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September 2012 Policy Study, Number 12-10

   

The Federal Trade Commission’s Investigation of Google

   

The Unfairness Claim

   

 

The claim that Google’s practices are unfair is, obviously, a much broader claim. It leads inevitably to problems, a central one of which is: what does “unfair” mean?

 

Supreme Court Justice Potter Stewart famously wrote, in the 1964 case of Jacobellis v. Ohio, that although he could not define hard-core pornography with precision, “I know it when I see it.” Alas, defining unfairness is not that easy.

 

How do we define fairness? In most of the cases that affect ordinary people, it doesn’t make a huge difference. But when an agency of the federal government accuses a large company like Google of unfairness, it can have a major effect on how all large companies do business going forward. And that can have a serious effect on consumer welfare.

 

When a searcher asks Google, for example, for directions or for a type of restaurant (e.g., Vietnamese cuisine), Google will probably display, as the first answer, one that includes a Google map and perhaps the phone numbers of several restaurants. Other maps, and other direction services, exist of course, and the argument of Google’s competitors is that Google should not always display its map first. Google’s preference for its own maps over other maps is said to be unfair.

 

But why should Google display a competitor’s product? And why should it display a product over which it has no quality control? How could Google be sure that the phone numbers of Vietnamese restaurants listed by Google’s competitors are correct? Remember that Google’s business model is to produce the best possible search experience it can for the searcher in order to entice him to return again and again so Google can charge fees for its advertising space. If Google thinks a competitor has a better answer than the Google product, it is in Google’s advertising business’s interest to display the competitor. And if Google were required to show no map at all, how would that help the searcher? And think through the analogies here: is Microsoft required to sell Apple’s MacOS? Is McDonald’s required to sell Burger King’s burgers? Under what theory then may the government require Google to showcase a competitor’s service on its site?

 

The point to understand is that Google’s incentive is to produce the most useful answers to questions, not (necessarily) links to other (competitive) websites. One of Google’s chief competitors, and complainants, Microsoft, does just what Google does: Microsoft promotes its services through its search engine, Bing, and explicitly says that it offers answers, not links. What’s unfair about that?

 

What Google’s competitors claim is that Google’s listing its services or products ahead of its competitors’ is unfair because Google’s services or products are in fact inferior. Yelp’s CEO has complained specifically that Google is attempting “to take an inferior product and put it in front of the user.”[14]

 

Setting aside the point that providing inferior information to searchers is not in Google’s advertising business’s interest, can it be that the Federal Trade Commission should get into the practice of evaluating the hundreds of thousands, or millions, of services and products offered on the Internet by Google and all its competitors in an effort to decide which are superior and which inferior? The idea is preposterous.


   

 

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