Judicial Remedies To Restore Competition in the Market for General Search

Yale Tobin Center for Public Policy. Judicial Remedies To Restore Lost Competition in the Market for General Search. September 4, 2024 (Working Draft). by Fiona Scott Morton, David Dinielli, Alissa Cooper, Gene Kimmelman, Margaret O’Grady. “The Trial – Last month, a United States federal judge found Google (today known as “Alphabet”) liable for illegal monopolization of the general search market. The finding of liability feels in some ways unexpected: courts in the United States, particularly appellate courts whose decisions can appear influenced more by policy and ideology than by evidence, have been trending in a conservative direction in competition cases. On the other hand, it’s relatively easy to conclude that Google is a monopolist and engaged in monopolization. Google holds 94% of the general search market on mobile and has held a similar share for a decade. One of the ways it has maintained its hold on this market is an arrangement with Apple—its most threatening competitor—that compensates Apple for staying out of the search market. Each year, Google pays Apple more than $20 billion (US) to make Google search the exclusive default at all search access points on Apple’s operating systems. Each company benefits from the arrangement: Google maintains its monopoly and Apple gets a share of the monopoly rents. The arrangement, however, also plainly kneecaps current rivals and discourages the development of potential rivals in the search market. One of the findings of the trial (long known in the economics discipline) is that consumers stick with a default choice even when taking just a few minutes to adjust the settings on their handset would give them a different search engine. Default status is therefore economically valuable and, were it available, would be the best way for entering search engines to gain customers. But these exclusive contracts make it virtually impossible for a rival search entrant to outbid Google for a default position on iOS. Rivals therefore cannot get access to compete for the millions of Apple users. And it is not only third parties that the Apple-Google contract blocks. It also eliminates any incentive for Apple to develop its own search engine. Why would Apple bother trying to develop its own search engine to compete with Google’s when, with no effort at all, it can earn billions of dollars just by making Google’s search engine the default on all of Apple’s devices?…”