By Don Racheter and Daniel Oliver
The news that the Federal Trade Commission is investigating Google’s search business should worry all Internet users.
The details of the FTC’s concerns about Google’s business practices are not public yet, but the assumption is that the FTC believes that when Google displays the result of a search, it gives priority to results that relate to its own services — and that there is something wrong with that.
How can people who use Google’s search engine be harmed if they are not paying for the service? Search is a free good. If the searcher is dissatisfied, try a different search engine — with a single click. Government investigators must think clicking to a different search engine is beyond the capability of Internet users. Ridiculous.
People may ask: How does Google make money if it provides answers for free? Google charges a fee for advertisements that are placed near the free answers Google provides to the searcher.
Unless Google can attract lots of searchers, it can’t charge advertising fees. Providing searchers with inferior answers would be counterproductive because the searchers would migrate to a different search engine. Another way of looking at it: Google has more interest in serving consumers than government has.
The government competition authorities may think something is wrong with Google’s products or practices. But there’s no evidence that Google’s users are dissatisfied, and there is polling that shows consumers understand they can easily switch to a competing service.
The real reason the FTC and the Texas attorney general are investigating Google is that Google’s competitors are unhappy. But government should be skeptical, always, when competitors complain.
There are two types of claims the FTC might make against Google. One is that Google is violating the antitrust laws by misusing its position in the search industry (it handles a nearly two-thirds of searches conducted on general search engines in the U.S.). The other is that Google is engaging in “unfair methods of competition,” which are prohibited by Section 5 of the FTC Act.
The problem with a claim based on normal monopolization theory, of course, is that Google hasn’t raised the prices it charges its users for search because Google doesn’t charge its users anything for search.
That means that the only possible monopolization claim against Google would be that Google is an “essential facility,” a designation that imposes certain obligations. But that claim has no merit. More details are in our white paper available at http://www.limitedgovernment.org.
Another problem with the monopolization claim is that the high-tech industry changes quickly, certainly too quickly for government to keep up with.
The claim that Google’s practices are unfair leads inevitably to problems, a central one of which is: what on Earth does “unfair” mean?
What Google’s competitors claim is that Google’s listing its services or products ahead of its competitors’ is unfair because Google’s services or products are in fact inferior.
Can it be that the FTC should get into the practice of evaluating the millions of services and products offered on the Internet by Google and all its competitors in an effort to decide which are superior and which inferior? Preposterous.
Search is a part of the fast-moving, high-tech world. Everything we know about government regulation tells us that the quality of searches would get worse, not better, if government regulated them. Government is inevitably basing its actions on what they know, which, by definition, is what happened yesterday.
In the search business there is neither market failure nor consumer harm. Even if there were, the market would solve the problem long before government regulators could figure out what was wrong or how to fix it.
l Don Racheter is chief operating officer of the Public Interest Institute, a non-profit, non-partisan public policy research organization in Mount Pleasant. Daniel Oliver, FTC chairman from April 1986 to August 1989, is a consultant to Google. Comments: Racheter@LimitedGovernment.org or DoliverSr@gmail.com