Randy Picker Examines Market Power and Advertising During AEI’s Discussion of Google and Antitrust

By TAP Staff Blogger

Posted on October 30, 2012

Professor Randy Picker, University of Chicago School of Law, joined a panel discussion earlier this month to examine the merits of the anti-trust concerns regarding Google's practices in the Internet search market. Hosted by American Enterprise Institute (AEI), the panelists explored the market for Internet search, the evolving competitive landscape, and the proper role of government regulation in this sphere. The event also coincided with the release of a new paper by Gregory Sidak of Criterion Economics and Judge Robert Bork titled "What Does the Chicago School Teach about Internet Search and the Anti-Trust Treatment of Google?"
Professor Picker addressed the relationship between market power and advertising, and discussed Google's implicit advertising costs for users. He also answered the question of whether we can "share the top link" on a search results page. Here are a few excerpts:
Design Choices and Link Competition
Focus on the different types of competition that is occurring on a search results page. One piece is what we’ll call organic search competition –no money involved. Firms build their websites with the hope that they will be highly ranked in Google, and they spend a lot of time trying to do that.
Second type of competition is obviously the advertising link that we see to the right where Google has built these auctions, and where it’s strictly a question of dollar competition.
What I want to focus on are what I’ll call the hard-wire links. If you look at the product bar at the top carefully, there are hardwired links to YouTube, among other Google products. There’s no competition for those; Google is not looking at other video sites; there is no auction there. It is simply a hard-wired link. And that’s also true with regards to maps. There are multiple map services; none of those appear here. This is the way in which Google has hard-wired the results for both the product bar at the top, and YouTube in particular, and then the maps in favor of Google.
But the real topic of interest … is what Google calls the one-box result. The one-box result has a number of components to it. What the European Union is focusing on are the review links. And those seem to be hard-wired in favor of Google. I say ‘seem’ since I think there’s less public information about what Google is doing there. Perhaps [there is] organic competition among the restaurants who show up in the one box, but hard-wired to Google on the reviews. I think that raises a number of legal issues.
Using Different Browsers Results in Different Search Returns
So one of the things you can do is try different browsers for searching, it turns out you get different results. And if you set your browser on IE6 –if you say I’m a really old browser. What you get here is, Google comes back with a version of the one-box, but they actually show multiple review sites.
Google and Market Power
If Google has market power –and to be clear I haven’t said that they do. But as I said at the beginning, you can easily imagine that Google has market power in the sense that they’ve been a wonderfully successful firm that’s built a great product. And seem to have a sustainable product quality advantage. And that’s associated with market power typically. The question isn’t in some sense whether they have market power, antitrust encourages them to go out and succeed and compete.
The question is what are they doing with that market power? What they’re not allowed to do is substitute out of exercising that market power through, as it were, high advertising prices, instead to be spending that power on building up their social products –the Google Plus sets. That’s what we regard as inadmissible.
The One Top Spot
There’s some discussion in the Bork and Sidak paper that there’s only one top spot, so what can you do. I think that’s a red herring. I don’t think that’s accurate. That focuses on the fact that there is a single search result, and the reality is that Google sees thousands of searches and it need not respond to each of those searches identically. And that over 10,000 Hyde Park restaurant searches, even if there’s only a single review slot, it could provide statistically any number of firms ranked in those slots. It could have 1,000 Google Plus reviews and 1,000 Yelp reviews, and 500 Bing reviews. … Don’t focus on what it means for a single search, focus on what it means for 10,000 searches.
The AEI panel discussion was covered by C-SPAN and that video is archived at http://www.c-spanvideo.org/event/209198.
Since C-SPAN’s video focused on the speakers and didn’t cover the slides very well, Professor Picker created a YouTube voiceover for his slides.

Randy Picker is the Paul H. and Theo Leffmann Professor of Commercial Law at the University of Chicago Law School. Professor Picker's expertise is in the laws relating to intellectual property, competition policy and regulated industries, and applications of game theory and agent-based computer simulations to the law.