Regulators & Politicians Get It Wrong On Tech. Again.
Despite one of the ugliest and most politically polarized elections in the country’s history, Republicans and Democrats alike have united behind a landmark Department of Justice (DOJ) lawsuit challenging a purported monopoly in the big tech space. It threatens to break tech goliath Google up over its dominance in the search engine and online advertising market, and is expected to receive a formal reply from Google by 21 December. Central to the case is the DOJ’s claim that Google abuses its dominance to illegally maintain a monopoly by extracting concessions from other companies that would be impossible in a competitive market. However, this rationale is misguided. By attempting to interfere in a market that is, in fact, competitive and continues to benefit consumers, it risks undermining the welfare of those whom it seeks to protect while diminishing the competitiveness of American companies against their international peers.
At the heart of the lawsuit are Google’s contracts with tech companies that integrate the tech giant’s Android operating system and search services. These contracts pay hardware producers like Samsung and Apple, and browsers like Mozilla Firefox and Apple’s Safari, to make Google their default search engine. They also require mobile manufacturers that use Google’s Android operating system to pre-install and bundle applications including Gmail, Google Maps and Youtube.
The DOJ contends that these arrangements could harm consumers since Google offers an inferior quality search product — one that harvests and utilizes more of their data while offering fewer privacy protections. They argue that Google gets away with this data robbery without losing its market share to competitors simply because consumers tend to prefer pre-installed defaults, even if alternatives are accessible on the market.
This claim is absurd. Firstly, while it’s true consumers are less likely to deviate from default options, this doesn’t imply that a market is uncompetitive or that the products they stick with are surviving despite their “inferior quality.” Take the infamous 1998 antitrust lawsuit against Microsoft. It alleged that the company wasn’t playing fair by bundling its Internet Explorer browser with its Windows operating system, thereby nudging consumers away from alternatives. Over 20 years later, despite its ongoing leverage in the operating system market, Microsoft has ceased supporting Explorer due to widespread consumer preference for Google Chrome, Mozilla Firefox and the like. And while it’ll still bundle Windows with its Edge browser, competition in the browser space remains fierce despite the default advantage.
There’s nothing keeping consumers from seeking out different services today. If consumers truly valued privacy in choosing their preferred search engine, then they would be leaving Google in droves, opting for one of the myriad of viable alternatives. That this isn’t happening, despite widespread awareness about data privacy issues and intense public debate around laws intended to address them, confirms the findings of studies showing that over half of all consumers don’t mind companies using their data if they get some benefit in return. The same studies find that a further quarter of consumers are entirely unconcerned about the use of their data.
Decisions weighing the importance of data privacy should remain with consumers, not leviathan regulators who think they know better.
Search engines are also able to better serve consumers precisely because they are able to harvest data from willing users to calibrate results and target advertising. Rather than simply relying on data obtained from those who use its search engine, Google leverages data from its other applications as well. This is exactly what lets it deliver a better search product. And it benefits not only consumers, but also businesses, especially small businesses, paying for advertising. Google’s data helps these enterprises better find and build awareness among their intended customer base than they could otherwise.
Google’s competitors are harmed only to the degree that they’re incapable of offering a preferable product as they’d likely need to harvest the same amount of user data in order to do so. Stopping Google from gathering data will do nothing to improve its competitors’ product.
Finally, threatening to break up companies by virtue of their dominant market share and ability to leverage that dominance across multiple services will only threaten American companies’ competitiveness in the global tech space.
Take Europe: The lack of modern European tech giants and the difficulties Europe’s tech companies face in competing against larger foreign rivals, like American multinationals or China’s Huawei, has been blamed on factors including a lack of venture capital and risk-averse investors. European antitrust regulation that make it harder for companies to leverage economies of scale, or to merge with or acquire other companies, contribute to these issues by deterring growth and investment. Shifting the approach of U.S. antitrust law in that direction would be a step backward.
Antitrust lawsuits are resource-intensive and notoriously difficult to win at the best of times. They also come at taxpayers’ expense. The lawsuit against Google has dire implications for search engine users, small businesses, and the international competitiveness of American firms. With a national economy in dire need of healing from the Covid-19 recession and runaway government debt that’ll be footed by our kids and grandkids, the DOJ’s ill-advised lawsuit couldn’t come at a worse time.
Satya Marar is a Policy Analyst at Reason Foundation and a Tech Policy Fellow at Young Voices.