Is Alphabet-Google 'too big to jail'? The Lords find out
Or is it just a Microsoft lobbying campaign?
Europe's examination of Big Tech's dominant platforms – like Alphabet-Google and Amazon – is only just beginning, but Parliament got a teaser of the battles ahead this week, as two antitrust professors sharply disagreed on the merits of the enquiry.
Professors David Evans, of UCL, and Ariel Ezrachi, of Oxford University, at least agreed on one thing: that regulating competition in today's online market place was tricky.
Authorities are aware of the dangers of getting it wrong," Ezrachi said, "so not to send a signal that would chill competition".
The two academics had been invited to give evidence before the House of Lords' EU Internal Market Sub Committee.
Evans thought the market place was so vigorous and the platforms' hold over users so weak, that it was all a fuss about nothing. Why regulate, he said, when "everything changes every couple of years?" He blamed it all on Microsoft for "lobbying".
Ezrachi gave five reasons that there may be cause for concern – and these highlighted key differences in Europe's approach to competition compared to the approach in the United States. Europe was more aggressive with monopolists and tended to intervene when the processes of competition were threatened, while US authorities didn't, he explained. With the platforms, "data driven network effects" were a potential factor in harming competition.
"Economics of scale make you much stronger, much quicker… which erects barriers to newcomers. It doesn't mean the market is not dynamic," he said. What he called "superplatforms" have so much data from big analytics, they get a unique and real-time view of the market.
Today's platforms like Amazon can engage in targeted tracking, resulting in almost perfect price discrimination, Ezrachi explained. That raises a potential transfer of welfare from the pockets of consumers to platform operators. And Ezrach also wondered if the market dominated by the big plantations was actually as dynamic as all that. "Behind the veil" there is slightly less competition.
The two disagreed politely about whether punters can switch from one platform to another.
"The empirical evidence suggest that most users, if search results are not what they expect, will not try to change," Ezrachi told the Committee. “The switching costs [to another search engine ]… are perceived to be much higher.”
He noted that Google clearly values being the default – paying around $1bn to Apple to be the default in iOS last year, according to Morgan Stanley.
Google had twice paid fines and people carried on using Google. "We're not sophisticated consumers," the professor noted.
The trickiest issue for regulators could be quality. Consumers like to get free stuff, and it's hard for consumers to know those free services could actually be a lot better.
Evans didn't have much time for the complaints.
"If you benefit one group of stakeholders make sure the benefits outweigh the penalties suffered by consumers or small business," he said. A line we can expect to hear from Alphabet (Google) over the next few months and years.
Federal regulators' lack of interest in pursuing Google, despite its dominant position and complaints about market abuse, was the subject of a congressional probe this year. Politically appointed FTC commissioners declined to take action, against their staff's advice.
"It is way beyond coincidence that several former employees of, or consultants to, Google, are positioned in most every major federal policy or law enforcement area of commercial interest to Google Inc," notes critic Scott Cleland, in a post entitled "Does US antitrust law apply to Google?"
State attorneys continue to probe Google's conduct, but with federal regulators reluctant to worry the Chocolate Factory, the Digital Citizens' Alliance group wonders if Google is "too big to jail".
Europe's probe into platforms will hinge on whether it can make a convincing case for quality suffering, and whether the data dominance of Amazon and Google means they own so much of the market as to exclude competitors we can't even imagine yet. ®