Smith Brain Trust / October 28, 2020

DOJ and Google

Case Targets Google Too Narrowly but Foreshadows Big Tech Regulation

DOJ and Google

SMITH BRAIN TRUST – As the Justice Department’s $1 trillion antitrust suit alleging Alphabet Inc., illegally uses Google to shut out Internet search competitors heads to a Friday (10/30) status hearing in U.S. District Court, Research Professor Kislaya Prasad at the University of Maryland’s Robert H. Smith School of Business says “Google’s search monopoly is too narrow, if not the wrong target.”

The DOJ alleges Google collects and uses billions of dollars from advertisements on its platform to pay for mobile-phone makers, carriers and browsers to maintain Google as their preset, default search engine.

This is “narrowly targeted,” says Prasad, academic director of the Center for Global Business. “The real issue is the range of businesses that Google is in while also being a gatekeeper through control of Internet search, for example, listings for hotel or flight bookings, which Google also offers, and forces competitors to advertise to climb above their listings.”

The standard of U.S. antitrust law, notes Prasad, has been about harm to the consumer, not competition. “So, one would ask whether Google's monopoly power leads to higher prices for consumers. But consumers are not even paying for Google's search services.”

Furthermore, Google's response to the DOJ suit has been that, “’for consumers, switching is easy, and competition is just a few clicks away and that actions against them would be to the consumers' detriment.’” In effect, Prasad adds, “the Google response is that such action would force substandard products on consumers.”

A takeaway here, Prasad says, is that the DOJ case against Google reflects “U.S. antitrust law’s ‘appropriate standards of harm’ have not kept up with the digital age, and that gatekeepers such as Google need more regulation  – namely targeting the “too many different businesses it’s in that create the unfair advantage in its search engine monopoly.”

Despite the narrowness of the present case, Prasad says, it does appear to foreshadow broader pressure on big tech. “Congress, via the House Subcommittee on Antitrust,  just issued a new report on digital markets as a perceivable call to action for the next Congress and administration to create and maintain robust competition in digital markets,” he notes. “Also, the EU appears to be putting together a ‘hit list’ of Internet companies to be subject to stricter regulation.” (Prasad examines this further in the Center for Global Business’ Global Pulse-series video "The EU's Big Target on Big Tech.")

Prasad concludes that closer attention to regulation of "big tech" is just beginning, with support from both sides of the aisle in Congress. “While the ultimate outcome [of the current DOJ case against Google] is unclear -- whether a fine or divestment, what is clear is that governments are waking up to the task of finally regulating ‘big tech.’”



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