In recent years, major international markets have been conducting antitrust investigations against Google. A few days ago, the U.S. Department of Justice filed a civil lawsuit against Google on the ground of monopoly, and have gathered attention from various industries. We would like to briefly intr
By Chiu-Hua Chen and Meng-Chin Tsai, Managing Partner and Senior Associate of Formosan Brothers, Attorneys-at-Law
In recent years, major international markets have been conducting antitrust investigations against Google. A few days ago, the U.S. Department of Justice filed a civil lawsuit against Google on the ground of monopoly, and have gathered attention from various industries. We would like to briefly introduce the background and rationale behind the Google investigation and discuss “what is antitrust law?”
The technical characteristic of “winner takes it all”
Ten years ago, when we used Google, we needed to browsed through a few pages before we could find what we are looking for. But today, such information is very likely to appear on the very first search result page. This is the result of Google’s accumulation of a large amount of data and the gradual optimization of such data. The more users Google has, the better it is to enhance the accuracy of the search results and giving their users a better experience, which attracts more users and forms a virtuous business circle. From the technical characteristics, the search engine market seems to have the innate characteristics of “winner takes it all.” After its market share in the search engine market increases, Google then has the ability to increase its market share in the online ads market and enjoy higher profits from ads.
United States v. Google
The U.S. Department of Justice holds that Google’s practice of paying huge amounts of money to cellphone companies (e.g., Apple) and service providers (e.g., AT&T) to ensure that Google is the default search engine on their phones and equipment is an illegal act to secure its monopoly. In addition, Google owns the Android OS and Android has an exclusive app store, Google Play. The app store sets Google as the default search engine for Google Play is also an illegal act to secure monopoly. Pursuant to the legislative intent of Article 2 of the Sherman Act of the U.S., which prohibits monopoly, the U.S. Department of Justice seems to believe that when one puts together the facts that, Google buying “shelf space,” Google setting its search engine as the default search engine, and the technical characteristic of search engines, it is sufficient to prove that Google intends to monopolize the market.
Facing such allegations, Google emphasizes that the reason Google pays related expenses to cellphone makers and service providers is the same as the reason merchants pay channel providers “slotting fees.” It is only a practice to get a better “shelf space.” Moreover, Google’s practice does not hinder consumers from choosing other search engines.
From the standoff between the two, we could clearly see a increasingly acute issue in today’s digital market: A search engine with a large market share may hinder smaller players in the market, but does it hurt the consumers? The answer seems to be unclear. As unclear it is, why then is Google sanctioned for antitrust?
Is “big” an original sin?
It is obvious that consumers prefer to use Google because they approve of the quality of the searches. However, even under such a perspective, a simple act of buying “shelf space” is not sufficient to maintain its market share. Therefore, the U.S. Dept. of Justice emphasizes such a case fact: For a better “shelf space,” Google pays cellphone makers and service providers huge amount of “slotting fee,” and Google has higher income from ads, which enables it to buy better “shelf space” than other new players in the market. The online ads market and the search engine market go hand in hand with each other. Under such background facts, Google’s practice of buying “shelf space” can almost guarantee its long-term reign in the search engine market and continual maintenance or increase of Google’s market share. The actions were taken by the U.S. Dept. of Justice seems to be signaling the following: When undergoing competition to secure market share, companies with higher market share shall be scrutinized with stricter rules than companies with lower market share.
In fact, such scrutiny trend began when the E.U. investigated Google for their unfair competition with price-comparison websites on search result listings, and Facebook for their practices regarding online shopping behavior. One could see that Google and other tech giants have been scrutinized due to their size. Judging from these facts, with respect to the high-tech industry, which has a “large user base,” the competition authorities worldwide seem to be exploring a possible way to balance the interests of each competitor in today’s digital economy. This trend will prove to be a great challenge to the advanced players in the high-tech industry since the large size of such companies, in terms of cooperation and alliance strategies, can easily step on the nerve of the authorities. On the other hand, however, this is a great opportunity for new players in the market. Making good use of competition laws to increase space for growth may be a business strategy worth considering.
(This article was published in the Experts Commentary Column of the Commercial Times. https://view.ctee.com.tw/economic/24149.html )
