By Geoffrey Manne and Berin Szoka
Back in September, the Senate Judiciary Committee’s Antitrust Subcommittee held a hearing on “The Power of Google: Serving Consumers or Threatening Competition?” Given the harsh questioning from the Subcommittee’s Chairman Herb Kohl (D-WI) and Ranking Member Mike Lee (R-UT), no one should have been surprised by the letter they sent yesterday to the Federal Trade Commission asking for a “thorough investigation” of the company. At least this time the danger is somewhat limited: by calling for the FTC to investigate Google, the senators are thus urging the agency to do . . . exactly what it’s already doing.
So one must wonder about the real aim of the letter. Unfortunately, the goal does not appear to be to offer an objective appraisal of the complex issues intended to be addressed at the hearing. That’s disappointing (though hardly surprising) and underscores what we noted at the time of the hearing: There’s something backward about seeing a company hauled before a hostile congressional panel and asked to defend itself, rather than its self-appointed prosecutors being asked to defend their case.
Senators Kohl and Lee insist that they take no position on the legality of Google’s actions, but their lopsided characterization of the issues in the letter—and the fact that the FTC is already doing what they purport to desire as the sole outcome of the letter!—leaves little room for doubt about their aim: to put political pressure on the FTC not merely to investigate, but to reach a particular conclusion and bring a case in court (or simply to ratchet up public pressure from its bully pulpit). Continue reading →
[I am participating in an online “debate” at the American Constitution Society with Professor Ben Edelman. The debate consists of an opening statement and concluding responses. Professor Edelman’s opening statement is here. I have also cross-posted the opening statement at Truthonthemarket and Tech Liberation Front. This is my closing statement, which is also cross-posted at Truthonthemarket.]
Professor Edelman’s opening post does little to support his case. Instead, it reflects the same retrograde antitrust I criticized in my first post.
Edelman’s understanding of antitrust law and economics appears firmly rooted in the 1960s approach to antitrust in which enforcement agencies, courts, and economists vigorously attacked novel business arrangements without regard to their impact on consumers. Judge Learned Hand’s infamous passage in the Alcoa decision comes to mind as an exemplar of antitrust’s bad old days when the antitrust laws demanded that successful firms forego opportunities to satisfy consumer demand. Hand wrote:
we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organization, having the advantage of experience, trade connections and the elite of personnel.
Antitrust has come a long way since then. By way of contrast, today’s antitrust analysis of alleged exclusionary conduct begins with (ironically enough) the U.S. v. Microsoft decision. Microsoft emphasizes the difficulty of distinguishing effective competition from exclusionary conduct; but it also firmly places “consumer welfare” as the lodestar of the modern approach to antitrust:
Continue reading →
[I am participating in an online “debate” at the American Constitution Society with Professor Ben Edelman. The debate consists of an opening statement and concluding responses. Professor Edelman’s opening statement is here. I have also cross-posted this opening statement at Truthonthemarket.]
The theoretical antitrust case against Google reflects a troubling disconnect between the state of our technology and the state of our antitrust economics. Google’s is a 2011 high tech market being condemned by 1960s economics. Of primary concern (although there are a lot of things to be concerned about, and my paper with Geoffrey Manne, “If Search Neutrality Is the Answer, What’s the Question?,” canvasses the problems in much more detail) is the treatment of so-called search bias (whereby Google’s ownership and alleged preference for its own content relative to rivals’ is claimed to be anticompetitive) and the outsized importance given to complaints by competitors and individual web pages rather than consumer welfare in condemning this bias.
The recent political theater in the Senate’s hearings on Google displayed these problems prominently, with the first half of the hearing dedicated to Senators questioning Google’s Eric Schmidt about search bias and the second half dedicated to testimony from and about competitors and individual websites allegedly harmed by Google. Very little, if any, attention was paid to the underlying economics of search technology, consumer preferences, and the ultimate impact of differentiation in search rankings upon consumers.
So what is the alleged problem? Well, in the first place, the claim is that there is bias. Proving that bias exists — that Google favors its own maps over MapQuest’s, for example — would be a necessary precondition for proving that the conduct causes anticompetitive harm, but let us be clear that the existence of bias alone is not sufficient to show competitive harm, nor is it even particularly interesting, at least viewed through the lens of modern antitrust economics.
Continue reading →
by Berin Szoka & Geoffrey Manne
In advance of today’s Senate Judiciary hearing, “The Power of Google: Serving Consumers or Threatening Competition?,” we’ve assembled a list of fallacies you’re likely to hear, either explicitly or implicitly:
- Competitors, not Competition. Antitrust protects consumer welfare: competition, not competitors. Competitors complain because a practice hurts them, but antitrust asks only whether a practice actually hurts consumers. The two are rarely the same.
- Big Is Bad. Being big (“success”) isn’t illegal. Market share doesn’t necessarily create market power. And even where market power does exist, antitrust punishes only its abuse.
