Earlier this month, news reports suggested that Federal Trade Commission staff were preparing to recommend a lawsuit against Google resulting from its long-running antitrust investigation. At this point, it is unclear whether the FTC is about to file a formal complaint or is angling for a settlement.
My organization, CCIA, has decades of expertise in high-profile antitrust cases, and has spoken up in the past when serious antitrust abuses have occurred in the high-tech space. Competition is vital for innovation, which is why we have always supported vigorous antitrust enforcement activity when competition was in jeopardy.
To preserve the effectiveness of antitrust as a tool to protect competition it is critically important to protect the reputation and vitality of antitrust law and its institutions. Antitrust supporters are frequently under attack.
As FTC Chairman Leibowitz has noted, the “cramped reading of the Sherman Act that we see in the federal courts today” has hampered the type of enforcement that might be desirable. It is thus important for the FTC to choose its cases carefully and wisely. Poorly chosen cases can lead to high-profile losses that — through both negative PR and the further “cramping” of antitrust jurisprudence by the courts — both psychologically and substantively damage the institutions and effectiveness of antitrust.
This is especially true if the Commission chooses to proceed under Section 5 of the FTC Act, which allows the Commission to take action against “unfair and deceptive” trade practices that may fall outside the bounds of traditional antitrust law. Unfortunately for the Commission, the courts have not been kind as of late when the agency has tried to enforce the ambiguous statute: it has been nearly a half-century since the agency last won a pure Section 5 case.
Some careful evolution of Section 5 may be appropriate, especially in complicated tech markets where the balance between coordination and competition is often blurred. But attempts to massively expand that authority carries great risks that a potentially useful tool may be crippled and unavailable to tackle discrete but important issues not well dealt with by the traditional antitrust statutes — such as the abuse of the standardization process by patent trolls.
Having no anchor in antitrust law, an antitrust case targeting Google’s search practices would actually have a chilling effect on ongoing innovation and cross-platform competition. The search industry is constantly evolving, particularly in the mobile arena, where Google competes against mobile apps like Yelp and IMDB as well as Apple’s Siri for consumers’ search queries.
Major companies like Microsoft, Amazon, and Facebook all compete (or will soon compete) with Google in search–and venture capitalists are still investing in new startups. If Google really had “monopoly power” in the economic sense, then this dynamic competition in the space would not exist.
While Google may have significant market share today, there is no guarantee that will be the case in the months and years to come. Because of the open, freewheeling and global nature of the Internet, the best product or service often experiences rapid adoption and gains market share quickly.
But unlike brick-and-mortar markets, that market share is fleeting for the same reasons that it was established so quickly to begin with.
Barriers to entry are also extremely low on the Internet and markets are notoriously hard to define and frequently in flux.
Small, medium and large companies are all readjusting strategies to enter each other’s markets and consumers are the beneficiaries. For example, MySpace controlled 75% of the social media market less than five years ago. Now, Facebook has over a billion daily users and promises to harness its personalized data to revolutionize the search industry (For its part, Google also is aggressively moving into the social media market).
A core principle of antitrust law is proving consumer harm. Here, the FTC’s case against Google is practically nonexistent. Google’s success in search does not arise from a lack of options. Consumers are a mouse-click away from a wide variety of competitors.
Instead, users have voted with their browser, choosing Google because they have concluded that — at this point in time — it provides the best results in the quickest way possible, just as they concluded in 2007 that MySpace was the social hub of the Internet.
In fact, the FTC’s investigation was not initiated due to testimonials of consumer harm, but because of complaints from competitors. Instead of out-innovating Google, companies have sought to manipulate the political environment to slow down a competitor when they should be focused on competing on the merits of their products.
This “rent seeking” behavior, as described by Adam Smith among others, is perhaps one of the biggest economic wrongs a company can commit–as it focuses on short-circuiting the efficiency enhancing, social welfare generating dynamics of free market competition, and it makes the government an accomplice.
If the FTC were to take the side of Google’s competitors over the views of actual consumers, this would not only run afoul of one of the key tenets of antitrust law but also stifle the dynamism that has been the trademark of the Internet since its earliest days. Major antitrust cases need to be based on solid factual records of conduct seriously harmful to consumers, not upon the accumulated rhetorical and PR campaigns of powerful, politically savvy competitors.
Instead of attacking exemplary American technology companies while our economy recovers from a recession, Washington must address the real systemic problems that undercut our current capitalist system and undermining growth and innovation.
Reforming high-skilled immigration policy, giving 21st century digital goods and services the same protections under international trade law as their tangible 20th century cousins, fostering sensible copyright policies that comport with the realities of an Internet age, and moving forward on meaningful reform of a dysfunctional patent system are all examples of policies that need to be tackled to maintain our status as the world’s Internet and innovation leader.
Additionally, the FTC and consumers would be well served if the agency focused on espousing a universal, platform-neutral enforcement strategy centered around disclosure. Such an approach, with clearly articulated guidelines and penalties, would provide guidance and certainty to the business community while ensuring consumers are empowered to make well-informed choices in a hypercompetitive marketplace.
The agency should focus on potentially deceptive behaviors that are universal across platforms and media. An approach founded narrowly on “social media,” “mobile applications,” or “search” will become quickly outdated as online markets transform quickly. This would be a more meaningful way for the FTC to fulfill its mission of protecting consumers.
There is no doubt that instances arise when regulators must take legal action, particularly when consumers are being deceived or mistreated. Although Google is a giant in the technology space, there is little to suggest that the company’s attempts to evolve their search platform represent such an occasion.
Big cases make headlines, but they also affect innovation and the future of entire industries. An even greater legacy for the FTC may be to acknowledge this fact, and preserve the integrity of antitrust laws for when their use is truly warranted.
Ed Black is the President & CEO of the Computer & Communications Industry Association.