Google Antitrust Case Shows the Flaws in Competition Regulation

Enforcement can bring harmful unintended consequences to the consumer and challengers

The US Department of Justice’s filing of an antitrust lawsuit against Google on Tuesday reflects growing concern in Washington about the power wielded by big technology companies. But it also highlights some of antitrust regulation’s fundamental flaws. 

Despite the DoJ’s assertion that Google’s contracts with smartphone manufacturers and telecom companies lock out competition, it is extremely hard to tell if a given business practice is competitive or anti-competitive. In fact, antitrust action can prevent a superior market response and enforcement can bring harmful unintended consequences. This case will be no exception. 

The DoJ has taken aim at contracts between Google and smartphone manufacturers, including Apple, to pay a share of its search advertising revenues in exchange for ensuring Google’s search engine is installed as the default on the mobile device. The suit argues these arrangements are monopoly abuse of Google’s leading market share in search. It asserts that this constitutes an illegal barrier to entry for Google’s competitors in search, such as Microsoft’s BingVerizon’s Yahoo and DuckDuckGo

As a practical matter for consumers, this does not make sense. It takes three steps to switch the default search on an iPhone from Google to another search engine. If, as is alleged, Google is acting as a gatekeeper to the internet, three clicks is not a very robust gate. 

In the US, the antitrust standard is consumer harm. But given that consumers use Google’s search free of charge and its services are constantly being improved and updated, that is a difficult standard for the DoJ to prove. Antitrust enthusiasts are calling for the rewriting and expansion of antitrust laws, inserting broader socio-economic goals above the primacy of consumer welfare. That’s a mistake. Antitrust should not be used to protect inefficient producers at the expense of consumer interests. Customers should stay king. 

Read the full article at Financial Times.