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Archive for March 24th, 2011

Google Books Settlement Rejected

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Some of you will recall that roughly a year ago I wrote a post on the Google Books settlement (“Google Books Settlement: It´s the search market stupid!”) in which I argued that the only competitive problem, if any, posed by the amended settlement related to the search market.  [In that post we also directed you to the transcript and a very good summary of the fairness hearing (Part I ; Part II) which may allow you to better understand all subsequent developments].

Yesterday, Judge Chin, of the Southern District of New York, issued an opinion concluding that the Amended Google Books Settlement (“ASA”)  is not fair, adequate or reasonable, precisely because it would further entrench Google´s maket power in the online search market. The Opinion is available here.

Judge Chin acknowledges that Google´s plan of creating a universal digital library would bring about great benefits for many, but concludes that the ASA “would simply go to far”. In his view, “it would permit the class action to implement a forward-looking business arrangement that would grant Google significant rights to exploit entire books, without permission of the copyright owners. Indeed, the ASA would give Google a significant advantage over competitors, rewarding it for engaging in wholesale copying of copyrighted works without permission, while releasing claims well beyond those presented in the case“.

From a reading of the opinion it is obvious that (i) Judge Chin has conferred significant relevance to the number and vociferousness of the objections presented to him, and has mainly based his Opinion upon them; and (ii) the decision is to a great extent motivated by concerns which are not directly antitrust-related, such as those over the adequacy of class representation  (e.g. foreign authors), involuntary expropriation of copyrights by virtue of the “opt-out” mechanism, or the alleged improper use of the settlement of a class action to regulate a aspects of a “forward  looking” business arrangement which had not been raised before the Court.

With regards to the antitrust concerns posed by the ASA, and after referring to the submissions made by several parties, Chin concludes that “Google´s ability to deny competitors the ability to search orphan books would further entrench Google´s market power in the online search market”.

Most, if not all, of the concerns outlined in the opinion would be addressed “simply” by switching from an opt-out to an opt-in model, although that would surely be detrimental to the scale and quality of the service provided and could perhaps even affect the viability of the project. Balancing all the interests at stake is certainly a daunting challenge.

There are no easy answers to the many fascinating issues that arise in connection with this case. In fact, its interest lies precisely on the fact that those issues can only be addresses by adopting a defined stance with regards to the core, almost ideological, debates underlying our discipline (amongst others, and to put a couple of them in their most basic terms: would we rather have a natural or de facto monopolist providing a service that no one else can provide, or would we rather prefer a counterfactual where we renounce to have that service for the sake of not having a monopolist controlling it? What room is there for fairness concerns in antitrust analysis?).

These are particularly complicated days at work, but you can expect a more detailed commentary of Judge Chin’s Opinion from us once things clear up a bit.

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PS. And speaking of Google, as announced here some days ago, on Friday I will be presenting a discussion on antitrust issues in cloud computing featuring Tero Louko (Google) and Carel Maske (Microsoft).

Other panels will feature Jennifer Vasta (Qualcomm), Thomas Kramler (European Commission), Luis Ortiz Blanco (Garrigues), Álvaro Ramos (Cisco), Miguel Rato (Shearman&Sterling), Pablo Hernández (SGAE) and Daniel Escoda (Telefónica).

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Written by Alfonso Lamadrid

24 March 2011 at 2:25 am

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