Our search neutrality paper has received some recent attention. While the initial response from Gordon Crovitz in the Wall Street Journal was favorable, critics are now voicing their responses. Although we appreciate FairSearch’s attempt to engage with our paper’s central claims, its response is really little more than an extended non-sequitur and fails to contribute to the debate meaningfully.
Unfortunately, FairSearch grossly misstates our arguments and, in the process, basic principles of antitrust law and economics. Accordingly, we offer a brief reply to correct a few of the most critical flaws, point out several quotes in our paper that FairSearch must have overlooked when they were characterizing our argument, and set straight FairSearch’s various economic and legal misunderstandings.
We want to begin by restating the simple claims that our paper does—and does not—make.
Our fundamental argument is that claims that search discrimination is anticompetitive are properly treated skeptically because: (1) discrimination (that is, presenting or ranking a search engine’s own or affiliated content more prevalently than its rivals’ in response to search queries) arises from vertical integration in the search engine market (i.e., Google responds to a query by providing not only “10 blue links” but also perhaps a map or video created Google or previously organized on a Google-affiliated site (YouTube, e.g.)); (2) both economic theory and evidence demonstrate that such integration is generally pro-competitive; and (3) in Google’s particular market, evidence of intense competition and constant innovation abounds, while evidence of harm to consumers is entirely absent. In other words, it is much more likely than not that search discrimination is pro-competitive rather than anticompetitive, and doctrinal error cost concerns accordingly counsel great hesitation in any antitrust intervention, administrative or judicial. As we will discuss, these are claims that FairSearch’s lawyers are quite familiar with.
FairSearch, however, grossly mischaracterizes these basic points, asserting instead that we claim
“that even if Google does [manipulate its search results], this should be immune from antitrust enforcement due to the difficulty of identifying ‘bias’ and the risks of regulating benign conduct.”
This statement is either intentionally deceptive or betrays a shocking misunderstanding of our central claim for at least two reasons: (1) we never advocate for complete antitrust immunity, and (2) it trivializes the very real—and universally-accepted–difficulty of distinguishing between pro- and anticompetitive conduct.
First, we acknowledge the obvious point that as a theoretical matter discrimination can amount to an antitrust violation in some cases under certain specific circumstances—not the least important of which is proof of actual competitive harm. To quote ourselves:
The key question is whether such a bias benefits consumers or inflicts competitive harm. Economic theory has long understood the competitive benefits of such vertical integration; modern economic theory also teaches that, under some conditions, vertical integration and contractual arrangements can create a potential for competitive harm that must be weighed against those benefits . . . . From a policy perspective, the issue is whether some sort of ex ante blanket prohibition or restriction on vertical integration is appropriate instead of an ex post, fact-intensive evaluation on a case-by-case basis, such as under antitrust law. (Manne and Wright, 2011) (emphasis added).
This is not much of a concession. While FairSearch tries to move the goalposts by focusing on a straw man proposition that search bias is categorically immune from antitrust scrutiny, this sleight of hand doesn’t accomplish much and reveals what FairSearch is missing. After all, consider that almost every single form of business conduct can be an antitrust violation under some set of conditions! The antitrust laws apply in principle to (that is, do not categorically make immune) horizontal mergers, vertical mergers, long-term contracts, short-term contracts, exclusive dealing, partial exclusive dealing, burning down a rival’s factory, dealing with rivals, refusing to dealing with rivals, boycotts, tying contracts, overlapping boards, and all manner of pricing practices. Indeed, it is hard to find categories of business conduct that are outright immune from the antitrust laws. So—we agree: “Search bias” can conceivably be anticompetitive. Unfortunately for FairSearch, we never said otherwise and it’s not a very interesting point to discuss.
With that point firmly established, one can return focus to the topic FairSearch painstakingly avoids throughout its response and on which we think the issue really does (and should) turn: Where’s the proof of consumer harm?