- Burden-Shifting. Google, like any defendant, is presumed innocent until proven guilty. So Google’s critics bear the burden of proving both that Google has market power and that it has abused that power to the detriment of consumers. Yet, ironically, it’s Google at the table defending itself rather than the antitrust agencies explaining their concerns.
- Ignoring Error Costs. The faster technology moves, the greater the risk of a “false positive” and the more likely “false negatives” are to be mooted by disruptive innovation that unseats incumbents. Thus, error costs counsel caution.
- Waving the Magic Wand. Google’s critics often blithely assume that Google is “smart enough to figure it out” when it comes to implementing, or coping with, a wide range of proposed remedies. But antitrust remedies, like all regulation, must be grounded in technological reality, and we must be realistic about real-world trade-offs.
Continue reading →
Republished from The Mark News
Privacy advocates are attacking Google again, this time for requiring that field-testers of its new, invite-only Google+ social network use “the names they commonly go by in the real world.” After initially suspending Google+ accounts flagged as pseudonymous, Google has clarified that such users will be given four days to add their real names to their profiles. Users who don’t like the policy can export all data they’ve put into Google+ and leave.
Cyber-sociologist Danah Boyd calls “real name” policies “an authoritarian assertion of power … [by] privileged white Americans … over vulnerable people [like] abuse survivors, activists, LGBT people, women, and young people.” In 2003, she denounced the “Fakester genocide” perpetrated by Friendster, the first major “real name” social network. Facebook later faced similar criticism from her and others for its purge of “Fakebookers” – those using fake names on the popular social network.
Boyd and others are right that anonymity can be “a shield from the tyranny of the majority,” as the U.S. Supreme Court has said while striking down laws requiring speakers to identify themselves. But, like the rest of the First Amendment, the right to anonymous speech limits government, not private actors. In other words, while the First Amendment bars government from forcing us to identify ourselves, those who sign up for Google+ must play by Google’s rules.
Boyd wants to regulate social-media giants as public utilities, but – unlike government bans – we can opt out of these services. Google and Facebook merely offer trusted communities that compete with sites like Twitter, where pseudonyms thrive alongside real names. With over 200 million users, Twitter has met the very demand Boyd cites –but she’s not satisfied.
As a gay activist myself, I’m sympathetic to her privacy concerns. But, as much as I respect Boyd, I find her obsession with “privilege” unhelpful. The engineers who design new social-networking tools may indeed tend to under-value the concerns of particularly privacy-sensitive users or groups. But their critics under-value authenticity’s benefits even more – or simply refuse to acknowledge that privacy is in tension with civility and usability, among other values. Continue reading →
I started to see hints of it last week, but I now believe Google+ is in full stumble-mode over user identity and naming. It looks as though they’ve taken common sense—everyone has one name—and woven it into their terms of service. You can’t use a non-traditional name on Google+. But naming and identity are more complex than that.
In my book, Identity Crisis, I wrote that an identity is a collection of information other people and institutions have about a person. Others use identity information they have to distinguish you from other people (or to group you) in their minds or records. This makes identity a gating mechanism: you can allow people into a part of your life by making them privy to the relevant set of identifiers, or keep them out by denying them that information.
Commonly, people use varied identities to exclude others, for social or professional reasons, such as when they open a social network account in a false name to keep their parents or their students from accessing parts of social life that are not meant for them to see. Sometimes identity is varied for political reasons, such as when an account opens in a pseudonym for the purpose of avoiding reprisal. This is an area where Facebook’s “real names” policy has stepped in it. The further one lives from conventional life in a given society, or the more contrarily to power, the more important it is to control identity.
Identity Woman—who tells her story at the first link above—uses her non-traditional identity in a non-traditional, but completely reasonable, way. It’s just the name that identifies her better to the community she plans to reach on Google+. But Google+ thinks that the name she is supposed to use is the same one her parents gave her, is the same one on her tax return, is the same one on her college degree, is the same one on her driver’s license.
Google+ has smartly replicated the real-world concept of social circles in its “circles” function. But they haven’t replicated real-world practice in terms of naming and identity. Why? Among other reasons, because doing so would allow users to decide which “circle” Google itself is in. Google doesn’t want that. Like Facebook wants to be your super-friend, Google wants to be your super-circle.
Google+ is seeing like a state, vastly simplifying the use of identity on its platform to serve its purposes. That will be a continuing discomfort and an impediment to its fullest success. But the fullest success of social networking will probably not be on an owned platform anyway.
It remains unclear how interested the Federal Trade Commission (FTC) is in bringing a formal antitrust action against Google, but we at least know that inquiries have been made. I suspect these inquires are far more serious than whatever the agency is fishing for with its new Twitter inquires. After all, as I note in my latest Forbes column, “Google isn’t even a teenager yet (having only been founded in September 1998), but the firm’s rise has been meteoric and it has made a long list of enemies in the process. Practically every major player in the Digital Economy… is gunning for Google these days, both in the commercial and political marketplace.” In this sense, it’s not surprising the FTC might take a keen interest in the company with so many competitors complaining.
