EVER since Europe’s competition commissioner filed formal antitrust
charges against Google’s shopping service on April 15th, it had been clear to
observers that Google would not back down without a fight. After being granted
an extension that nearly doubled the standard amount of time given to companies
to reply, Google today issued its response to the commission. It is not subtle:
“We believe that the [commission’s] preliminary conclusions are wrong as a
matter of fact, law and economics,” writes Kent Walker, Google’s general
counsel. (Disclosure: Eric Schmidt, executive chairman of Google’s parent
company, Alphabet, sits on the board of The Economist's parent company.)
Start with fact. Google says its online-shopping service has not damaged
competitors, quite the reverse: web traffic (excluding paid referrals) to other
price-comparison sites has increased by 227% over the past decade. However, it
did not say by how much its own traffic, or internet traffic in general,
increased during the same period. As for law, Google argues that the
commission's proposed remedies, which include obliging its website to display
ads "sourced and ranked" by rival companies, would only have a legal
basis if it were a monopoly provider of essential supplies such as gas or electricity.
And as regards economics, Google says the commission fails to grasp how the
market works. "Economic data spanning more than a decade, an array of
documents, and statements from complainants all confirm that product search is
robustly competitive," it says.
Google has long argued that competition is just a click away. This is
true but somewhat disingenuous: the more users a dominant firm has, the more
data it collects, and the more it can improve its service, allowing it to
extend its lead over rivals. However, Google says that the commission's
solution amounts, in effect, to making it freeze its innovation even as its
rivals continue to improve their products. If so, this might be good news for
its competitors but it is unclear what benefit it would bring for consumers.
When the commission started its investigation in 2010, Google was the
only game in town. At the time it seemed inconceivable that a startup might be
able to compete with the web giant. Yet the rise of the mobile internet has
allowed a thousand competitors to rise, each targeting a different aspect of
Google’s sprawling empire. Citymapper, for example, has begun to draw commuters
away from Google Maps.
The parties to the commission's case cannot agree even on how to define
the online-shopping market, and other fundamental questions. This will ensure
that the legal arguments will go on and on: the chances of a settlement or some
other speedy solution now look remote. And this case is just the beginning. The
commission is also looking at Android, Google’s mobile operating system, as
well as myriad other services, including image search. All this will keep
Brussels’ lawyers, journalists and lobbyists busy for years. In comparison, the
commission’s case against Microsoft and its bundling of Internet Explorer,
which dragged on for over a decade, may one day seem almost straightforward.
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