The BYCIG Free Market Series is a BYCIG series of posts that are centered around a central concept — free markets and competition in the United States economy. The common topic for these Free Market Series reports is going to be FTC and DOJ updates concerning antitrust litigation. Our thoughts, beliefs, and questions about these topics will all be laid out in the following articles.
Fun Fact: The term mortgage has been in the English language since the late 13th century. It comes from two latin words, meaning, “death pledge.”
What’s up with GOOG?
Google has recently been under attack from the DOJ, with speculations about potential outcomes and impacts of this DOJ scrutiny all over the main news outlets. Regardless of all this press attention, it’s hard for the average consumer to understand what Google actually did wrong. Therein lies somewhat of a paradox with the suit — many of the consumers deemed as damaged by Google monopolistic behaviour are unaware that they have suffered anything at all. This is the foremost issue with monopoly cases in this era; when tech companies like Google are able to form a market for a product and create a desire for their market, it becomes a major burden to prove that Google has somehow committed monopolistic and unfair market behaviour. Despite that, there is no doubt that they 100% have — it’s just difficult to understand exactly why anyone should care.
Our BYCIG presidents Jasper Gould and Emile Chilingirian spoke with Professor Lawrence J. White. Professor Lawrence White is the Robert Kavish Professor of Economics at NYU and he is often called the forefront expert on antitrust history. We turned to Professor White to help us understand what’s going on with Google; White explained, the DOJ alleges that, “Google has been buying default installation rights — when you open up your Apple device the default search is going to be provided by Google, not by Bing, not by DuckDuckGo, but by Google.” By doing so, White tells us, this leads to, “a crowding out for the opportunity to be installed. There would be [if changed] more competition in the search market. Others would be competing more vigorously, innovating in ways that are hard to imagine.” In doing so, Professor White tells us that the consumer is actually hurt by nature. “People who do search have been harmed by having less choice, or so the DOJ says.”
Professor White seems to sign on with the DOJs claims, and our BYCIG is tempted to do so as well. The problem with the status quo is that since the Google Chrome Complex is undisruptable, there is not only lack of a chance for innovation by competitors, but there is a total lack of necessity to innovate on behalf of Google. Google is taking advantage of something like an “only mover” advantage which is starting to burnout. Google is settling into a status quo where there is no advancement in the Search tech, no optimization, and plenty of a chance to engage in predatory behaviour if so willing. The hope is that if some method were taken to provide an opportunity to competitors, what we would see is innovation and development in the value proposition that Chrome provides. If the Chrome value proposition can develop no one is sure where this technology could go — but without competition there is no reason for Google to change the value proposition in any way at all.
The more challenging question here is what to do about it. Judge Amit Mehta has decided that Google was in fact in the wrong. Now we wait and see what is done about it. Professor White had something to say about potential solutions; “The DOJ is saying basically: These guys bought the default position — default positions are important, there is a lot of inertia. If they hadn’t bought the default position, there would be more choice, Bing would have a bigger volume of searches. Because volume matters, and scale matters, and you would learn how to do the search better if you had a lot more experience doing search, these guys have been disadvantaged.” We asked him what he would do about this and he let us in on his Professor White’s, “magical remedy – first you have to stop Google from buying people [customers], Apple isn’t going to be very happy about that because they have been getting $20 billion a year, but so be it. They can’t do what they’re doing, and also, they can’t do something indirect — no cheaper advertising, nothing of that nature. They can’t buy access.”
White does a great job of identifying the core of the problem, up front. Google cannot buy customers in a way that is to the detriment of potential competitors. They must be getting customers through a superior product, not through a superior size check written to the native platforms. White provides a strong and somewhat makeshift solution to this complex issue. He says that if it could be so that sometimes, once a month he suggests, when we open up Google, it says something along the lines of, “‘You have your choice of search engines’ and they would be randomly assorted. Once a month, we would have to check off our choice.” By doing so, White argues, the Google product wouldn’t have a native advantage but rather an advantage due to its being the preferred search product.
Interestingly, White told us, they tried this in Europe, and it didn’t change anything. Below is the market share of search engines in the EU. The small, momentary dip in the blue line, indicates the Google Choice rollout due to EU legislation. The change in market share was entirely negligible. So maybe Google does just have a better product?
Check in on the BYCIG website to read the next BYCIG Free Markets article which will cover more potential solutions to the Google question and other notable antitrust cases going on right now. We want to thank Professor White for his time and knowledge, and we hope you enjoyed the article.