Will antitrust become a geopolitical matter?
By Alberto Mingardi
The EU Commission has fined Google 2.4 billion euros for abusing its dominant position when it comes to its Google Shopping service. This is just one of the Google competition cases going on in Europe right now. In the very same press release that announces the verdict, the Commission soberly mentions that it has “already come to the preliminary conclusion that Google has abused a dominant position in two other cases, which are still being investigated,” one concerning AdSense and one concerning the Android operating system. Stating that the Commission has already reached a conclusion and at the same time that the cases are still being investigated is a bit bizarre. It sounds like: we think you’re guilty, but we’re still searching for evidence. This reminded me of a paper by my colleague Serena Sileoni, who scrutininzed antitrust legal proceedings in the European Union.
Still, it is perhaps not inconsistent with the mindset of a prosecutor, who is after all trying to demonstrate her own proposition.
The EU decision sparkled lots of comments. ITIF, a Democrat-leaning think tank, seems to agree with TechFreedom, an organisation led by Berin Szoka and that has a rather critical take of antitrust enforcement.
In his comments on the matter, Berin makes plenty of sense to me, outlining the apparently negligible regard for the consumers’ perspective in the EU’s own press release; the arbitrary nature of market definition, particularly in an area as ebullient as e-commerce; and the fact that subjective intent, internal memos and “investigative” works are apparently more relevant for the decision than economic analysis.
Deirdre McCloskey wrote on monopoly (and how it “has dramatically fallen
1800 to the present, not risen”) in this yet unpublished paper, which deals with economics and “imperfections”. The Google Shopping case makes me think precisely of argument Professor McCloskey made. That is, today regulators and the public seem to be overly concerned with bigness: we fear big companies, for they may influence consumer behaviour in a substantial way. I always find it a bit curious that those who fear semi-coercive strategies by big business do not care about the full stop coercive practices of big government, but that’s another matter. But if we think about the effect of monopoly in a consumer’s life, this doesn’t necessarily correlate with the impact of the “size” of the businesses she is dealing with. When I was a kid, in my neighbourhood we had just a couple of groceries, one right down the street from my grandparents’ house. Though it was obviously convenient for us, I remember distinctively the place for three reasons: (a) supplies were low quality and old-ish; (b) prices were very high; and (c) we always suspected the owner was cheating us, making us pay for more prosciutto than we got.
Because my parents were working in another town, on their way back they frequently stopped in a larger store, getting better and cheaper stuff. When this wasn’t possible, we were forced to patronize the more convenient, but inferior, family shop next door, so we ended up going there far more often than we wished.
What a liberation it was when a department store opened a block away! We got cheaper stuff, more variety, and, quite frankly, better things than in the small shop that was virtually monopolising a neighbourhood.
My sense is that something similar is happening with e-commerce. I understand people who are concerned with big G and others messing around with data (though I’m more preoccupied with governments messing around with data). But when it comes to online shopping, I have difficulty not agreeing with Berin, who thinks the Commission has taken sides with competitors rather than taking the viewpoint of consumers.
Another item, however, worries me more than the case itself (whose minutiae we’ll learn when more documents are made available). It is the fact that European antitrust disputes are easily turned into geopolitical problems when they involve US companies. It has always been so, starting with GE/Honeywell back in 2001. But I think this is all the more likely when antitrust bodies move in rather uncharted waters, like in high-tech sectors. The lack of precedents, the fact that often scholars and analysts have legitimate disagreements themselves, makes it easier for the press to read the different cases as struggles between sovereign powers. This happened even in times when the US-EU relationships were more serene than now.
Part of it is just journalistic speculation, but part of it is due to the fact that for quite a few European commentators antitrust is but another means to pursue a kind of industrial policy. Read, for example, Professor Höppner of Technical University Wildau, who argues that the decision is actually going to foster an environment for investment and innovation and maintains that since “even the smallest publishers, broadcasters, telecoms providers and radio channels are subject to media-specific regulations” and “there are no such requirements for search or other web services”, the EU commission had better take an active role.
Many well-meaning people think that by thwarting US tech giants, the EU Commission is helping the rise of European ones. But is attempting to create entrepreneurial success by antitrust means really a good idea? Would that benefit consumers? If so, at what cost?