Google loses antitrust case in Europe

Commentary: Google has lost another multi-billion-dollar antitrust case brought against it by the European Union. The accusation is that Google used its control of the Google Play store to stifle competition in search. Previously, the Google was fined for favoring their own products in searches to the determinant of competitors.

The key issue in the recent case involves licensing terms that prevent phone manufacturers from pre-installing Google Play unless also pre-installing other Google apps, especially Google Search. Because Google Play is by far the dominate app store on Android based devices, manufacturers had no choice but to accept Google’s terms.

Having Google Search available pre-installed, the argument goes, limits consumer’s use of competitor search engines as few would use an alternative when Google Search is available. Thus, Google would be able to extend its dominance of search from PCs to Android based mobile phones. Since about 80% of mobile phones use Android, this is a big deal.

This argument lacks credibility as many of Google’s competitors in the search engine space are large players—like Microsoft—who have considerable marketing muscle. Moreover, other search engines can and do pay to be pre-installed.

Indeed, they can even go a step further by paying to be the initial default search engine, meaning when consumers first power up their smart phones, it will be the default search engine that appears. Google, for example, is rumored to pay Apple $3 billion per year to be the default search on the iPhone.

But default status is not a guarantee of market share. Hal Varian, Google’s in-house economist, points to the example of the experience of Yahoo! with Firefox. Yahoo! paid to be the default search on Firefox. Initially, Yahoo! saw increased searches among Firefox users, but quickly, as consumers realized the situation, they switched back to their preferred search engine. It appears that being default couldn’t overcome Yahoo! fundamental problem, which is that it isn’t very good.  

Still, the question is why is Google bundling Google Play with Google Search? After all, an obvious alternative is simply to charge for Google Play rather than giving it away free, but it doesn’t. Instead, Google is “paid” via bundling Search with Play. The people at Google are very smart, so what is their motive for doing this?

It could be that Google is following a strategy of being everywhere thereby becoming a familiar friend on which consumers will rely. This has some validity. If people are familiar with Google Search, then they will be more to seek it out when switching among devices.

There are other theories as to Google’s motives. One is that having Google pre-installed reduces the value of being the default search, so will making less expensive for Google to purchase default status—a convoluted argument.

One suspects that the real reason Google lost in Europe is that it is big, it successful, and it is American. If this is ultimately the reason for the successful action, then consumers who are the loser as the reason for Google’s dominance is that it has a better product.

Christopher A. Erickson, Ph.D., is a professor of economics at NMSU. He does not use Edge even though it comes pre-installed in Windows. The opinions expressed may not be shared the regents or administration of NMSU. Chris can be reached at [email protected].

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