Maroc - EURASIAREVIEW.COM - A la une - 09/Sep 23:33

Tricks Of The Trust-Busting Trade – OpEd

On Monday, August 5, 2024, Judge Amit Mehta of Washington, DC’s federal district courtruled thatGoogle exercises an unlawful monopoly of the market for general search engines (GSEs). GSEs aresoftware applicationsthat allow users of web browsers (like Google’s Chrome, Microsoft’s Edge, Apple’s Safari, and Mozilla’s Firefox) to hunt for information on the web by entering keywords on their digital devices. Judge Mehta’s finding of an unlawful Google monopoly accepted evidence presented by the US Department of Justice during a 10-week-long trial last year. The DOJ argued that Google’s GSE nowadays accounts for 90 percent of the Internet searches initiated by consumers, a share that has grown from 80 percent a decade ago. What is more, Judge Mehta concluded that Google violated the Sherman Act (1890) by paying billions of dollars to web browsing companies in return for making Google’s GSE the default option for searching the Internet. Doing so supposedly undermined competition in the GSE market by foreclosing other search engines. But that reasoning is based on a misunderstanding of market processes wherein even a small competitive “fringe” of rivals stands ready to expand their market shares if a dominant firm stumbles and fails continuously to meet consumers’ expectations. Market shares routinely are manipulated by antitrust law enforcers; paraphrasing Judge Learned Hand, a company’s mere size does not by itself offend the antitrust laws. According to the supporters of Judge Mehta’slandmark decision, “the ruling on Google’s search dominance was the first antitrust decision of the modern Internet era in a case against a technology giant.” Vanderbilt law school professor Rebecca Haw Allensworth gushed that “this is the most important antitrust case of the century, and it’s the first of a big slate of cases to come down against Big Tech.” Not so fast. Every web browser, including Google’s Chrome, allows users of desktop computers and other smart devices to change their browser’s default GSE easily by clicking on “preferences” or “settings” and choosing another search engine at no additional charge. Chrome and its rivals make money not from GSE users but by selling advertisers’ access to those users. Even Judge Mehta recognized that Google’s GSE now dominates the Internet search market because of its “superior product quality” and “numerous innovations” (read: the scale and scope necessary to deliver high-quality search experiences). If that were not true, consumers would, with little effort, switch to another search engine (e.g., Yahoo!, Microsoft’s Bing, DuckDuckGo, Yandex). It likewise is not true thatUS v. Googleis “the first antitrust case of the modern Internet era in a case against a technology giant” unless the definition of “modern” is restricted to the twenty-first century. The honor (or dishonor) of being first goes toUS v. Microsoft, a case decided in 1998, in which the Justice Department alleged that the defendant was guilty of exercising an unlawful monopoly because, at the time, Microsoft accounted for 90 percent of the market for “Intel-compatible” PC operating systems shipped in the United States. That dominance supposedly was fortified by the company’s incorporation of its Internet Explorer web browser into Windows 95 (or 98) at no additional charge, to the detriment of Netscape’s Navigator and other web browsing rivals. (Because GSEs were in their infancy then, search engines, called “indexers” or “web crawlers,” played no role in the litigation.) Courts have frequently accepted a 90 percent market share as the benchmark for declaring successful business enterprises to be unlawful monopolies throughout antitrust law enforcement history. That was the bright line in the “mother of all monopolization cases” against Standard Oil in 1911 and the prosecution of the Aluminum Company of America (Alcoa) in 1945. More recently, in the yet-to-be-decidedUS v. Apple, the Department of Justice alleged monopoly based on the iPhone’s 65 to 70 percent share of smartphone sales. Before market shares can be computed, the product and geographic boundaries of a relevant antitrust market must be drawn. Therein lies the rub. The narrower a market’s boundaries, the smaller the number of sellers (and buyers) actively participating in it, and the larger each of those seller’s market shares will be. (If the relevant market for dry cleaning services is the corner of one street intersection, the sole dry cleaner located there is a monopolist.) The nadir of market definition exercises was reached in 1966 when the Justice Department blocked a merger betweenVon’s Grocery Co. and Shopping Bag Food Stores because the combination would have created a retailer accounting for justseven percentof Los Angeles grocery store sales. Antitrust law enforcers are predisposed to draw market boundaries tightly, often ignoring sellers that compete actually or potentially to constrain the sellers within those boundaries. InAlcoa, for instance, the Department of Justice and the courts excluded previously produced aluminum that, even in the 1940s, routinely was recycled into new products that competed with the “virgin” aluminum ingots the defendant was said to have monopolized. If recyclable aluminum had been included in the relevant market, Alcoa’s market share would have been 30 percent, not 90 percent. Staples has been trying to acquire Office Depot since 1997. The initial merger proposal was blocked by the Federal Trade Commission on the theory that the combination would undermine competition between office-supply “superstores,” a market definition that encompassed just those two companies plus Office Max. Office supplies sold by Walmart, mail-order outlets like Quill, and smaller “Mom-and-Pop” retailers of office supplies were excluded from the FTC’s “market.” In announcing opposition to the recently proposed $24.6 billion merger between Kroger and Albertsons, the FTC likewise has claimed that competition would be impaired in the market for “traditional grocery stores,” a market definition that ignoresgroceries sold byWalmart, Amazon, Costco, Trader Joe’s, and numerous other local and online retailers. Relevant antitrust markets are only snapshots of the contours of dynamically changing competitive market processes. By the time a federal court order broke upStandard Oil Company’s “monopoly,”new oil fields were opening in West Texas, and new refineries were coming online. The entries of Texaco and other competitors ate into Standard’s share of the markets for crude oil and kerosene (the principal refinery product of the day), dropping it quickly from 90 to 70 percent. Google was not founded until September 4, 1998, supplying yet more evidence of the dynamism of “Big Tech.” It bears emphasizing that controlling 90 percent of a relevant antitrust market is not a monopoly, defined in economics textbooks as the extremely rare case of asingleseller of a product for which, in consumers’ eyes, no good substitutes are available. Google isnota monopoly of general search engines. It surely is large, even dominant, in the GSE market if that definition is apt, but size by itself does not mean that consumers are or have been harmed. So, why does Google pay billions to Apple and other web-browsing companies to make Google’s GSE the default search engine option, an option that consumers can easily change? For the same reason that food manufacturers pay “slotting fees” to grocery stores for prime shelf space product placements, and movie and television production companies are paid for showing branded merchandise briefly to their audiences. Those payments supply competitive edges in reaching prospective buyers but do not make consumers worse off. The developers of rival GSEs can choose to make their search engines as good as or better than Google’s, investments that seem within the capabilities of Microsoft and perhaps Yahoo! Alternatively, they could offer to pay web-browsing companies more than Google does to overcome their evident inferiorities as default search engines. Or rival GSEs could mimic DuckDuckGo’s strategy of attracting users by emphasizing privacy features (“Our ads don’t follow you around”) or other attributes that consumers value. Default options are “sticky” because of consumers’ inertia, but they are not locked in stone. Superior functionality always finds a way into markets, includinghigh-tech ones. Vigorous competition (even between small numbers of rivals) serves consumers better than antitrust intervention ever has. This article was also published in Law & Liberty