When Innovation and Competition Are at Odds, Antitrust Enforcers Need Innovative Remedies

The European Commission (EC) ended one of its years-long antitrust investigations into Google this summer when it issued a $2.7 billion fine—the largest in EC history. The EC charged Google with abuse of a dominant position by using Google Search—the most popular search engine in Europe, with 90% market share—to divert traffic toward Google Shopping—a more specialized search website for comparison shopping. The fine fuels the debate over whether antitrust enforcement is appropriate for Google’s conduct or whether such enforcement quells Google’s incentive to innovate its products. Google has also been under investigation by the EC for antitrust issues concerning its Android and AdSense products.

While Google Search competes against much smaller rivals Bing and Yahoo, Google Shopping does not enjoy a “dominant position” in the comparison shopping market. Other comparison shopping websites such as NexTag and PriceGrabber compete vigorously with Google Shopping to attract merchants who pay to have their products listed on the websites. The websites then rely on customers who use them as a tool to find, compare, and purchase products from those merchants, thereby validating the merchants’ investments in the website. Though some potential customers may go directly to their favorite comparison shopping websites to make a purchase, most simply go to Google—the gateway of the Internet—to begin their search. In this role, Google has the unique ability to direct traffic to other websites, and to many, Google has a responsibility not to engage in “search bias,” meaning that Google should display the most objectively relevant results, never seeking to censor results that may be harmful to Google’s business.

The antitrust controversy lies in Google Search displaying links to Google Shopping in a prominent position on general search results pages. For instance, if a user Googles “digital cameras,” there would be a list of ten “blue links” to websites relevant to the search query. The first page of a Google Search result is coveted by websites. Users rarely venture past the first page of search results. In addition to those links, however, Google also includes a specialized box (called a OneBox) above the search results containing images and links to Google Shopping results for digital cameras. If the user is interested in purchasing a digital camera, their eyes are immediately drawn to the OneBox. They need look no further. Other comparison shopping websites are rarely included on the first page of results, and only Google Shopping is ever featured in OneBox results, a fact which has caused measured decreases in traffic to their websites. Google’s stated goals in including the OneBox is that it is an innovative feature of Google Search, and it enhances the user experience by making searches easier and faster. Though useful to many users at first glance, the OneBox has prevented comparison shopping websites from reaching potential customers while Google Shopping comfortably sits atop the search results.

So why is this a cause for concern to antitrust enforcers? Because Google is using its dominant position in the general search market to unfairly compete in the comparison shopping market. Consumers wishing to purchase a digital camera could be left with fewer comparison shopping websites, less innovation in comparison shopping websites, and higher prices as Google Shopping amasses and takes advantage of greater market share, thanks to Google Search directing traffic. The remedy, according to the EC, is that Google Search must stop abusing its dominant position to affect the comparison shopping market (in addition to the record-setting fine). Specifically, Google Search should not be allowed to prominently display links to Google Shopping, but must endeavor to unbiasedly display links to whichever comparison shopping websites are the most objectively relevant to the search query.

In addition to paying the EC fine, Google must adjust how it displays comparison shopping search results. This could potentially mean that Google stops displaying the OneBox altogether, or displays comparison shopping results from competing websites in the OneBox. Either way, Google has vocally disagreed with the EC’s decision, claiming that the OneBox was meant only to enhance Google Search, not to unfairly compete in the comparison shopping market. The OneBox solves a problem: it shortens the amount of time that users spend searching for a product. In that respect, it should be lauded as an innovation, something that antitrust enforcers also seek to protect.

Traditional antitrust models view innovation as a byproduct of competition, but this case pits innovation and competition against each other. Antitrust enforcers must be careful not to create a cooling effect on innovation when combatting unfair competition, especially on the Internet—a platform unforeseen by decades and centuries-old antitrust laws—where products can be shaped and integrated in non-traditional ways. Undoubtedly, we will see more cases where making a product easier to use or faster inadvertently harms competition. When antitrust enforcers are confronted with a tradeoff between innovation and competition, their remedies must balance those competing interests as well.

Instead of simply chastising Google as biased, a better remedy in this case would have been to require an alteration of the OneBox so that it displays the most relevant comparison shopping results, not just Google Shopping’s. In effect, the OneBox would be treated as an essential facility—a facility (traditional examples are bridges and utilities) owned by one company that its competitors need to use in order to compete, and that the company must provide reasonable access to. That kind of solution would strike at the core of the antitrust violation while keeping intact the hard work put in to creating the OneBox in the first place. Because of the EC’s fine, Google and other Internet companies may curtail their innovation efforts for fear of antitrust litigation. If a new feature, developed with purely virtuous intentions, affects another market, the risk of a fine may be too great to implement it. Antitrust enforcers must clarify their guidelines in the wake of this case and endeavor to seek remedies that allow companies to safely pursue innovative new features.

Nicholas Elia is a third-year student at Temple University-Beasley School of Law where he is focusing on antitrust law and economic policy. His article, Google’s OneBox as an Essential Facility: Antitrust Enforcement in the European Union and United States, will be published in the upcoming issue of the Temple International and Comparative Law Journal.

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