The DOJ is moving in the right direction on antitrust
Washington Examiner
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The Department of Justice is suing Google for monopolizing digital advertising.
As we have been saying for some time, the tech giant has used anti-competitive tactics, including its 2008 acquisition of the ad servicing company DoubleClick and its 2009 acquisition of the mobile advertising company AdMob, to build a digital advertising monopoly.
Thanks to these acquisitions, which should not have been approved by regulators at the Federal Trade Commission to begin with, Google now controls the biggest system publishers use to offer ad space, the biggest system advertisers use to buy ad space, and the exchange that matches buyers and sellers.
In the indictment, the DOJ notes that one Google executive described the company’s control of the market thus: “The analogy would be if Goldman or Citibank owned the New York Stock Exchange.” That is about right, and it is very wrong.
This week’s lawsuit follows a 2000 DOJ lawsuit, also against Google, alleging that the company entered into exclusionary agreements with device manufacturers and web browsers that pushed consumers to use their search engine product.
Taken together, these two cases signal a much-needed rethinking of how antitrust law is interpreted. Before the 1970s, the Supreme Court employed multipronged, highly subjective legal standards that left firms with little guidance on what any one judge might or might not consider a violation of the Sherman Act.
The court has since developed a simpler “consumer welfare standard” test that makes enforcement more uniform. Unfortunately, the consumer welfare standard has become too narrowly focused on both court rulings and law enforcement guidelines. Too often, the price for a product paid by consumers has been the only factor considered when judging whether a company’s behavior has been anti-competitive or not. This allowed firms such as Google to escape antitrust enforcement since so many of its products — search on Google, video on YouTube — are free, at least in terms of price tag and dollars, to consumers.
But price was never the only consideration in the Sherman Act more broadly or the consumer welfare standard more narrowly. What about quality delivered to consumers? If Google, which does not invest in producing news, is capturing the profits of publishers that do produce news, thus lowering the overall quality and quantity of news produced, isn’t that also bad for consumers?
As the DOJ complaint shows, that is exactly what is happening. By monopolizing the digital advertising market, Google is capturing revenues that would otherwise have gone to news publications, including this one. And instead of using that money to invest in better news publishing, Google distributes its ill-gotten profits to its investors.
Both the DOJ’s search engine case and its new digital advertising case will take years to go through the courts. Congress can speed up this process now by passing the Journalism Competition and Preservation Act, which would create an antitrust exemption for small publishers that want to work together to make Big Tech firms — Google, Facebook, etc. — pay them more for their content.
Acquisitions such as Google’s 2008 purchase of DoubleClick and Facebook’s 2012 takeover of Instagram should not have been approved by antitrust regulators to begin with. It is good to see them moving in the right direction now.
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