An antitrust case against Google: a threat to free competition — VOICES for REASON

Will Google follow in Microsoft’s footsteps and become the target of antitrust prosecution? In a recent article on the influential and popular blog TechCrunch, Wharton professor Eric Clemons argues that it could-and should.

Clemons’s argument, despite its considerable length and its use of multiple case studies and technical diagrams, can be summed up rather straightforwardly: Google is abusing the “market power” gained from its dominant search engine–by “overcharging” advertisers who want access to its search engine’s users. Clemons flatly asserts that “Google enjoys monopoly power over corporations that participate in its keyword auctions.” And: “Google is abusing its monopoly position by overcharging corporations for access to consumers.”

All of this talk of Google’s power makes Google sound like a menace to competition and customers. But let’s take a closer look at this power, to see where it comes from, and whether it’s good or bad

Through incredible technical innovation and brilliant management and marketing, Google has created by far the most popular search engine on the planet, earning hundreds of millions of users. Through additional innovation, it has created the AdSense program, which has enabled millions to engage in highly profitable advertising to the user-base Google brought together. Because Google offers customers an unmatched advertising audience, it has the power to charge higher prices and demand more favorable terms than, say, a less-popular search engine can. For example, Google holds expensive auctions for top keywords. Or, to take another bugaboo of Google opponents, the company has an at-will customer policy that allows them to drop any customer at any time (such as the many outfits that have tried to defraud Google) without the onerous legal obligation to explain themselves case-by-case.

Google’s prices and terms, denigrated as “overcharging” and “unfair,” are in fact earned. And Google’s power to demand them exists only insofar as it continues to offer superior value to its competitors. The second AdSense stops making financial sense to advertisers, Google will see its so-called monopoly position disappear. Clemons and others note that it will be hard for a competitor to overtake Google in search and advertising–but that just proves how much value Google brings to the table relative to anyone else. This is grounds for admiration for being a superior competitor–not prosecution for being “anticompetitive.”

So long as Google has no power to force consumers to use its products and no power to prevent competitors from offering competing products of their own, it can pose no threat to the competitive process.

There is, however, one player in today’s market that can thwart competition: the government. By using the vast and arbitrary political power given to it by antitrust law, the government can forcibly control successful companies like Google and Microsoft, telling them what products they can sell, what markets they can enter, what prices they can charge. Any superior company can be stopped in its tracks because some bureaucrat, company, or academic declares its voluntary prices too high, its voluntary terms too onerous–even, to take another of Clemons’s accusations against Google, that its stable of free products is too large!

When the government can come in and claim that the outcome of a free, competitive process isn’t to its liking, competition is gutted and injustice is served. In the case of Google, that may mean torture by antitrust prosecution. Google famously encourages employees to devote 20% of their time to creative projects of their own choosing. An antitrust case could effectively force much of that time and energy, especially for top performers, to be devoted to convincing the Department of Justice that Google did not engage in “unfair competition” or some other undefined antitrust term. 

The foundation of free competition is individual rights, especially the right of business owners to use their property as they choose, so long as they do not resort to force or fraud. We should recognize that companies have a right to offer the products and prices of their choosing, and others have a right to deal with them or not. Period.

Unfortunately, since the Microsoft case, in which the company was prosecuted for the sin of adding a free web browser to its wildly successful operating system, freedom has been losing ground in the computer and software industries, once the freest industries in the country. In recent years, competition has been perverted by an embarrassing series of skirmishes in which industry leaders like Google and Microsoft defend their own dominance as being earned and beneficial, but declare that the dominance of others is “anticompetitive” and in need of government prosecution. But it’s not too late for someone to stand up on principle. So Google, Microsoft, and everyone else: “Don’t be evil.” Stand up for true freedom of competition in high-tech.