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Competition agencies repair tech markets

Because markets do not fix themselves

Google apologists claim that technology markets do not require intervention as they change quickly and repair themselves before regulators can.

No self correction

Every technology monopolist facing antitrust enforcement has made the same claim.  IBM did it in the 1970s and 1980s.  Microsoft did it in the 1990s and 2000s.  If one were to believe the claims of the three behemoths – IBM, Microsoft and Google – who have dominated the information technology landscape over the past 50 years, no antitrust enforcement would ever have been appropriate in this sector.  The truth is that each of these companies have dominated the industry for long periods of time, and there is little reason to believe that Google will lose its market power any time soon.  There is, in fact, little evidence that technology markets correct themselves over any period of time that would negate the need for antitrust enforcement.

In 2000, Microsoft argued to a U.S. court that “the software industry has quickly moved beyond the events that were placed at issue in this case.”  (See page 18 of the transcript of Microsoft’s closing argument at the Microsoft trial in Washington).  Microsoft went on to argue that “this industry continues to change both rapidly and unpredictably, and in ways that are inconsistent with the notion that Microsoft can control the nature or pace of that change.”

Unleashing competitive forces

The truth is that Microsoft continued to dominate the overall information technology landscape for well after it made these arguments, and indeed retains market power in key markets to this day.  It was only the European Commission’s decision in 2004 that finally brought changes to Microsoft’s conduct.  Microsoft became a different company, focused on actual competition law compliance, and this unleashed competitive forces from which consumers are benefiting today.  The same was true following the European Commission’s settlement with IBM twenty years earlier, in 1984.

In short, it has been competition law enforcement, not market evolution, that has disciplined – to the benefit of competition and consumers — the very few companies that have dominated the information technology landscape over the past decades.  Even if market evolution has eventually contributed to re-allocation of market power from one behemoth to another, market forces such as network and (especially today) data scale effects have enabled these companies to maintain their dominance for long periods of time.  And competition law enforcement has been necessary to protect consumers from the abuses of these dominant companies.

Entrenched monopoly

Google has been saying that its position in the search market has been in peril ever since the European Commission began investigating it five years ago.  The truth is that its search monopoly remains at least as entrenched as it was when Google first began making claims about its imminent demise.  And the search market remains a vital market in today’s economies, with huge implications for consumers.  If Google is allowed to continue delivering search results that line its pockets instead of results that are best for consumers, antitrust law will have failed to achieve its fundamental purpose. The European Commission’s formal charges against Google’s practices in the comparison shopping market show that Google has decimated competition in this market and has been delivering comparison shopping search results that make Google the most money rather than provide consumers with the best deals.  Market evolution is doing nothing to save consumers from this fate.  Only competition law enforcement will do so: Until the Commission finally condemns this conduct, Google will for the foreseeable future continue expanding its anticompetitive practices in search and consumers will continue to suffer.

Even if it were true that changes in market circumstances ultimately tend to reduce a firm’s market power, would this be a reason to leave consumers in the cold and abdicate any enforcement against dominant firms for the long periods of time during which they remain dominant?  Adopting dominant companies’ claims that antitrust enforcement is unnecessary and inappropriate in technology markets would effectively write antitrust laws out of existence for one of the most significant parts of today’s economy.  It would give dominant technology firms free reign to engage in unlimited abuses for undetermined periods.

Enforce the law

Antitrust laws exist for a reason.  They are founded on the proposition that it is primarily competition that spurs innovation, appropriate prices and overall consumer benefit.  History has shown that this proposition is correct, and that antitrust laws have played a key role in ensuring vibrant competition, including competition in technology markets.  We are unlikely to see the end of history any time soon, and antitrust laws should be enforced in all markets as history has shown they should.

– Brussels, 10 May 2016