Is Google abusing its power?

At barely 15 years old, Google enjoys the kind of market dominance in web search that would have made the oil barons of the 19th century envious. Its market share in most countries is 90% or higher. Even in its competitive home market Google accounts for 70% of all web searches, despite rivals like Microsoft spending billions to catch up. But is Google a force for openness and good, or a repressive monopoly?

The companies behind FairSearch, a coalition of competitors in the search market, are convinced the latter is true. Formed by a group of travel websites in 2010, FairSearch has since grown to include titans like Microsoft, Nokia and Oracle. Its rallying cry is predictable: "Google is abusing its search monopoly to thwart competition".

Although FairSearch's agenda is obviously self-serving, regardless of the high-minded ideals it espouses on its website, it does make some valid points. Google is clearly using its power in web search to drive attention to its own offerings in other markets like travel, maps, restaurant reviews and online shopping. The question is whether it is doing so unfairly and at the expense of competitors.

So far, FairSearch's efforts to prove its case have been thwarted. In January 2013, after nearly two years of investigation, the US's Federal Trade Commission (FTC) decided that Google had not broken any of the country's antitrust laws. 

The decision was made at least partly due to the fact that the FTC could not prove malicious intent. And this in turn is probably because no one except Google's own geeks really understand how its algorithms actually work. It's a similar problem to the one faced by patent infringement lawsuits: the people called on to judge fairness are often ill-equipped to do so.

Promoting itself
But all is not lost for Google's detractors. Europe's antitrust regulators are currently considering a complaint filed by FairSearch on the April 9. Unlike the case considered by the FTC, this complaint focuses on Google's practices in the burgeoning mobile search market. FairSearch alleges that Google is using its popular Android operating system to unfairly promote its own services.

Android is certainly influential in the mobile market, powering around 70% of all smart phones currently being sold. And while FTC may have let Google off the hook, the Europeans are much more likely to penalise the company. European regulators have a reputation for being harder on big businesses than their American counterparts, particularly those founded outside of Europe's borders.

Another factor that might count against Google is that this European complaint is centered on an operating system (Android) rather than a search engine. Antitrust regulators must take the cost of switching into account when they are judging cases. Switching to a new search engine is trivial and takes seconds. Switching to a new operating system on a phone is generally beyond the capability of most consumers and implies buying an entirely new handset. 

This switching cost was a vital factor in a slew of antitrust cases against Microsoft some of which have been dragging on since the early 1990s. Regulators in both the US and Europe found that Microsoft abused its monopoly power in the desktop operating market in many ways, most famously to win the "browser wars" by favouring its own Internet Explorer over rivals.

But it is far from clear whether Google is really engaging in the kinds of blatantly anti-competitive practices that Microsoft once used. Danny Sullivan, an independent industry analyst, has poked multiple holes in FairSearch's claims, pointing out several blatant misrepresentations and untruths in its complaint. His main argument is that Google does not force Android licensees to use its search engine, despite what FairSearch claims.

Credibility and legitimacy
Like Sullivan I believe that Microsoft's presence in the FairSearch coalition robs it of its credibility and legitimacy. Aside from the breath-taking hypocrisy of one of the world's worst monopolists whining about anti-competitive behaviour, Microsoft has far too much invested in its own search business to be at all objective on the subject. Antitrust cases are about stopping monopolies from abusing their power – they are not about undercutting your direct competitor because your own product is second rate.

It is also worth remembering the original point of antitrust legislation: to shield consumers and businesses from being harmed by the actions of monopolies who controlled access to vital commodities like oil, steel and grain.

You could argue that consumer attention – Google's stock in trade – is the oil of the 21st century. But Google does not own or control the supply of this attention like you would own a mine or an oil well. It earns that attention the old fashioned way: by being better than its competitors.

Regardless of what the regulators do or do not decide, the market has a way of sorting things out on its own. By the time Microsoft had finished getting mauled in the courts over Internet Explorer, its share in the web browser market was already in terminal decline. Just 10 years ago Internet Explorer commanded over 90% of the market. Now it is second or even third in many countries, and shows no signs of reviving. 

Consumers are not the helpless sheep that regulators so often assume they are. As a market matures, so does the general public's understanding of that market. Spending another decade and untold millions of tax dollars (or euros) chasing after Google is probably not worth the trouble.

If, like Microsoft, Google becomes a complacent bully, more interested in maintaining the status quo than innovating, then the market will simply move to their newer, hungrier competitor.

There's no need for the nanny state to intervene at the smallest hint of unfairness. No one is going to starve or go bankrupt because they have Google search on their phone instead of Bing. Regulators would do well to remember that.