Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

On the Proposed Branding Remedy in Google

with 2 comments

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Google is a clever company.

Remember: as part of a proposed settlement with the Commission, Google has offered to brand search results.

Under this remedy, users can spot if Google preferentially displays links towards its own related services.

But if my understanding is correct, the nub of the issue is not one of consumer information, but rather one of users’ reaction to Google’s preferential search tactics.

Put differently, what matters is how users behave when Google’s own related services appear prominently in search results lists.

I have qualms with the idea that a remedy of this kind can change anything. It may even backfire. Faced with branded search results, users may increasingly click on Google’s related services, at the expense of competing services. This is because a large number of users find value to using services that belong to one single IT ecosystem (a sort of service-based network externality, driven by economies in transaction costs – no need to login twice, for instance – technological stability and service integration). Not to talk of the fact that Google has strong image in the public that users may associate with higher quality.

This thought came whilst reading Josh Wright’s excellent paper on Evidence-Based Antitrust. In essence, Wright makes the point that antitrust enforcement should be based on existing empirical data and on robust economic analysis. In contrast, antitrust enforcement should stray from predictive analysis, and avoid using untested economic models, brought by parties and elaborated by economic consultants in the context of particular cases.

This paper is refreshing. It illustrates the profound intellectual schism that separates antitrust enforcement in the US and the EU. For a number of years, I had been leaning with the view that both sides of the Atlantic had achieved convergence . But Wright’s arguments that antitrust enforcers should display”humility” and avoid a too predictive approach to antitrust enforcement shines a bright light on the arrogant resilience, in the EU, of the object-based enforcement model. A must read.

Written by Nicolas Petit

9 April 2013 at 11:04 am

Posted in Uncategorized

2 Responses

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  1. So consumers freely and knowingly choosing to use Google’s services would be a problem?

    I understand that you’re not a fan of the behavioral economics logic underpinning the Microsoft WMP and IE cases. In this case I would argue that the issue of consumer reaction is even less obvious: consumers don’t have a default application installed, and they don’t have to invest time, memory space of money in downloading competing applications. The force of inertia should therefore be weaker. It’s purely a matter of choice, and the remedy would aim at ensuring that those choices are even more informed. Or am I missing something?

    Alfonso Lamadrid

    10 April 2013 at 1:53 am

  2. Let me put this more clearly: my point is that this proposed remedy will likely exacerbate the “herd” factor, which is precisely what the Commission seeks to get rid off.

    The only common feat that I see with the WMP and IE cases is that it shows how complex it is to devise remedies in such markets.

    Nicolas Petit

    10 April 2013 at 9:51 am


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