By: Hugh Ragan
Last month, the U.S. Justice Department launched a lawsuit against Google accusing the company of illegally protecting the cornerstone of its empire: search and advertising. This demonstration of government resolve is welcomed by many Americans who are wary of the threats that Google, and other Big Tech behemoths, pose by harnessing mountains of consumer data and acting as gatekeepers to the internet. This lawsuit represents a chance to “remake one of America’s most recognizable companies and the internet economy that it has helped define”, says a recent New York Times article. However, it would be naïve to believe that an antitrust lawsuit, the success of which is far from guaranteed, could effectively solve these concerns. The United States needs updated competition laws that reflect the new realities of the digital economy, and a coordinated strategy of platform governance to address the threats posed by Google, which fall outside the scope of competition law.
Current antitrust law in the United States aims to prove one thing: consumer harm. This is typically proven by demonstrating that a monopolist has exploited their dominant market position by charging higher prices to consumers than would have prevailed in a market with healthy competition. This argument cannot be used against Google, whose primary consumer product is free to use. The Justice Department has instead accused Google of throttling competition through exclusive deals signed with Apple to keep its search product the default on all Apple smartphones. Google’s estimated 80% share of the general search market has allowed them to “control a treasure trove of user data and deny access to competitors”, says the article. Such anticompetitive practices could demonstrate harm to the consumer if the Justice department can successfully argue that they have led to a loss of innovation, fewer choices of search alternatives, or diminished quality of search services, including consumer data privacy.
Kent Walker, Google’s Chief Legal Officer, asserts that people are not forced to use his company’s search, and they genuinely prefer it over the alternatives. The current antitrust case would “do nothing to help consumers. To the contrary, it would artificially prop up lower-quality alternatives, raise phone prices and make it harder for people to get the search services they want to use,” according to Walker.
Walker’s defence might strike people as quite reasonable. However, that should not support the company’s innocence. Rather, it highlights three important limitations of competition laws as they currently exist.
First, for antitrust laws to be effective in proving harm to the consumer, these laws need to be amended to better reflect the new realities of a digital economy. Most importantly, this means accounting for their troves of consumer data. This data does not appear on company balance sheets like other assets, yet it is immensely valuable and central to the business models of Google and other Big Tech firms. In this light, Google’s 2006 acquisition of YouTube is not a harmless merger between a search company and a video streaming company. The merger combines two companies who derive their business advantage from their ability to amass more consumer data, and thus predict user preferences and behaviour, better than competitors. A modernized competition law should have different criterion for acceptable mergers or include data portability laws, prohibiting Google or other firms from having exclusive ownership over the consumer data they collect. A modern competition law would also distinguish between platform ownership and product development, recognizing that Google enjoys a significant advantage in its own app store by extracting heavy fees from companies seeking coveted access to that marketplace while being able to see and advertise their own products for free.
Second, competition policy must expand its goals beyond merely preventing consumer harm. If nothing else, focusing solely on consumer harm is asking to prove an impossible counterfactual. We will never know for sure how many world-changing innovations we have missed out on due to Google’s dominance. But more importantly, this singular focus leaves little room for the type of non-economic arguments that were the basis of American competition laws during the peak antitrust period of the early 20th century. Louis Brandeis, a standout jurist of that era, argued that industrial size not only restricted innovation, but thwarted individual initiative. In this way, Brandeis believed large companies to be at odds with the principles of democracy and freedom.
America could look to Europe for an example of a competition policy that reflects Brandeis’ intent of linking a competitive economy and personal freedom. European Union competition policy aims primarily to achieve a level playing field for businesses. They have pursued this objective with vigour, having launched three successful lawsuits against Google’s practices within the past decade, resulting in more than $10 billion in fines to the company.
Finally, it must be noted that even an improved competition policy cannot be infinitely leveraged, as stricter antitrust law requires real trade-offs to efficiency that would burden other companies and dissuade entrepreneurialism. To address the wider harms to privacy, misinformation, and polarization, America needs to turn beyond competition policy and consider a nationally coordinated strategy of platform governance. Adopting such a strategy would end the era of self-governance among several Big Tech firms who have taken advantage of the government’s laissez faire regulatory approach for years. “Antitrust may need to sharpen its tools, but regulation is going to be complementary”, said a Reuters article on the subject.
The ongoing Google antitrust lawsuit demonstrates an important step forward. But in order for this suit to set a meaningful precedent, competition law must be updated to ensure a fair 21st century digital economy. More importantly, there should be no illusion of the ability for competition law to effectively address the issues raised by Google’s immense power. When faced with a similar lawsuit, Facebook’s Mark Zuckerberg wondered aloud why the court remained fixated on competition, suggesting instead the real threat was his company’s increasing use of unregulated artificial intelligence. Were we listening?
Hugh Ragan is a Master of Public Policy candidate at the University of Toronto’s Munk School of Global Affairs & Public Policy. He currently serves as a member of the Peterson Leadership Speaker Series Committee at Munk, in addition to contributing towards the Economic Nationalism project with the Policy Innovation Initiative. His primary goal is to understand the relationship between policy design and people’s incentives, values and choices. Hugh holds a Bachelor of Arts (Honours) in Economics from Queen’s University.