Recent antitrust investigation case study and firm market power analysis

¶ … Antitrust Investigation: Google

It was reported in 2011 that the 'Wall Street Journal' reported that the FTC was preparing a major antitrust investigation into Google's core search advertising business. Specifically stated by the Wall Street Journal was:

"The new FTC investigation . . . will examine fundamental issues relating to Google's core search advertising business, which still accounts for the overwhelming majority of its revenues. Those will include whether Google -- which accounts for around two-thirds of internet searches in the U.S. And more abroad -- unfairly channels users to its own growing network of services at the expense of rivals'." (Schonfeld, 2011, p.1)

It is reported that the issues was that Google "was using its market power 'in search to push consumers to its own services." (Schonfeld, 2011, p.1) Stated as the most prominent example is that of "Google Places, which comes up at the top of search results for pretty much every local search, whether or not it is the best result." (Schonfeld, 2011, p.1)

I. Reasons for Antitrust Suit

According to the Huffington Post "The problem by the Federal Trade Commission, confirmed…will require Google to convince regulators that its closely guarded recipe for search results is designed to give people the best recommendations, not bury links to its rivals." (2011, p.1) The inquiry is such that is reported to be "expected to peer into Google's financial engine: the advertising links tied to the subject of each search request. Some of these commercial messages appear shaded in color, at the top of the search results page, while others are stacked in the right hand column." (Huffington Post, 2011, p.1) According to the Huffington Post "The FTC's investigation threatens to put Google on the same course as nemesis Microsoft, which was the target of a Justice Department lawsuit that began in the 1990s and dragged into the next decade. That case alleged that Microsoft used its dominant Windows operating system to kill competing software makers." (2011, p.1) Proving that Google abused its dominance is reported to involve regulators getting Google to "turn over sensitive documents that it has resisted sharing in the past. And Google probably won't be shy about fighting for the right to adjust its search formula to deliver more useful results to its audience." (Huffington Post, 2011, p.1) Manne (2013) reports that the case against Google "rested on certain assumptions about the functioning of the markets in which Google operates. Because these are tech markets, constantly evolving and complex, most assumptions about the scope of these markets and competitive effects within them are imperfect at best. But there are some attributes of Google's markets -- conveniently left out of the critics' complaints -- that, properly understood, painted a picture for the FTC that undermined the basic, essential elements of an antitrust case against the company." (p.1)

II. Resolution of the Anti-Trust Case Against Google

Manne (2013) reports that there are two major findings now that the investigation has been concluded: (1) the online information market is dynamic and it is a fool's errand to identify the power or significance of any player in these markets based on data available today -- data that is already out of date between the time it is collected and the time it is analyzed; (2) Each development in the market -- whether offered by Google or its competitors and whether facilitated by technological change or shifting consumer preferences -- has presented different, novel and shifting opportunities and challenges for companies interested in attracting eyeballs, selling ad space and data, earning revenue and obtaining market share. To say that Google dominates "search" or "online advertising" missed the mark precisely because there was simply nothing especially antitrust-relevant about either search or online advertising. Because of their own unique products, innovations, data sources, business models, entrepreneurship and organizations, all of these companies have challenged and will continue to challenge the dominant company -- and the dominant paradigm -- in a shifting and evolving range of markets." (p.1)