The Corner

Fortress Europe: The EU vs. Google

One of the fondest conceits of those that defend the EU is that is some sort of bastion of the liberal economic order. It’s certainly better from that point of view than other variants of a European Union might have been, but that’s not a high bar.

Writing for the Library of Economics and Liberty, Pierre Lemieux looks at the EU’s current antitrust suit against Google (my emphasis added):

The EC accusation illustrates how antitrust can be used as a protectionist instrument and a coercive tool by less-efficient competitors. More generally, it reveals the poverty of the standard antitrust doctrine, which ignores the fact that the pursuit or maintenance of a dominant market position gives firms a strong incentive to innovate. This doctrine is blind to the fragile and temporary character of any market dominance not protected by government regulation. It downplays the fact that market dominance crucially depends on how one defines the relevant market. The attack against Google ignores the huge value that Google has created by providing services that are essentially free for the individual consumer. And note the irony of the whole confrontation: the European Union, a large non-competitive organization, charges a private company with abusing an uncertain market position.

One important lesson of the antitrust attacks against Google is a Public Choice lesson. The action of the EC follows complaints by Google competitors on the European market, including Foundem (a British price comparison website), Expedia, and Microsoft. These complainants obviously called for government action because they could not compete against Google by simply persuading customers to patronize them instead. They sought protection from the state, which amounts to what Public Choice analysts call rent-seeking.

Protectionist interests may also lurk behind the EC’s attack against Google, a company whose headquarters are located in Silicon Valley. The day before the charges against Google were announced, Günther Oettinger, the EC’s so-called “digital commissioner,” publicly complained that “our online businesses are today dependent on a few non-EU players,” warning that “this must not be the case again in the future.” Because governments are clubs of producers more than associations of consumers, a Public Choice analyst would expect the European authorities to cater to European businesses’ dissatisfaction with a large American company taking away some of their digital business….

… Antitrust arguments are especially unpersuasive in fluid and innovative high-tech markets. Google did not even exist 20 years ago. In the late 1990s, the dominant search engine was Alta Vista. Veronica, another major Internet search engine, had just recently gone out of fashion. The U.S. Department of Justice sued Microsoft for antitrust violations in 1998, the very year Google was founded. Before that, IBM spent 13 years fighting antitrust action by the U.S. government; the case was dropped in 1982, about the time personal computers were starting to challenge Big Blue’s dominant position. The antitrust authorities are usually one battle behind. Today, many competitors, such as social networks—most notably Facebook—challenge Google’s position. (Google tried to compete against Facebook with Google+, but obviously failed.)

 There is some irony in Google being attacked by governments, which are not exactly competitive sorts of enterprises. The danger of the concentration of power lies in government, not in private businesses, which can always be challenged on the market and gain entrenched power only through government protection and privilege. Moreover, large private organizations provide a barrier to state power.

I’d add that in this case the ‘government’ that is attacking Google is the EU, a post-democratic construction accountable to no one. It is true that its antitrust rulings (the EU Commission effectively acts as both prosecutor and judge in these cases) can be appealed to the EGC (the EU’s General Court), but that’s an oligarch court not famous for rocking the boat.

And this is also true:

[W]e have many economic and philosophical reasons to defend Google against the perverse antitrust system. The system is perverse because once in place, it is an open call for rent-seeking and retaliation. Google itself used it to complain against Nokia and Microsoft before the EC. Google is not known as a staunch defender of free markets.

But amusement at the spectacle of a biter bit, is no reason, as Lemieux writes, not to defend “Google’s freedom of contract against the European Leviathan or any other Leviathan.”

And meanwhile, the TTIP trade talks continue between the US and its EU ‘partner’. I wonder how good an idea that really is.  

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