Search, Antitrust, and Competition Policy

Transcription

1 Search, Antitrust, and Competition Policy Frank Pasquale Schering-Plough Professor in Health Care Regulation and Enforcement, Seton Hall Law Affiliate Fellow, Yale Information Society Project GMU Law Review Conference 2012

2 Importance of Search Among the many new information technologies that are reshaping work and daily life, perhaps none are more empowering than the new technologies of search.... Whereas the steam engine, the electrical turbine, the internal combustion engine, and the jet engine propelled the industrial economy, search engines power the information economy. David Stark

3 A Real Layer of Internet or Just one of Many Functions? Self-portrayal, up to mid-aughts: efficient, scientific, and neutral methods of organizing the world s information Directory, leading users to best other sites Emerging trends Search engines as media companies Steering users to own properties Rival normative accounts Like rating agencies or AAA firms using old reputation to mislead consumers Innovators reorganizing information to better serve consumers Query: what is missing in identity of user as consumer?

4 Worries About Search As necessary as physical carriage? Nunziato, Virtual Freedom Pasquale, Internet Nondiscrimination Principles Spread from general purpose to specialized search Net neutrality analogy Need ISP to get to internet; need general search to find specialized search

5 Why Very Large Market Share by One Firm? Natural Monopoly Story Each current search makes later searches more effective Pervasive personalization Massive data advantage is self-reinforcing One-stop shopping in twosided market Analogy: dating site Monopolization Story Edelman on data portability If you accept that specialized search is separate market: Dominant SE can promote its own properties to the top of results Opaque ranking rules and ad sales can make it hard for specialized search to break through in general purpose searches Baidu allegation: tie ads to organic ranking

6 Search Engines As An Internet Gateway Internet-based businesses can depend on search engines for a substantial proportion of their traffic and revenues. (Foundation of Foundem Antitrust complaint against Google in EU; next several slides use graphics from a Foundem presentation.)

7 Search Engines As An Internet Gateway Search: Search Advertising: 80-95% Globally 90% in UK 95% in EU 85% Globally Some sites can receive a majority of traffic from Google.

8 Possible Abuse of Gateway Status Search: Search Advertising: 80-95% Globally 90% in UK 95% in EU 85% Globally Foundem not upset about horizontal search or monopoly maintenance per se General purpose search engines and social networks are sites that don t rely on other sites for traffic, usually. Their concern is about google leveraging power to steer traffic to Google s own services Compare Maytag refrigerator electricity example from Tim Wu s work on net neutrality. Coming soon?... travel jobs insurance... everything!

9 How Much of the Information Search Landscape Should One Company Control? Artificial Mkt Definition? It seems unfair to say to Google: you can only dominate general purpose search But. 1. What do we think if one dominant search engine did penalize vertical rivals repeatedly? 2. Does that SE get to (gradually) dominate price comparison, online video, digital mapping, news aggregation, travel search, job search, property search, financial search, insurance search, book search, etc.? 3. Is there any limit to naturalizing innovation in a fluid field here? Would similar arguments for vertical integration and laissez-faire reverse Microsoft?

10 Market Definition? Market definitions are contestable here. The great debate in antitrust and high-tech industries Are courts and agencies too slow to deal with rapidly changing market? Or will laissez-faire allow consolidation by an unaccountable behemoth? If concerns linger

11 Antitrust or Regulation? The Case for Regulation Natural monopoly More data makes every product better Infrastructure of real-time mapping of entire internet too costly to be done 2, 3, 4 times over Bing losing $2B per year Quaero abandoned Need basic monitoring Transparency Publicity regarding misuses of a credence good The Case for Antitrust AAI Concerns re ITA First Amendment will stymie regulation Lorain Journal Vision of competing startups

12 One Theory for EU Intervention Against Google? Dominant Horizontal Search Engine Discriminatory + Penalties + Preferential Placement ( Universal Search ) = Unassailable Competitive Advantage in Adjacent Markets

13 Foundem s EU Antitrust Complaint Dominant Horizontal Search Engine Discriminatory + Penalties + Preferential Placement ( Universal Search ) = Unassailable Competitive Advantage in Adjacent Markets

14 Search Penalties Foundem: Google has always used exclusionary penalties, but these used to be reserved for spam, and sites caught cheating Google s algorithms Query, ala Crane: should this always be the case? Penalty Start 1 Time Penalty Google Search Rank

15 Timeline Excluded from Search (26 th June 2006) Jan 2006 Jun Aug Sep 2007 Dec 2009 Jan 2011

16 Remedies? Regarding Google s Penalties: More transparency about the existence and rationale for these penalties More effective and transparent appeals process What to do About Google and Doubleclick? Hold Google to Its Word with Some Extreme Factfinding About Privacy Practices, Open Internet Policy Blog, Oct. 8, 2007.

17 Thoughts on Universal Search Dominant Horizontal Search Engine Discriminatory + Penalties + Preferential Placement ( Universal Search ) = Unassailable Competitive Advantage in Adjacent Markets

18 Shopping, News, Video Results; Keeping Searchers in the Google Ecosystem Actual Search Results

19 Traffic to Google Product Search Google Product Search integrated into Google Universal Search Data from comscore

20 Effect on Traffic to UK Competitors % Change in Visitor Numbers Between Oct 2007 and Oct 2009 Data from comscore

21 Effect on Traffic to US Competitors % Change in Visitor Numbers Between Oct 2007 and Oct 2009 Data from comscore

22 Remedies? Transparency: Clear labelling of Google s own services when displayed within/alongside actual search results Compare Navx, where Google proposed a settlement of the case, which included establishing a set of published standards to increase transparency and clarify Google s advertising standards. (?) Algorithmic Intervention No discrimination in favor of Google s own services Raises some First Amendment Issues

23 Trouble for Google with the European Commission -The EU Competition Commission has also been investigating Google for potential antitrust violations since November The EC Commissioner recently announced that the EC will determine by March whether to file a complaint against Google for its practice, which is a quicker timeline than originally anticipated. -The investigation began in reaction to claims from small businesses, which alleged that Google moved their sites down in search results. The European Commission also looked into whether Google gave its own service preferential treatment in search results. -If Google is found to have violated European antitrust laws, the Commission has the authority to fine Google up to 10% of its annual revenue, which totaled $23 billion in 2009.

24 Search Penalty Irrespective of Relevance Example 1: Foundem Penalised sites are excluded when they are one of hundreds of relevant results; but they are also often excluded when they are the only relevant result, e.g. for the query compare prices shoei xr-1000 Rank Yahoo 1 Bing 7 Google 145 (Page 14!)

25 Search Penalty Irrespective of Relevance Example 1: Foundem After whitelisting on Dec 2 nd 2009 Rank Yahoo 1 Bing 7 Google 145 Google 6

26 Search Penalty Irrespective of Relevance Example 1: Foundem After whitelisting a few weeks later Rank Yahoo 1 Bing 7 Google 145 Google 1

27 Vertical-Search-Targeted Penalties? Around 2006, Google started to introduce a new kind of algorithmic penalty Targeted at sites: with a lack of original content (a.k.a. copied from others ), and whose primary purpose is to drive traffic to other sites These characteristics describe a small number of Spam sites... TOWN Spam Lots of content copied wholesale from other sites to serve as search engine fodder and to hang Google Ads on and monetise.

28 Vertical-Search-Targeted Penalties? But, they are defining characteristics of ALL search services......including Google s own... Search services are not intended to produce travel original jobs content, they property are intended to efficiently organise, search and summarise the content of others A key performance metric for a search service is often how quickly and efficiently it can deliver users to other sites the sites containing the information, products, or services they are looking for