A European Court upholds Google's $2.8 billion fine for... advertising?

Maybe it's time to revisit the legislation when it becomes unlawful for firms to promote their own items on their own platforms.

After Google challenged a $2.8 billion punishment from an antitrust dispute in 2017, the EU's second highest court ruled against the business last week.

"The decision comes after the European Commission concluded in 2017 that Google prioritized its own comparison shopping services and penalized the corporation 2.42 billion euros ($2.8 billion) for violating antitrust laws," according to the press release, CNBC reports.

In a press release, the General Court noted that “by favoring its own comparison shopping service on its general results pages through more favorable display and positioning, while relegating the results from competing comparison services in those pages by means of ranking algorithms, Google departed from competition on the merits.”

Google Shopping is a feature that allows users to compare items and prices from various online stores. Despite the fact that other services were still included on Google's results page, Google was pushing its own service with a higher ranking. Regulators, on the other hand, found this intolerable. Google, they said, was misusing its "monopoly" status to the disadvantage of customers.

Though there are several concerns with this argument, probably the most important one is that Google is not a monopoly. True, it has a large market share, but competitors like as Bing and Duckduckgo are equally freely accessible, and nothing prevents them from stealing Google's clients by providing better services.

Another significant flaw in this judgement is that it fails to understand the gap between the platform's service and the adverts that run on it. The purpose of Google's service is to disseminate information. It generates money through advertisements. True, advertisements are intended to convey information, but this does not imply that Google is obligated to advertise on behalf of its competitors.

Consider what this judgement might imply in different scenarios to demonstrate the folly of compelling a platform to market their competitors as much as themselves. Facebook would be barred from advertising Marketplace on their platform unless they did the same for Kijiji. A monopolistic Honda dealership couldn't sell Hondas unless they also sold Toyotas in similar numbers. And, for the love of God, don't let them position the Hondas in better spots on the lot than the Toyotas.

So, why does Google give this method a pass when it's self-evidently absurd in almost every other context? One of the problems with antitrust lawsuits is that they are often arbitrary. Prosecutors have this weapon called antitrust in their hands, and it's their duty to come up with ad hoc justifications to use it. They scoff at the thought of applying their rules with any degree of regularity. Why are certain mergers halted while others are not? Why are certain businesses able to market their products on their own platforms while others are unable to do so? There are no good answers, because none of this is based on any objective criteria. In practice, it almost feels like the point is just to punish big companies for being big.

 

Of course, they say this is about helping consumers. But if this is really about consumer well being, why such an extortionate fine? And why does the money go to the government and not the users or competitors who were ostensibly harmed?

In theory, the benefit of this approach is that consumers will be better off because they will have more information about the choices that are available to them. But while it’s possible that some consumers will derive some benefit from this, there are many costs to be considered as well.

First, having more options isn’t necessarily better. As Barry Schwartz explains in his book The Paradox of Choice, being inundated with options can turn us away from choosing at all. And even if we decide to pursue one of the options in front of us, we are often less satisfied with the choice we made because we feel like we could have done better.

The capacity of a company to invest, develop, and adapt to consumer demand is also hampered by antitrust laws.

To begin with, the resources spent on the lawsuit may have been better spent assisting customers. More importantly, when businesses are restricted from expanding, merging, or even promoting their own products on their own platforms, it poses a significant hurdle to boosting consumer welfare.

Firms want to help consumers. That’s how they make profits. But they can only do so to the extent that they are free to run their business as they see fit. If their hands are tied by antitrust regulations, their ability to innovate and adapt, that is, to compete, is significantly curtailed.

As Thomas DiLorenzo notes, “it is well known to antitrust scholars that one effect of antitrust is to induce companies to be less successful than they could be out of fear of attracting the attention of antitrust regulators. It was the official policy of General Motors for many years to never let its market share top 45 percent for this very reason.”

The idea is that laws governing what corporations are permitted to do eventually stifle competition. As a result, many good ideas are stymied, not because of their economic flaws, but because they would be politically impossible to implement.

Of course, there may be instances where businesses are excessively large and should be broken up. However, customers, not politicians, must make this decision.

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