Google’s ‘monopoly’. It’s the market, baby!

Luca Minola, Insituto Bruno Leoni // 07.12.2016

The long-standing saga of the European Union’s battle against Google recently saw the addition of a new chapter. A few days ago an open letter by Kent Walker – Google Senior Vice President and General Counsel – was published in order to defend Mountain View from the unfair competition charges leveled by Brussels.

 

Both in 2010 and 2015 the American internet giant was closely scrutinized by the EU Directorate-General for Competition, currently chaired by Margrethe Vestager, to investigate its alleged dominant position in the digital economy market. The main charges are two-fold. According to the Commission, Google systematically facilitates its comparative buying products in the generic search results and stifles the development of alternative operating systems to Google Android, by signing exclusive agreements with tablets and smartphones producers.

 

Without getting into the specific issues that led to the two investigations (for an in-depth analysis, see the paper by Istituto Bruno Leoni “EU Antitrust Vs. Google”), we can outline a number of reasons to conclude that punishing Google is completely wrong.

 

Instead of protecting the consumers’ freedom of choice, the Commission’s investigation of Google seems aimed at protecting its competitors.

Google’s alleged dominant position is the result of a steady technological and digital innovation and, above all, the outcome of consumers’ preferences. Indeed, it is individuals and their choices which determine who is the real winner in market competition.

 

The reasons that drive many consumers to use Google are many. For instance, those who use its price comparison engine, prefer it to other services, because it allows them to avoid intermediaries – reducing search time – and thus to get more information faster.

 

However, this situation is neither stable nor guaranteed over time. As opposed to the Commission’s contention, the digital services market is a dynamic and developing one.

 

Experience has shown us that, in order to break alleged monopolies, it is not necessary to have specific regulations – which in fact tend to create or sustain them – rather than an open environment where competition encourages private investments, innovation, creativity and entrepreneurship.

 

One example of this is Windows, whose position was considered virtually unassailable up until few years ago. The alleged Microsoft monopoly has been broken by the success of actors – Google itself included – that have completely redefined the supply and demand conditions of the market.

 

Finally, picturing Google as a single, leading, and undisputed actor means taking into account just a small part of the digital economy, where in fact the market appears to be virtually boundless and tends to spread to areas which are completely ignored by the Commission. Search engines, merchant platforms, comparison sites are not the only competitors of Google, but, above all, these can be seen in the specific apps that the consumer decides to install on his smartphone or tablet.

 

If Google has obtained a dominant position in the market, it is because it has earned the confidence of its consumers by offering steady reliability in its services and by creating a familiar environment, thus encouraging users to choose it over competitors offering similar services.

EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).