European regulators have totally missed the point about Google and monopolies

 
Sam Bowman
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Fair-goers use laptops at the US search
There's a reason there are no European tech giants to regulate in the first place (Source: Getty)

When is a monopoly not a monopoly? When it’s big – but fragile. That’s why it was such a mistake to go after Microsoft in the 1990s for pre-installing Internet Explorer on Windows machines.

Microsoft had a big share of the market, yes, but it has been eclipsed by rivals like Android, iOS, and Linux. Today, Windows machines only account for 14 per cent of new devices sold annually.

Google is today’s Microsoft. Once again, the European Commission regulators who have fined Google €2.4bn say that software bundling takes advantage of a software “monopoly”. By putting results from Google Shopping (Google’s price comparison tool) at the top of searches for consumer products, they claim that Google is basically a monopolist that can force its other products on users.

Set aside that Google Shopping is useful to people who wouldn’t think to use a price comparison site otherwise. Ignore the fact that Google’s real rival in online shopping is Amazon, which is actually a much bigger player in that space.

The Commission’s biggest mistake here is to think that competition cannot take place between platforms, so it must be forced within them. Having a large market share does not mean you necessarily are a monopolist. In the absence of physical or legal barriers to entry that keep out other rivals, having a huge market share could just be because you have the best product – for now.

If Google is only dominant because it has the best product, anything it does that hurts its users will strengthen its competitors. If prioritising Google Shopping really is bad for users, then rivals that do it differently will have something extra in their favour. Indeed, Microsoft’s Bing has explicitly advertised on the basis of its shopping search being better. Apple, Amazon and Facebook have all beaten Google in other areas. If any could come up with a search engine that gave better results than Google’s does, users would switch in droves.

Competition between search platforms is much more important than competition within them. It wouldn’t matter if an Apple Search engine gave special priority to Apple products if, overall, it was a better product and users could switch to it. As long as competition between products exists, the product itself can be extremely tightly integrated. Proof of this is the success of the iPhone, where Apple is often extremely strict about forcing users to use its own apps, compared to Google’s relatively open and flexible Android platform.

This integration is what funds the other products we use for free, like Google Search and Android. If Google makes money from Shopping, but gets you there from Search, it has revenue and incentive to improve the latter – which is good for lots of things apart from finding new pairs of shoes to buy, and useful for users overall. Android makes no money at all, but because it gets users to use Google’s other products that do make money, the company invests heavily in it.

The Commission will kill the model if it’s not careful, at least in Europe.

Some have said that the European Commission only ever seems to punish American tech firms, not European ones. The reason is simple. Because of rulings like this, there are no European tech giants to regulate in the first place.

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