Search, Antitrust, and Competition Policy · Search, Antitrust, and Competition Policy Frank Pasquale Schering-Plough Professor in Health Care Regulation and Enforcement, Seton Hall
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Search, Antitrust, and Competition Policy
Frank Pasquale Schering-Plough Professor in Health Care Regulation and
Enforcement, Seton Hall Law Affiliate Fellow, Yale Information Society Project
GMU Law Review Conference 2012
Importance of Search
• “Among the many new information technologies that are reshaping work and daily life, perhaps none are more empowering than the new technologies of search. . . .
• “Whereas the steam engine, the electrical turbine, the internal combustion engine, and the jet engine propelled the industrial economy, search engines power the information economy.” – David Stark
January 26, 2012 Frank Pasquale, Seton Hall Law
A Real “Layer” of Internet or Just one of Many Functions?
• Self-portrayal, up to mid-aughts: – efficient, scientific, and neutral methods of organizing
the world’s information – Directory, leading users to best other sites
• Emerging trends – Search engines as media companies – Steering users to own properties
• Rival normative accounts – Like rating agencies or AAA firms using old reputation
to mislead consumers – Innovators reorganizing information to better serve
consumers • Query: what is missing in identity of user as “consumer”?
January 26, 2012 Frank Pasquale, Seton Hall Law
Worries About Search
• As necessary as physical carriage?
– Nunziato, Virtual Freedom
– Pasquale, Internet Nondiscrimination Principles
• Spread from general purpose to specialized search
– Net neutrality analogy
• Need ISP to get to internet; need general search to find specialized search
January 26, 2012 Frank Pasquale, Seton Hall Law
Why Very Large Market Share by One Firm?
Natural Monopoly Story
• Each current search makes later searches more effective – Pervasive personalization
– Massive data advantage is self-reinforcing
• One-stop shopping in two-sided market – Analogy: dating site
Monopolization Story
• Edelman on data portability
• If you accept that specialized search is separate market: – Dominant SE can promote its
own properties to the top of results
– Opaque ranking rules and ad sales can make it hard for specialized search to break through in general purpose searches
– Baidu allegation: tie ads to organic ranking
January 26, 2012 Frank Pasquale, Seton Hall Law
Search Engines As An Internet Gateway
Internet-based businesses can depend on search engines for a substantial proportion of their traffic and revenues. (Foundation of “Foundem” Antitrust complaint against Google in EU; next several slides use graphics from a Foundem presentation.)
January 26, 2012 Frank Pasquale, Seton Hall Law
Search Engines As An Internet Gateway
Search:
90% in UK
95% in EU
85% Globally
Search Advertising:
80-95% Globally
Some sites can receive a majority of traffic from Google.
January 26, 2012 Frank Pasquale, Seton Hall Law
Possible Abuse of Gateway Status
Search:
90% in UK
95% in EU
85% Globally
Search Advertising:
80-95% Globally
travel jobs insurance Coming soon? ... ... everything!
Their concern “is about google leveraging power to steer traffic to Google’s own services” Compare “Maytag refrigerator electricity” example from Tim Wu’s work on net neutrality.
Foundem “not upset about horizontal search or monopoly maintenance per se”
General purpose search engines and social networks are sites that don’t rely on other sites for traffic, usually.
January 26, 2012 Frank Pasquale, Seton Hall Law
How Much of the Information Search Landscape Should One Company Control?
• Artificial Mkt Definition?
– It seems unfair to say to Google: you can only dominate general purpose search
But…. 1. What do we think if one
dominant search engine did penalize vertical rivals repeatedly?
2. Does that SE get to (gradually) dominate price comparison, online video, digital mapping, news aggregation, travel search, job search, property search, financial search, insurance search, book search, etc.?
3. Is there any limit to “naturalizing” innovation in a “fluid” field here? Would similar arguments for vertical integration and laissez-faire reverse Microsoft? January 26, 2012 Frank Pasquale, Seton Hall Law
Market Definition?
• Market definitions are contestable here.
• The great debate in antitrust and high-tech industries
– Are courts and agencies too slow to deal with rapidly changing market?
– Or will laissez-faire allow consolidation by an unaccountable behemoth?
• If concerns linger…
January 26, 2012 Frank Pasquale, Seton Hall Law
Antitrust or Regulation?
The Case for Regulation
• Natural monopoly – More data makes every
product better
– Infrastructure of real-time mapping of entire internet too costly to be done 2, 3, 4 times over
• Bing losing $2B per year
• Quaero abandoned
– Need basic monitoring
• Transparency
• Publicity regarding misuses of a credence good
The Case for Antitrust
• AAI Concerns re ITA
• First Amendment will stymie regulation – Lorain Journal
• Vision of competing start-ups
January 26, 2012 Frank Pasquale, Seton Hall Law
Dominant
Horizontal
Search Engine
One Theory for EU Intervention Against Google?
