Editor’s Note: This is the third post in an ACSblog debate on antitrust scrutiny of Google between Harvard Business School Professor Benjamin G. Edelman and George Mason University School of Law Professor Joshua D. Wright. This online debate follows a recent U.S. Senate hearing on whether Google’s business practices “serve consumers” or “threaten competition.”
By Benjamin G. Edelman, Assistant Professor, Harvard Business School
Professor Wright questions whether Google biases results towards its own services, and asks whether consumers are harmed even if Google does bias its results. I don’t find these questions so difficult, and while Professor Wright suggests we’d struggle to identify appropriate remedies, I see some straightforward solutions.
Let’s start with the question of whether Google biases its results towards its own services. On a whim, I ran a search for pop superstar Justin Bieber. Google’s top-most link promoted Google News (in oversized bold type). Down a few inches came a “Videos” section where three thumbnails and three video titles all linked to YouTube clips. (Less prominent links identified other services showing these same videos – links added only after critics flagged the problem of Google always directing this traffic to its own video site.) Lower, Google presented a block of Google Images results. In the analogous context of extra-prominent links to Google Finance, Google’s Marissa Mayer argued that the company should be permitted to put its own links first. “It seems only fair right, we do all the work for the search page and all these other things, so we do put it first.” Marissa doesn’t dispute that Google favors its own links – and she couldn’t, when Google’s links widely appear in prominent ways no other service enjoys.
And what of the consequences of Google’s bias? Professor Wright posits an “efficient bias” wherein Google usefully offers consumers its full suite of services. Certainly it’s handy to have a single Google password providing access to personalized search, finance, videos, and more. But this misses the serious harms of Google’s ever-broadening panoply of services.
Consider an advertiser, say a hotel, dissatisfied with high prices for Google’s dominant AdWords advertising service. If Google prominently features links to Expedia and Tripadvisor, the hotel can strike deals with those sites to promote its property – a plausible alternative to high prices for ads from Google. But consider Google’s recent changes to its search result format. Where Google used to link to Expedia, Google Hotel Finder now appears front-and-center – pushing Expedia links lower and less prominent. And where Google used to link to Tripadvisor, users now see Google Places – which requires hotels and booking services to pay Google to get direct booking links. (Adding insult to injury, Places also asks a hotel to bid against its competitors for ads on its own Google Place page. If the advertiser bids too low or refuses to participate, Google features competitors instead.) Sending less traffic to alternative advertising venues like Expedia and Tripadvisor, Google can raise prices with greater confidence, and advertisers have little means of escape. There’s nothing “efficient” about that; Google raises price above marginal cost, restricts supply, and takes its pound of flesh from advertisers who have little alternative.
Wright suggests we should focus on harm to consumers. In the long run, consumers certainly suffer when innovators can’t launch businesses or get financing for fear of Google blocking their opportunities. Who would launch a video sharing site, knowing that Google overwhelmingly sends video-related traffic to YouTube? And if savvy developers envisioned a new mapping site superior to Google Maps, perhaps with better printing or clearer instructions, that team would struggle to reach consumers since Google systematically features its own service whenever a search calls for a map. These foreclosures impede competition, slow innovation, and are a proper subject of antitrust inquiry.
Meanwhile, advertisers continue to suffer a particularly clear-cut harm – and since advertisers’ payments fuel Google’s $30+ billion annual revenue, antitrust authorities absolutely must consider their plight. As I argued in my opening piece, Google has been thug-like in its imposition of exceptionally harsh terms. Google offers no defense of its take-it-or-leave it terms; Google knows that even the largest advertisers have no viable alternative.
Professor Wright questions what remedy is appropriate for Google’s ever-expanding scope. I recently suggested several remedies for search bias, grounded in tried-and-true remedies antitrust authorities have applied in similar circumstances. For example, two decades ago, travel agents used reservation systems that were owned by airlines, and each airline’s reservation system favored its own flights – making it hard for travel agents or passengers to find the flight that actually best met their needs. Department of Justice litigation put a stop to this practice, disallowing reservation systems from sorting flights based on improper factors like carrier identity. The analogue here is that Google shouldn’t favor its own services just because they come from Google; putting Google Finance first because it’s most popular might be fine if it actually were most popular (it isn’t), but Google ought not put its services first just because they come from Google.
More recently, the European Commission required Microsoft to offer a “browser ballot box” to let users easily choose their preferred web browser, even a browser that competes with Microsoft’s own offering. Such a choice can also be provided within search results: When a user seeks information that matches a predefined vertical (like video, pictures, finance, or news), a drop-down box or other listing could let the user choose a preferred vendor. A user might choose Google for ordinary web search, but prefer Hulu’s video index, Yahoo’s stock quotes, Yelp’s local results, and Amazon’s product search. A bit of AJAX would let users switch their providers any time. Suddenly Google would be far less able to leverage its dominance in search to achieve dominance in other categories. That would be a major benefit to users, advertisers, and the entire online economy.