Trust, Anti-Trust and Google

Design by Arjav Jain
Written by Vignesh

The latest version of android dropped recently and it raised a small buzz in the tech community, a refinement of Android 10 which itself was a refinement of 9 and so on. The era of revolutionary software changes seems to be over. The omnipresent Google search and service integration are still present as a sense of despair sets in. It becomes hard to imagine an alternative to android and a world without google. Competitors have fizzled out. It’s either google and its play store monopoly or its apple’s app store monopoly. We grow more aware of the privacy practices of Google with every new documentary and book, but we cannot think of a viable alternative, it simply is more convenient to stay with Google, cheaper to stay with Android. The end of the internet might be easier to imagine than the end of Google

This month the US Department of Justice filed a lawsuit against Google. It has been more than 20 years since anything of a similar magnitude took place, the last instance being the suit the government brought and won against Microsoft radically transforming the trajectory of that company. The skyrocketing levels of valuation and market power amassed by Google and big tech have kept regulatory hawks circling about them for a while. But for a long time, Anti-Trust law didn’t have the teeth to cut into the internet economy. That might be about to change.

It was 1911, Standard Oil had become one of the largest corporations in US history, controlling nearly 90% of all oil output production and refinement. It had amassed enormous market power and used it to eliminate all competition through acquisition, merger and simplifying using its financial might to undercut and force competition out of business. Then the supreme court ruled it as an illegal monopoly and broke it up into 34 different companies. There has been one other case of the U.S. breaking up a company over the grounds of a monopoly, which was AT&T in 1984.

The story of Standard Oil is important because we see the same themes re-emerge in big tech today. Amazon is an obvious comparison, it too has amassed immense market power, it frequently underprices products to eliminate competition and has quite frankly grown too big. We see how deep its pockets are in India where it has quite effectively overcome our Flipkart.

But Amazon is not the only comparison. Every player of big tech commands a near-monopoly on some frontier and has enough might to keep any challengers at bay.

The European Union arguably has a much stronger Anti-Trust law and has been legally embroiled with Google, Facebook, and others over the last decade. It has fined them for privacy violations and has made strides adopting a more comprehensive legislative framework to address privacy and data concerns. However, none of this has been an existential threat to these companies.

In the U.S. over the last few years calls have been made to break up big tech,  Facebook’s failure to curb misinformation on their platform in 2016 potentially changing the election, brought the issue to the forefront of lawmakers. Anti-trust has enjoyed a bipartisan consensus in periods but has seen waning emphasis since the 60s. The fact that anti-trust sees enthusiastic support only for big tech is politically revealing. There are numerous other sectors in the economy that have seen increasing market power and concentration, but none have the same headline-grabbing, politically mobilizing the power of big tech.

The timing of the lawsuit has raised some eyebrows as well, with less than a month to go before the election results. Trump has made his disdain for the social media companies clear since 2016 they have been getting better at flagging misinformation and false claims to his detriment. But support for scrutinizing big tech has been strong amongst the Democrats as well, Senator Elizabeth Warren in her run for the Democratic nomination had to break up big tech as a major part of her political agenda. But even with a political consensus winning the case against google might not be an easy task.

The trouble lies with the way anti-trust law has been written and practiced. Google doesn’t price any of its services/products. Consumers are replaced by users who avail of its myriad of products at no apparent cost, Google will even argue that its data harvested advertising is a benefit for consumers. Google will say its users choose Google over its competitors every time. But that story starts to look less convincing when we look at the volumes of money Google pays Apple to integrate its search with its products(14-21% of Apple’s profits), which puts a price on being the default option. Google integrates its search into every Android device on the market. Google’s Chrome browser accounts for nearly 70% percent of the total browser market share.

22 years ago the department of justice brought the lawsuit against Microsoft because it bundled its Internet Explorer browser as default with its operating system, to the detriment of Netscape, a rival browser. The internet has grown only orders of magnitude more valuable since. A survey of the most important findings of behavioral psychology immediately will inform us about the value of being the default option, people go with defaults and finding an alternative to a given default is something most people never do. That’s just the tip of the iceberg, behavioral manipulation facilitated by copious amounts of data to sustain monopoly and amass market power is a new reality the law has to face.

This immense sophistication behind data and behavior manipulation is difficult to capture with a law intended for oil tycoons, and railway barons. Recently anti-trust law has been looking at short-term consumer welfare with less regard to producer and overall market health. A legacy of the Chicago school of economics, the anti-trust doctrine shifted away from economic paradigms that assessed the structure of the market to a much more narrowly defined scope on the impact on consumer prices. This has enabled horizontal mergers which involve the acquisition of a competitor and vertical mergers which involve the acquisition of firms in the general supply chain to escape unscathed. To address big tech, the anti-trust doctrine needs to come back to market structure and firm conduct, analyzing the very foundations of competition.

This will be a long-drawn-out fight, the lawsuit with Microsoft lasted nearly a decade. Even if the government loses the fight the very presence of scrutiny will dramatically impact Google’s conduct over the next few years. The implications for the rest of big tech however is unclear, a victory will set the precedent for anti-trust for years to come, enabling the further pursuit of big tech. Only time will tell what the new frontier for Google will be.


References :

Cecilia Kang, David McCabe and Daisuke Wakabayashi, “ U.S. Accuses Google of Illegally Protecting Monopoly”, The New York Times.

Lina M. Khan, “Amazon’s Antitrust Paradox’’,  The Yale Law Journal.

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