Sushant Chari is a student of the LSE and a writer for LLB Online.
Google is a superpower. With effectively all of the world’s digitized information within the reach of its famed spider, Google is a search monopoly to whom other businesses sometimes owe their very existence in an increasingly digital global market. The statistics are startling in two important ways.
First, 50% of users will click on a result somewhere in the top 4. Close to a 90% don’t even scroll past the top 10. This has some very frightening effects for businesses competing in the online market-place. If you don’t show up on page one, you’re toast.
Second, Google’s dominance in the search engine and online advertising game is unprecedented. Save for a few exceptions (the Czech Republic for example, perhaps for linguistic reasons) Google commands a market share of nearly 100% in Europe. In the United States, AOL competes with the superpower for a meagre portion of market share and is nowhere close. Google left China giving Baidu the chance to expand its market share, but where the company has stayed the course, it has been invincible. So far, at least.
And that’s fine. Competition law does not, in most cases, seek to stop success (although pure-blooded Hayekians might argue otherwise). Google got where it is because of exemplary software engineering by Larry Page and Sergey Bryn. In fact, in 1998 when asked which of his competitors he was most wary of, Bill Gates said his greatest competition was probably some university students working on the next best thing in a garage or dorm room. That is just where Google’s founders were. In addition, unlike many tech companies and most companies in other sectors, Google’s elite are its engineers. Not its executives, accountants and lawyers. The creative power behind the algorithm runs the company. Google perhaps deserves to be where it is in search and online advertising. Its competitors and the authorities are however worried about what happens when the company exerts its near absolute dominance in this sector to help its successes in others.
In November of last year, pursuant to complaints by Found ‘em (a price comparison site), ejustice.fr (a French search engine) and Microsoft’s Ciao, the European Competition Commission launched an investigation into claims that Google was cooking its search results to disadvantage of its competitors. By making them appear lower down on the platform, it was, argues David Wood a lawyer for one of the complainants, causing serious harm to good businesses.
Is this any different from what DG Competition has been focussed on for the past decade? Since 1998 the Commission thought Microsoft was abusing its dominance inter alia through the inclusion of certain software in its devices without interoperability provisions. The last reference made to these issues was in 2009 when the Commission held that the company no longer commanded an abusive share of the market. They had a rough time of it with the Commission. In fact, when Microsoft first complained to the EC, Clifford Chance Global Antitrust head Thomas Vijne was quoted as saying: "The filing of this complaint reflects one of the greatest ironies of antitrust history".
But what about Google? If information is an intrinsically different commodity to PCs, it seems that it would occupy a market more susceptible to new competition, not less. Google has often claimed that the “competition is a click away”. This may well be true. A quick click on a different icon shifts you over to Bing, but it takes significantly more effort to switch from using a PC with which a consumer is already acquainted to a Mac (where a price-differential also plays a role). However, problems arise when a company is as large ($250 billion in market capitalisation) and powerful (300 billion page views in 2012 so far) as Google. In fact it has purchased several start-ups in Silicon Valley, feeding its innovation. It is not even clear how many such “takeovers” there have been. Wikipedia puts the number at 49. As recently as January 1, 2012, Google purchased Niijinsky, a travel platform developed in Portugal. Has Google changed what it means to be a successful start up into “sell to Google”?
Also it is arguably not that easy to switch over. The more searches there are on Google, the more efficient it becomes at locating websites that are relevant and its algorithm is tuned ever more finely. This puts it miles ahead of the competition. Companies that engage in Search Engine Optimisation are mostly targeted at getting their clients’ results towards the top of the list on Google, not Bing or Yahoo.
This is dangerous for the market. We email through Gmail, search through Google (when was the last time you heard someone say, “Yahoo it”) and watch videos on YouTube. There is scarcely a major activity on the web that Google does not control. Apart from the privacy concerns which are beyond the scope of this article, internet search/advertising, video-viewing and other services seem to be monopolised by Google.
David Wood points out that one of the main issues is the lack of transparency as to how the algorithm works. Google has full control over the information relating to the design of its algorithm and rightly so. It would be ludicrous for the Competition Commission to decide that Google should disclose this. The algorithm is Google’s genius and publicising that is anti-competitive by definition. I’m unclear as to what Mr Wood means by the need for more transparency and uncertain as to how this may be achieved.
Google rejected all the charges against it. “We built Google for users, not websites. The nature of ranking is that some websites will be unhappy with where they’re ranked”. To explain why Found ‘em might appear lower down in search results, Google suggested this was because their algorithm disadvantages websites with a lot of duplicated content. 79% of Found ‘em’s content, Google claims, is duplicated.
There is no doubt disagreement as to whether an investigation should be carried out at all.
But if these facts (and others of an intensely technical nature) are to inform a decision by the Commission, how effective might it be in understanding their complexity? Mr Wood points out that he feels the current case team at the competition commission is probably the most experienced of its kind around today. It oversaw the Google-Double-click merger as well as the Microsoft-Yahoo merger. I find this misstates the problem. Those deals were overseen with reference to market shares and the maintenance of competitiveness by preventing a company from getting too much of it. This case is different by its very nature because it will require an investigation of the algorithm itself. Not only is this an uncomfortable proposition, the Commission simply may not understand but given the rate at which Google is progressing it is unlikely that at any point in time, any one person (even Bryn or Page) completely gets it.
Before we begin talking about remedies such as specific performance of search engine "rectification", we must first find a way to identify whether they need rectification. This cannot be done without an effective, technically adept analysis of the algorithm (something it is unclear the Commission is capable of). Google hold all the strings. The question is then one of deference to the market. Should we let the market regulate itself in a similar way to its regulation of Microsoft? Or is selling advertising space in a search engine different from selling CPUs?
I certainly hope Google adheres to its informal motto, "Don't be evil".