Preferential
Placement
(“Universal Search”) + +
Unassailable
Competitive
Advantage
in Adjacent
Markets
= Discriminatory
Penalties
January 26, 2012 Frank Pasquale, Seton Hall Law
Dominant
Horizontal
Search Engine
Foundem’s EU Antitrust Complaint
Preferential
Placement
(“Universal Search”) + +
Unassailable
Competitive
Advantage
in Adjacent
Markets
= Discriminatory
Penalties
January 26, 2012 Frank Pasquale, Seton Hall Law
Search Penalties
• Foundem: “Google has always used exclusionary penalties, but these used to be reserved for spam, and sites caught cheating Google’s algorithms”
• Query, ala Crane: should this always be the case?
Google Search Rank
Time 1
Penalty Start
Penalty
January 26, 2012 Frank Pasquale, Seton Hall Law
Excluded
from
Search (26th June 2006)
Jan 2006
Jun 2006
Aug 2006
Dec 2009
Jan 2011
Timeline
Sep 2007
January 26, 2012 Frank Pasquale, Seton Hall Law
Remedies?
• Regarding Google’s Penalties:
– More transparency about the existence and rationale for these penalties
– More effective and transparent appeals process
• What to do About Google and Doubleclick? Hold Google to Its Word with Some Extreme Factfinding About Privacy Practices, Open Internet Policy Blog, Oct. 8, 2007.
January 26, 2012 Frank Pasquale, Seton Hall Law
Dominant
Horizontal
Search Engine
Thoughts on “Universal Search”
Preferential
Placement
(“Universal Search”) + +
Unassailable
Competitive
Advantage
in Adjacent
Markets
= Discriminatory
Penalties
January 26, 2012 Frank Pasquale, Seton Hall Law
Shopping, News, Video Results; Keeping Searchers in the Google Ecosystem
Actual Search Results
January 26, 2012 Frank Pasquale, Seton Hall Law
Traffic to Google Product Search
Google Product Search integrated into Google Universal Search
Data from comScore
January 26, 2012 Frank Pasquale, Seton Hall Law
Effect on Traffic to UK Competitors
% Change in Visitor Numbers Between Oct 2007 and Oct 2009
Data from comScore
January 26, 2012 Frank Pasquale, Seton Hall Law
Effect on Traffic to US Competitors
% Change in Visitor Numbers Between Oct 2007 and Oct 2009
Data from comScore
January 26, 2012 Frank Pasquale, Seton Hall Law
Remedies?
• Transparency: Clear labelling of Google’s own services when displayed within/alongside actual search results
– Compare Navx, where Google proposed a settlement of the case, which included establishing a set of published standards to increase transparency and clarify Google’s advertising standards.
• (?) Algorithmic Intervention
– No discrimination in favor of Google’s own services
– Raises some First Amendment Issues
January 26, 2012 Frank Pasquale, Seton Hall Law
Trouble for Google with the European Commission
-The EU Competition Commission has also been investigating Google for potential antitrust violations since November 2010. - The EC Commissioner recently announced that the EC will determine by March whether to file a complaint against Google for its practice, which is a quicker timeline than originally anticipated.
-The investigation began in reaction to claims from small businesses, which alleged that Google moved their sites down in search results. The European Commission also looked into whether Google gave its own service preferential treatment in search results.
-If Google is found to have violated European antitrust laws, the Commission has the authority to fine Google up to 10% of its annual revenue, which totaled $23 billion in 2009. January 26, 2012 Frank Pasquale, Seton Hall Law
Search Penalty Irrespective of Relevance Example 1: Foundem
Penalised sites are excluded when they are one of hundreds of relevant results; but they are also often excluded when they are the only relevant result, e.g. for the query “compare prices shoei xr-1000”
Bing 7
Google 145
Yahoo 1
Rank
(Page 14!)
January 26, 2012 Frank Pasquale, Seton Hall Law
After “whitelisting” on Dec 2nd 2009…
Bing 7
Google 145
Yahoo 1
Rank
Google 6
Search Penalty Irrespective of Relevance Example 1: Foundem
January 26, 2012 Frank Pasquale, Seton Hall Law
After “whitelisting” a few weeks later
Bing 7
Google 145
Yahoo 1
Rank
Google 1
Search Penalty Irrespective of Relevance Example 1: Foundem
January 26, 2012 Frank Pasquale, Seton Hall Law
• Around 2006, Google started to introduce a new kind of algorithmic penalty
• Targeted at sites:
– with a “lack of original content” (a.k.a. “copied from others”), and
– whose “primary purpose is to drive traffic to other sites”
• These characteristics describe a small number of Spam sites...
Vertical-Search-Targeted Penalties?
TOWN
Spam
Lots of content copied wholesale from other sites to serve as search engine fodder and to hang Google Ads on and monetise.
January 26, 2012 Frank Pasquale, Seton Hall Law
• But, they are defining characteristics of ALL search services...
– Search services are not intended to produce “original content”, they are intended to efficiently organise, search and summarise the content of others
– A key performance metric for a search service is often how quickly and efficiently it can deliver users to other sites – the sites containing the information, products, or services they are looking for
travel jobs property
...Including Google’s own...
Vertical-Search-Targeted Penalties?
January 26, 2012 Frank Pasquale, Seton Hall Law
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