Google Search under Antitrust Scrutiny

The European Commission (“EC”) recently fined Google €2.42 billion, ruling that Google abused its market dominance in one market, internet search, to illegally advantage itself in a separate market, the comparison shopping market.

The EC asserts that Google stifled competition by giving prominent placement to Google Shopping in its search results and demoting rival shopping services. The EC points to a large traffic increase for Google Shopping and a sharp decrease for rivals as evidence that competition was harmed. Google’s appeal contends that the EC has not adequately accounted for competition from merchant platforms like Amazon and has misconstrued its quality-improving efforts as abusive leverage. In the United States, Google is facing similar scrutiny from the Missouri Attorney General and calls for the Federal Trade Commission to reopen its investigation of Google’s search practices.

A key point of contention is whether comparison shopping platforms like Google Shopping, which display advertising from online sellers, constitute a separate market from merchant platforms like Amazon that sell directly to consumers. The EC views them as separate markets. Google argues that Google Shopping is a pro-competitive force in a wider market, allowing smaller online merchants to compete with large sellers like Amazon. Google claims that Amazon’s rapid expansion in EU countries explains the sharp drop in traffic to other shopping websites.

Further complicating antitrust analysis is the difficulty of quantifying consumer harm when Google’s search services are free. The EC emphasizes the loss of choice and future innovation, citing evidence that, by a large margin, consumers click only on the first ten search results and rarely click on results not shown on the first page. Consumer welfare is allegedly harmed because rivals cannot gain enough visibility to thrive. However, the link between the EC’s evidence and alleged consumer harm cannot be assumed. Consumers may directly query other shopping websites in addition to Google. They may well understand that Google has an incentive to promote its own products; Google Shopping results are clearly labelled as advertising. Consumers also may value Google Shopping results if they allow consumers to connect more quickly with what they are seeking.

Analysis of both issues, market definition and the assessment of consumer harm, will be aided by a better understanding of consumer behavior. Behavioral questions include which platforms consumers view as substitutes for different types of search, how many platforms they typically query for a single searches, and whether they expect or value neutral search results.

EI Senior Economist Clarissa A. Yeap specializes in empirical microeconomic analysis in the assessment of liability and damages in antitrust, intellectual property, and class action matters.