Closer Look at Google v. Bing

On E&L’s own terms, Bing results are more biased than Google results; rivals are more likely to agree with Google’s algorithmic assessment (than with Bing’s) that its own content is relevant to user queries.  Bing refers to Microsoft content other engines do not rank at all more often than Google refers its own content without any agreement from rivals.  Figures 1 and 2 display the same data presented above in order to facilitate direct comparisons between Google and Bing.

As Figures 1 and 2 illustrate, Bing search results for these 32 queries are more frequently “biased” in favor of its own content than are Google’s.  The bias is greatest for the Top 1 and Top 3 search results.

My study finds that Bing exhibits far more “bias” than E&L identify in their earlier analysis.  For example, in E&L’s study, Bing does not refer to Microsoft content at all in its Top 1 or Top 3 results; moreover, Bing refers to Microsoft content within its entire first page 11 times, while Google and Yahoo refer to Microsoft content 8 and 9 times, respectively.  Most likely, the significant increase in Bing’s “bias” differential is largely a function of Bing’s introduction of localized and personalized search results and represents serious competitive efforts on Bing’s behalf.

Again, it’s important to stress E&L’s limited and non-random sample, and to emphasize the danger of making strong inferences about the general nature or magnitude of search bias based upon these data alone.  However, the data indicate that Google’s own-content bias is relatively small even in a sample collected precisely to focus upon the queries most likely to generate it.  In fact—as I’ll discuss in my next post—own-content bias occurs even less often in a more representative sample of queries, strongly suggesting that such bias does not raise the competitive concerns attributed to it.

Filed under: antitrust, business, economics, google, Internet search, law and economics, monopolization, technology Tagged: antitrust, Bias, Bing, Blekko, google, microsoft, search, Web search engine, Yahoo