Disclosure: I serve as a consultant to various companies that compete with Google. That work is ongoing and covers varied subjects, most commonly advertising fraud. I write on my own—not at the suggestion or request of any client, without approval or payment from any client.
Google often argues that “competition is one click away” — as if Google’s many successes result solely from competition on the merits. Let me offer a different perspective: After early success in search and search advertising, Google used its strength in those sectors to increase its likelihood of success elsewhere — even where competitors’ offerings were objectively preferable and even where consumers would have preferred alternatives had that choice been genuinely available.
For example, in September 2013 web sites buzzed with the news that users would be required to create Google+ social networking accounts to comment on YouTube videos. There was no obvious reason why a user should need to join Google’s social network in order to post a brief comment on a video. Indeed, for years users had routinely posted via separate YouTube accounts. Google claimed that improvements would increase the quality of YouTube comment discussions and to prevent spam, but there was no obvious reason why those benefits required using Google+. That said, critics quickly saw the strategic implication: Google+ was years late to the market; other social networking services were far better established and already enjoyed much more success. But Google could use its other powerful properties, YouTube among others, to increase the pressure for users to join Google+.
Nor was Google+ unusual in benefiting from Google’s other products. In the context of mobile phones and tablets, Google had established a series of restrictions requiring that if a manufacturer sought to install any Google service–such as Maps, YouTube, or the Google Play store for installing other apps from Google and others–the manufacturer must accept a variety of obligations. For example, the manufacturer must install all the Google apps that Google specified–even if the manufacturer preferred another app. Furthermore, Google required that apps icons be placed in the locations that Google specified, including multiple entries on the device’s prominent “home” screen. The device must use Google Location Services, not competitors’ offerings, even if competitors’ offerings were faster, more accurate, or more protective of privacy. And manufacturers must take all these actions for Google’s benefit without any payment from Google. As a result, competing apps had to struggle to reach users–resorting to soliciting user installations one-by-one, rather than faster and more predictable bulk installations by device manufacturers.
Most obviously, Google’s core search service systematically favors Google results. Search for a stock ticker symbol, and you’re encouraged to go to Google Finance. If a video is deemed relevant, it will almost always be from YouTube. And so on. Sometimes these services are just as good for consumers; sometimes, not. But for any user unwilling to spend extra time requesting other services–day in and day out, ad infinitum–Google’s offerings become the easy and obvious defaults in every affected sector. Yelp may be a little better or even a lot better. But when Google puts Google Local front and center, many users will go there instead.
Today I’m posting an article exploring a series of incidents where Google used similar methods–broadly, tying and bundling–to expand its dominance into additional markets. In each market, I present the details of Google’s approach, then assess concerns under antitrust law. Selected examples:
| If a ___ wants ___ | Then it must accept ___ |
| If a consumer wants to use Google Search | Google Finance, Images, Maps, News, Products, Shopping, YouTube, and more |
| If a mobile carrier wants to preinstall YouTube for Android | Google Search, Google Maps (even if a competitor is willing to pay to be default) |
| If an advertiser wants to advertise on any AdWords Search Network Partner | All AdWords Search Network sites (in whatever proportion Google specifies) |
| If an advertiser wants to advertise on Google Search as viewed on computers | Tablet placements and, with limited restrictions, smartphone placements |
| If an advertiser wants image ads | Google Affiliate Network (historic) |
| If an advertiser wants a logo in search ads | Google Checkout (historic) |
| If a video producer wants preferred video indexing | YouTube hosting |
| If a web site publisher wants preferred search indexing | Google Plus participation |
My bottom line: Google’s use of tying portends a future of reduced choice, slower innovation, lower quality, and higher prices. To date, Google has focused its harshest terms on advertisers, but after paying Google some $60+ billion each year, advertisers recoup these expenses through higher prices to consumers. Meanwhile, if a broad class of opportunities are effectively off-limits to competitors because Google either has claimed those sectors or is positioned to be able to claim them whenever it chooses, the incentive to invest is sharply attenuated. These are exactly the practices that competition law seeks to prevent.
My full article:
Leveraging Market Power through Tying and Bundling: Does Google Behave Anti-Competitively?
(update: published as “Does Google Leverage Market Power Through Tying and Bundling?” Journal of Competition Law & Economics 11, no. 2 (June 2015): 365-400.)