Still, I just can’t find much merit in an antitrust case against Google since, as I noted in my column, “The firm’s success seems tied to high quality products that users prefer over rival services. Importantly, barriers to entry are low: there’s nothing stopping new entrants from innovating and offering competing online services to match Google.”
Regardless, instead of arguing about the merits of an antitrust action against Google, let’s consider the more interesting, and I think intractable, question of remedies. Here’s what I had to say about that in my Forbes essay: Continue reading →
On the podcast this week, Pamela Samuelson, the Richard M. Sherman Distinguished Professor of Law at Berkeley Law School, discusses her new article in the Columbia Journal of Law & the Arts entitled, Legislative Alternatives to the Google Book Settlement. Samuelson discusses the settlement, which was ultimately rejected, and highlights what she deems to be positive aspects. One aspect includes making out-of-print works available to a broad audience while keeping transaction costs low. Samuelson suggests encompassing these aspects into legislative reform. The goal of such reform would strike a balance that benefits rights holders, as well as the general public, while generating competition through implementation of a licensing scheme.
To keep the conversation around this episode in one place, we’d like to ask you to comment at the web page for this episode on Surprisingly Free. Also, why not subscribe to the podcast on iTunes?
[By Geoffrey Manne & Joshua Wright. Cross-posted at Truth on the Market]
No surprise here. The WSJ announced it was coming yesterday, and today Google publicly acknowledged that it has received subpoenas related to the Commission’s investigation. Amit Singhal of Google acknowledged the FTC subpoenas at the Google Public Policy Blog:
At Google, we’ve always focused on putting the user first. We aim to provide relevant answers as quickly as possible—and our product innovation and engineering talent have delivered results that users seem to like, in a world where the competition is only one click away. Still, we recognize that our success has led to greater scrutiny. Yesterday, we received formal notification from the U.S. Federal Trade Commission that it has begun a review of our business. We respect the FTC’s process and will be working with them (as we have with other agencies) over the coming months to answer questions about Google and our services.
It’s still unclear exactly what the FTC’s concerns are, but we’re clear about where we stand. Since the beginning, we have been guided by the idea that, if we focus on the user, all else will follow. No matter what you’re looking for—buying a movie ticket, finding the best burger nearby, or watching a royal wedding—we want to get you the information you want as quickly as possible. Sometimes the best result is a link to another website. Other times it’s a news article, sports score, stock quote, a video or a map.
It is too early to know the precise details of the FTC’s interest. However, We’ve been discussing various aspects of the investigation here and at TOTM for the last year. Indeed, we’ve written two articles focused upon framing and evaluating a potential antitrust case against Google as well as the misguided attempts to use the antitrust laws to impose “search neutrality.” We’ve also written a number of blog posts on Google and antitrust (see here for an archive).
For now, until more details become available, it strikes us that the following points should be emphasized: Continue reading →
I have an op-ed up at Main Justice on FTC Chairman Leibowitz’ recent comment in response the a question about the FTC’s investigation of Google that the FTC is looking for a “pure Section Five case.” With Main Justice’s permission, the op-ed is re-printed here:
There’s been a lot of chatter around Washington about federal antitrust regulators’ interest in investigating Google, including stories about an apparent tug of war between agencies. But this interest may be motivated by expanding the agencies’ authority, rather than by any legitimate concern about Google’s behavior.
Last month in an interview with Global Competition Review, FTC Chairman Jon Leibowitz was asked whether the agency was “investigating the online search market” and he made this startling revelation:
“What I can say is that one of the commission’s priorities is to find a pure Section Five case under unfair methods of competition. Everyone acknowledges that Congress gave us much more jurisdiction than just antitrust. And I go back to this because at some point if and when, say, a large technology company acknowledges an investigation by the FTC, we can use both our unfair or deceptive acts or practice authority and our unfair methods of competition authority to investigate the same or similar unfair competitive behavior . . . . ”
“Section Five” refers to Section Five of the Federal Trade Commission Act. Exercising its antitrust authority, the FTC can directly enforce the Clayton Act but can enforce the Sherman Act only via the FTC Act, challenging as “unfair methods of competition” conduct that would otherwise violate the Sherman Act. Following Sherman Act jurisprudence, traditionally the FTC has interpreted Section Five to require demonstrable consumer harm to apply.
But more recently the commission—and especially Commissioners Rosch and Leibowitz—has been pursuing an interpretation of Section Five that would give the agency unprecedented and largely-unchecked authority. In particular, the definition of “unfair” competition wouldn’t be confined to the traditional measures–reduction in output or increase in price–but could expand to, well, just about whatever the agency deems improper. Continue reading →