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Google, Monopoly and Antitrust 101

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Stephen D. Houck served as lead trial counsel for the 20 state plaintiffs in the government's lawsuit against Microsoft while he was chief of the Antitrust Bureau for the New York State Attorney General's Office from 1995 to 1999. He is an adviser to Google.

At the recent Senate antitrust subcommittee hearing on Google, which featured testimony by Google Chairman Eric Schimidt, followed by a panel composed primarily of representatives of Google's competitors, the complaints about Google were far removed from what the antitrust laws require for a monopolization case: 1) the existence of monopoly power and 2) predatory conduct undertaken to attain or maintain that power.

Mr. Schmidt was pressed repeatedly to concede that Google has a monopoly simply because of its share of the market. In fact, Google faces competition from a variety of means of finding information on the Internet, including general search engines, specialized search engines, social networks like Facebook and Twitter, and mobile applications. Calculation of market shares depends on how a market is defined, which would be a difficult task here given the multiplicity of options available to consumers.

But definitional issues aside, a high market share alone is not what the antitrust laws mean by monopoly power. Indeed, a high market share is what companies strive for and is their perfectly legal reward for making products that consumers find attractive. As courts have often said, marketplace success based on "skill, foresight and industry" is precisely what the antitrust laws are supposed to encourage. It doesn't take a rocket scientist -- or an antitrust lawyer -- to recognize that Google's remarkable success is due to its innovative products delivered at no cost to consumers who find them invaluable for finding information on the Internet.

Moreover, a high market share is of little antitrust concern unless it is durable -- i.e., it persists over time and is protected by barriers that insulate it from competition. For example, evidence in the Microsoft case, on which I worked as a government prosecutor, showed that consumers with Windows-based applications found it difficult and costly to switch to non-Windows operating systems, even ones they regarded as superior. A lawyer for Google's competitors argued at the hearings that Google is protected by a similar barrier -- the popularity of its products which yields data that enables Google's engineers to make its products even better. But product improvement is a good thing, not an illegal barrier to competition, and nothing prevents consumers from switching to another search engine if they don't like Google's results.

It is noteworthy that Google's share of the market (however defined) has fluctuated over time and is nothing like Microsoft's 90 percent or greater share of the PC operating system market which has endured for decades. In short, neither of the traditional antitrust concerns about the existence of monopoly power -- that it permits a monopolist to increase prices or reduce output without regard for competition -- seems to apply to Google's practices which were the subject of competitors' complaints at the hearings.

Finally, and most importantly, the conduct complained of by Google's competitors is not what the antitrust laws mean by predatory conduct -- i.e, conduct undertaken to exclude competitors and lacking any legitimate purpose. Examples of such conduct from the Microsoft case include technological ties that had no purpose except to make it difficult for consumers to get rid of Microsoft products they did not want, and Microsoft's threats to use its monopoly power to punish companies -- even ones as large as Apple and IBM -- for making non-Microsoft products available to consumers. In other words, the evil of what Microsoft did was to use its monopoly power to squelch competition rather than to compete on the merits. Google's practices, by contrast, do not prevent consumers from switching to rival products. On the contrary, consumers can switch to competing search engines or other websites easily, instantaneously and cost-free.

To be sure, Google does make numerous changes to its products to try to stay one step ahead of its rivals. In fact, the Senate hearings left little doubt that what really underlies competitors' complaints about Google is their unhappiness about Google's constant effort to make its products better -- which they understandably don't like, but which is the essence of competition. Ironically, Google's perceived need to continually improve its products is one of the best indicators that the market is functioning well and that government intervention is not only unnecessary, but is likely to distort innovation and impede consumer choice.

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