The Case Against the Antitrust Case Against Google
We have just uploaded to SSRN a draft of our article assessing the economics and the law of the antitrust case directed at the core of Google’s business: Its search and search advertising platform. The article is Google and the Limits of Antitrust: The Case Against the Antitrust Case Against Google. This is really the first systematic attempt to address both the amorphous and the concrete (as in the TradeComet complaint) claims about Google’s business and its legal and economic importance in its primary market. It’s giving nothing away to say we’re skeptical of the claims, and, moreover, that an approach to the issues appropriately sensitive to the potential error costs would be extremely deferential. As we discuss, the economics of search and search advertising are indeterminate and subtle, and the risk of error is high (claims of network effects, for example, are greatly exaggerated, and the pro-competitive justifications for Google’s use of a quality score are legion, despite frequent claims to the contrary). We welcome comments on the article, and we look forward to the debate. The abstract is here:
The antitrust landscape has changed dramatically in the last decade. Within the last two years alone, the United States Department of Justice has held hearings on the appropriate scope of Section 2, issued a comprehensive Report, and then repudiated it; and the European Commission has risen as an aggressive leader in single firm conduct enforcement by bringing abuse of dominance actions and assessing heavy fines against firms including Qualcomm, Intel, and Microsoft. In the United States, two of the most significant characteristics of the “new” antitrust approach have been a more intense focus on innovative companies in high-tech industries and a weakening of longstanding concerns that erroneous antitrust interventions will hinder economic growth. But this focus is dangerous, and these concerns should not be dismissed so lightly. In this article we offer a comprehensive cautionary tale in the context of a detailed factual, legal and economic analysis of the next Microsoft: the theoretical, but perhaps imminent, enforcement action against Google. Close scrutiny of the complex economics of Google’s technology, market and business practices reveals a range of real but subtle, pro-competitive explanations for features that have been held out instead as anticompetitive. Application of the relevant case law then reveals a set of concerns where economic complexity and ambiguity, coupled with an insufficiently-deferential approach to innovative technology and pricing practices in the most relevant precedent (the D.C. Circuit’s decision in Microsoft), portend a potentially erroneous—and costly—result. Our analysis, by contrast, embraces the cautious and evidence-based approach to uncertainty, complexity and dynamic innovation contained within the well-established “error cost framework.” As we demonstrate, while there is an abundance of error-cost concern in the Supreme Court precedent, there is a real risk that the current, aggressive approach to antitrust error, coupled with the uncertain economics of Google’s innovative conduct, will nevertheless yield a costly intervention. The point is not that we know that Google’s conduct is procompetitive, but rather that the very uncertainty surrounding it counsels caution, not aggression.
Filed under: antitrust, business, economics, google, law and economics, legal scholarship, markets, scholarship, technology Tagged: antitrust, error costs, geoffrey manne, google, joshua wright, microsoft, network effects