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Top 5 Worst Antitrust Enforcement Decisions in the 21st Century
Submitted by Scott Cleland on Fri, 2016-11-04 11:25
Google is in the process of submitting its defenses to the EU antitrust charges that Google abuses its >90% dominance in search, mobile, and advertising. At the same time a new U.S. Administration soon will take a fresh look at U.S. antitrust enforcement, much like the EU did for Europe in late 2014.
So how did EU v. Google become the most consequential antitrust case of the young 21st century?
The evidence shows Google did not become the proliferating monopoly it is today on its own, but with the help of 211 acquisitions (one a month for 18 years) and exceptionally lax enforcement of antitrust laws expressly designed to prevent monopolization via mergers and acquisitions, and anti-competitive exclusion behaviors.
Tellingly, Google acquired the foundation of every one of Google’s derivative dominant businesses after Google Search: Adsense & AdWords (via Applied Semantics & Overture settlement); Maps (via Keyhole); video (via YouTube); mobile OS (via Android); ad-serving/analytics (via DoubleClick); and mobile-advertising (via AdMob).
Thus it should be no surprise that this list of the top five worst antitrust enforcement decisions of this young 21st century involve Google and that the FTC owns direct responsibility for four of the five worst antitrust enforcement decisions of the 21st century.
To be fair, the first two worst decisions were during the W. Bush Administration; the second two during the Obama Administration, and the fifth during the previous European Commission.
Collectively, these five worst antitrust enforcement decisions and their anti-competitive implications have enabled and facilitated maximal Google horizontal >90% market concentration infourmarkets and maximal vertical concentration with ~200 free Google products and services.
Simply, this EU is trying to clean up the Google-opolization mess caused by the epic failure of exceptionally lax FTC antitrust enforcement.
The Top Five Worst Antitrust Enforcement Decisions of the 21st Century
First, the Bush DOJ/FTC unilaterally decided to no longer consider privacy to be a relevant non-price factor in antitrust enforcement, apparently without involvement of Congress, the courts or the public, while turning a blind eye to any consumer privacy harms caused by anti-competitive behaviors.
This decision has fostered the perverse market dynamic where many online advertising companies now effectively compete on the basis of who can take advantage of consumer privacy most, rather than compete on the basis of whom best can protect consumer privacy.
Common sense tells us that law enforcement committed to maximizing the effect of deterrence signal neither the exact time/place of their police patrols, nor where they won’t patrol.
However, with privacy and antitrust, authorities have unwittingly telegraphed to the marketplace exactly where they won’t provide accountability, so potential privacy bad actors know they can get away with anti-competitive abuse of consumers’ privacy with relative impunity.
Second, the Bush FTC approved Google-DoubleClick 4-1, with no conditions in 2007, tipping Google to a PC search and search advertising monopoly by combining the #1 and #2 global online advertisers.
Specifically, the FTC facilitated Google-opolization by allowing Google to extend its: leading 650m user search audience with DoubleClick’s 800m viewer audience; its leading advertiser client base with most all of the top 1500 global advertisers that Google did not have; and its leading publisher client base with 17of the top 20 websites that it did not have.
At that time, DoubleClick was Google’s only real global advertising platform rival.
Third, the Obama FTC approved Google-AdMob 5-0 with no conditions in 2010, tipping Google to a mobile search advertising monopoly by combining the #1 and #2 mobile advertising platforms.
Specifically, the FTC facilitated Google-opolization of mobile search advertising by allowing #2 Google with 25% share to acquire the #1 AdMob mobile advertising platform with 50% share.
At that time, AdMob was Google’s only substantive rival mobile ad platform.
The FTC’s justification for approving Google-AdMob was that the FTC believed Apple’s iAd would enter the online advertising business and become a major mobile advertising competitor to Google.
It did not.
Fourth, Obama FTC commissioners rejected their staff investigators’ recommendation to prosecute Google for search and search advertising antitrust violations; instead they shut down in 2013 all Google antitrust investigations covering search, search advertising, Android and standard essential patent abuse, in effect encouraging Google to extend its monopoly to several adjacent markets.
Consider the FTC Staff Report conclusions before the 2012 election:
“Staff concludes that Google’s conduct has resulted – and will result – in real harm to consumers and to innovation in the online search and advertising markets. Google has strengthened its monopolies over search and search advertising through anticompetitive means, and has forestalled competitors ability to challenge those monopolies, and this will have lasting negative effects on consumer welfare.” (p. 116)
FTC investigators also concluded that: “Google is clearly the dominant provider of ‘general’ search services in the U.S.” (p. 68).
Even Google’s Chief Economist, Hal Varian, admitted: “We’re the dominant incumbent in the industry” (footnote 547).
In addition, the FTC uncovered email evidence Larry Page personally supported the search bias self-dealing that Google now denies: “Larry [Page] thought product [Google’s shopping service] should get more exposure” (footnote 120).
Since the FTC quietly shut down its Android investigation in January of 2013 without any explanation, Google’s tying/bundling of its dominant search and other apps to its Android operating system, has resulted in Google commanding 15 of the 19 Android apps that have had over 1 billion downloads.
Fifth, EU DG-Competition Vice President Joaquín Almunia decided in May 2012 that negotiating a Google Search/Shopping settlement with Google was superior to litigation. Apparently this encouraged Google to stonewall the negotiations and extend its dominance into several other markets from 2012-2014.
The combination of the FTC politically looking the other way on anything Google antitrust since the 2012 election, and EU DG-Comp VP Almunia’s naiveté in offering Google four chances to propose its own punishment and remedy, has enabled Google-opolization of mobile search, OS/app store, and advertising.
Google did not become a monopolist on its own; it became one because antitrust authorities made five of the worst antitrust enforcement decisions of the 21st century.
The first gave Google and other Internet companies an antitrust blank check to do whatever they wanted with consumers’ private information. Since then, effectively no commercial abuse of privacy can be considered anticompetitive in the U.S. by the DOJ or FTC.
In the second, third and fourth, FTC commissioners proved serially incapable or unwilling to see anything anticompetitive with Google monopolizing the access to, or monetization of, much of America’s information economy -- right under its nose.
And the fifth, EU VP Almunia’s naïve decision to negotiate with Google reinforced the preceding four worst antitrust enforcement decisions.
Sadly, an environment of exceptionally lax antitrust enforcement involving Google not only created an unprecedented horizontal Google info-opoly, but also apparently gave Google the confidence to engage in anti-competitive collusive behavior in apparently agreeing to stop competing in the social media market with Facebook, if Facebook would stop competing with Google in search. (See the evidence and timeline of that apparent collusion here.)
Remember the old adage: “when the cat is away the mice will play.”
Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an internetization consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google and also before the relevant House oversight subcommittee on Google’s privacy problems.