search, antitrust, and competition policy · search, antitrust, and competition policy frank...

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”?


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


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


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.)


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.


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.


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…


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


Dominant

Horizontal

Search Engine

One Theory for EU Intervention Against Google?

Preferential

Placement

(“Universal Search”) + +

Unassailable

Competitive

Advantage

in Adjacent

Markets

= Discriminatory

Penalties


Dominant

Horizontal

Search Engine

Foundem’s EU Antitrust Complaint

Preferential

Placement


Unassailable

Competitive

Advantage

in Adjacent

Markets

= Discriminatory

Penalties


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


Excluded

from

Search (26th June 2006)

Jan 2006

Jun 2006

Aug 2006

Dec 2009

Jan 2011

Timeline

Sep 2007


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.


Dominant

Horizontal

Search Engine

Thoughts on “Universal Search”

Preferential

Placement


Unassailable

Competitive

Advantage

in Adjacent

Markets

= Discriminatory

Penalties


Shopping, News, Video Results; Keeping Searchers in the Google Ecosystem

Actual Search Results


Traffic to Google Product Search

Google Product Search integrated into Google Universal Search

Data from comScore


Effect on Traffic to UK Competitors

% Change in Visitor Numbers Between Oct 2007 and Oct 2009

Data from comScore


Effect on Traffic to US Competitors

% Change in Visitor Numbers Between Oct 2007 and Oct 2009

Data from comScore


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


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!)


After “whitelisting” on Dec 2nd 2009…

Bing 7

Google 145

Yahoo 1

Rank

Google 6



After “whitelisting” a few weeks later

Bing 7

Google 145

Yahoo 1

Rank

Google 1



• 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.


• 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?


search, antitrust, and competition policy · search, antitrust, and competition policy frank...

Documents