The EU Searches for a Monopolist, Finds Google

by on March 1, 2010 · 1 comment

Today’s The Wall Street Journal Europe published an editorial that Alberto Mingardi of Istituto Bruno Leoni and I penned about the competition complaints brought against Google in Europe.

The EU Searches for a Monopolist, Finds Google

If policy makers set the terms in a primitive year like 2010, nobody will have to respond to Google.

By WAYNE CREWS AND ALBERTO MINGARDI

Google isn’t a monopoly now, but the more it tries to become one, the better it will be for us all. Competition works in this way: Capitalist enterprises strive to gain in profits and market share. In turn, competitors are forced to respond by trying to improve their offerings. Innovation is the healthy output of this competitive game. The European Commission, while pondering complaints against the Internet search giant, might consider this point.

Google has been challenged by a German, a British, and a French Web site, for its dominant position in the market for Web search and online advertisement. The U.S. search engine is said to be imposing difficult terms and conditions on competitors and partners, who are now calling regulators into action. Google’s search algorithm is accused of being “biased” by business partners and competing publishers alike.

Before resorting to the old commandments of antitrust, we should consider that the Internet world is still largely impervious and unknown to anybody—including regulators. We are in terra incognita, and nobody knows the likely evolution of the market. But one thing is for sure: Online search can’t evolve properly if it’s improperly regulated—no matter the stage of evolution.

While the exact form of “remedy” is anyone’s guess depending upon the petitioner and the whims of regulators, intervention would basically mean some kind of shortcut for Google’s competitors, such as regulatory guarantees of future search ranking or placement; limitations on future Google services that could undermine an emerging rival; oversight of certain pricing practices or advertising practices; coerced changes to the Google interface; or bureaucratic oversight of paid-vs.-unpaid search results. The net effect would be to rescue Google’s competitors from the requirement to compete, and to give them access to Google customers whom they didn’t conquer on their own merits.

Today’s search-engine capabilities help break down information bottlenecks, allowing ever-increasing access to countless HD-equipped Webcam broadcasters world-wide. Public policy is often schizophrenic, but using the language of monopoly to attack information services and communications is particularly perverse. Speech is the core freedom, and today’s competitive technologies, including search, vastly extend it for us all.

Google isn’t targeted by regulators in Brussels alone. It enjoys declining popularity in many capitals, from Beijing to Washington D.C. In the U.S., conservatives have been complaining about bias in Google’s search results, such as a purported deference toward Al Gore.

But so what? Let Google be the MSNBC of search engines. Somebody else can be Fox if we need it. It remains the case, as in the mid-1990s when Sergey Brin and Larry Page got started, that if you create a search engine, nobody can stop you. Nobody can stop Microsoft from creating one either. Oh, wait…

Everyone seems to think Google is theirs to regulate, that they have more of a right to prescribe Google’s algorithm or business policies than Google itself does.

In search, as in the media itself, competing biases are good; pretended or forced objectivity, not so good. The decisions about how to rank search or what to reveal in a search are properly a matter of Google’s own free speech, and it is not anyone else’s place or right to decide. Differences of opinion and preferences about rankings are properly to be dealt with by competition from Microsoft/Yahoo; the likes of Teoma, the “theory of everything” Steven Wolfram engine; or something we don’t know about yet being hatched in a dorm room. Other pressures include consumer demands, and Google’s own business partners. Monopoly leads to reduced demand, and if Google truly “monopolizes,” then its own business partners are hurt by its behavior and will defect.

The policy environment to foster is one that maximizes the possibility of rival search technologies emerging in response to inappropriate bias. Today’s approach is the opposite, to create a stunted search environment because everyone’s afraid or reluctant to create an aggressive new search algorithm—why invest, if marvelous success means regulation and confiscation? The search capabilities needed for tomorrow’s Internet won’t come to be if policy makers set the terms in a primitive year like 2010 and nobody has to respond to Google.

Various types of search already optimize for various types of biased results (or unbiased ones—bias or no-bias can itself be a competitive feature and will be unless regulators undermine the process). As centuries of experience with freedom of speech tell us, biases in information services are perfectly appropriate, perhaps even necessary in free societies. If regulators do not know this, they need to be removed from their jobs.

If a formal European Commission inquiry is set to start, it certainly needs to be a short one. Would that global recessions selectively dis-employed publicly funded regulators and academics who make a living by tearing down what others have created. Regulators rarely bring anything to the table but an appetite.

Mr. Crews is vice president for policy at the Competitive Enterprise Institute in Washington, D.C. Mr. Mingardi is director general of Istituto Bruno Leoni in Milan.

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Wayne Crews / Wayne Crews is vice president for policy and director of technology studies at the Competitive Enterprise Institute, and an adjunct scholar at the Cato Institute. He started the Dysfunction Network as a side project. He is a dad of four. Wayne's work explores the impact of government regulation of private activity: Areas of interest include antitrust and competition policy, safety and environmental issues, and information age concerns like privacy, online security, broadband policy, and intellectual property. Wayne is the author of the yearly report, Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State, and he co-authored the recent reports This Liberal Congress Went to Market? a Bipartisan Policy Agenda for the 110th Congress and Communications without Commissions: A National Plan for Reforming Telecom Regulation. Prior to the assorted government bailouts now taking place, he wrote the report Still Stimulating Like It’s 1999: Time to Rethink Bipartisan Collusion on Economic Stimulus Packages. Wayne is co-editor of the books Who Rules the Net: Internet Governance and Jurisdiction (2003) and Copy Fights: The Future of Intellectual Property In the Information Age (2002). He is co-author of What’s Yours Is Mine: Open Access and the Rise of Infrastructure Socialism (2003), and a contributing author to others. He has published in the Wall Street Journal, Chicago Tribune, Forbes, Communications Lawyer, the International Herald Tribune and others. He has made various TV appearances on Fox, CNN, ABC, CNBC and the Lehrer NewsHour, and his regulatory reform ideas have been featured prominently in such publications as the Washington Post, Forbes and Investor’s Business Daily. He is frequently invited to speak, and has testified before congressional committees on various issues. Earlier Wayne was a legislative aide in the United States Senate to Sen. Phil Gramm, covering regulatory and welfare reform issues. He was an Economist and Policy Analyst at Citizens for a Sound Economy Foundation, and has worked as an economist at the U.S. Food and Drug Administration and as a Research Assistant at the Center for the Study of Public Choice at George Mason University. He holds an M.B.A. from William and Mary and a B.S. from Lander College in Greenwood, South Carolina. He was a candidate for state senate as a libertarian while at Lander.

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