Today ICLE released a white paper entitled, A critical assessment of the latest charge of Google’s anticompetitive bias from Yelp and Tim Wu.
The paper is a comprehensive response to a study by Michael Luca, Timothy Wu, Sebastian Couvidat, Daniel Frank, & William Seltzer, entitled, Is Google degrading search? Consumer harm from Universal Search.
The Wu, et al. paper will be one of the main topics of discussion at today’s Capitol Forum and George Washington Institute of Public Policy event on Dominant Platforms Under the Microscope: Policy Approaches in the US and EU, at which I will be speaking — along with a host of luminaries including, inter alia, Josh Wright, Jonathan Kanter, Allen Grunes, Catherine Tucker, and Michael Luca — one of the authors of the Universal Search study.
Follow the link above to register — the event starts at noon today at the National Press Club.
Meanwhile, here’s a brief description of our paper:
Late last year, Tim Wu of Columbia Law School (and now the White House Office of Management and Budget), Michael Luca of Harvard Business School (and a consultant for Yelp), and a group of Yelp data scientists released a study claiming that Google has been purposefully degrading search results from its more-specialized competitors in the area of local search. The authors’ claim is that Google is leveraging its dominant position in general search to thwart competition from specialized search engines by favoring its own, less-popular, less-relevant results over those of its competitors:
To improve the popularity of its specialized search features, Google has used the power of its dominant general search engine. The primary means for doing so is what is called the “universal search” or the “OneBox.”
This is not a new claim, and researchers have been attempting (and failing) to prove Google’s “bias” for some time. Likewise, these critics have drawn consistent policy conclusions from their claims, asserting that antitrust violations lie at the heart of the perceived bias. But the studies are systematically marred by questionable methodology and bad economics.
This latest study by Tim Wu, along with a cadre of researchers employed by Yelp (one of Google’s competitors and one of its chief antitrust provocateurs), fares no better, employing slightly different but equally questionable methodology, bad economics, and a smattering of new, but weak, social science. (For a thorough criticism of the inherent weaknesses of Wu et al.’s basic social science methodology, see Miguel de la Mano, Stephen Lewis, and Andrew Leyden, Focus on the Evidence: A Brief Rebuttal of Wu, Luca, et al (2016), available here).
The basic thesis of the study is that Google purposefully degrades its local searches (e.g., for restaurants, hotels, services, etc.) to the detriment of its specialized search competitors, local businesses, consumers, and even Google’s bottom line — and that this is an actionable antitrust violation.
But in fact the study shows nothing of the kind. Instead, the study is marred by methodological problems that, in the first instance, make it impossible to draw any reliable conclusions. Nor does the study show that Google’s conduct creates any antitrust-relevant problems. Rather, the construction of the study and the analysis of its results reflect a superficial and inherently biased conception of consumer welfare that completely undermines the study’s purported legal and economic conclusions.
Today’s Canadian Competition Bureau (CCB) Google decision marks yet another regulator joining the chorus of competition agencies around the world that have already dismissed similar complaints relating to Google’s Search or Android businesses (including the US FTC, the Korea FTC, the Taiwan FTC, and AG offices in Texas and Ohio).
A number of courts around the world have also rejected competition complaints against the company, including courts in the US, France, the UK, Germany, and Brazil.
After an extensive, three-year investigation into Google’s business practices in Canada, the CCB
did not find sufficient evidence that Google engaged in [search manipulation, preferential treatment of Google services, syndication agreements, distribution agreements, exclusion of competitors from its YouTube mobile app, or tying of mobile ads with those on PCs and tablets] for an anti-competitive purpose, and/or that the practices resulted in a substantial lessening or prevention of competition in any relevant market.
Like the US FTC, the CCB did find fault with Google’s use of restriction on its AdWords API — but Google had already revised those terms worldwide following the FTC investigation, and has committed to the CCB to maintain the revised terms for at least another 5 years.
Other than a negative ruling from Russia’s competition agency last year in favor of Yandex — essentially “the Russian Google,” and one of only a handful of Russian tech companies of significance (surely a coincidence…) — no regulator has found against Google on the core claims brought against it.
True, investigations in a few jurisdictions, including the EU and India, are ongoing. And a Statement of Objections in the EU’s Android competition investigation appears imminent. But at some point, regulators are going to have to take a serious look at the motivations of the entities that bring complaints before wasting more investigatory resources on their behalf.
Competitor after competitor has filed complaints against Google that amount to, essentially, a claim that Google’s superior services make it too hard to compete. But competition law doesn’t require that Google or any other large firm make life easier for competitors. Without a finding of exclusionary harm/abuse of dominance (and, often, injury to consumers), this just isn’t anticompetitive conduct — it’s competition. And the overwhelming majority of competition authorities that have examined the company have agreed.
Exactly when will regulators be a little more skeptical of competitors trying to game the antitrust laws for their own advantage?
Canada joins the chorus
The Canadian decision mirrors the reasoning that regulators around the world have employed in reaching the decision that Google hasn’t engaged in anticompetitive conduct.
Two of the more important results in the CCB’s decision relate to preferential treatment of Google’s services (e.g., promotion of its own Map or Shopping results, instead of links to third-party aggregators of the same services) — the tired “search bias” claim that started all of this — and the distribution agreements that Google enters into with device manufacturers requiring inclusion of Google search as a default installation on Google Android phones.
On these key issues the CCB was unequivocal in its conclusions.
On search bias:
The Bureau sought evidence of the harm allegedly caused to market participants in Canada as a result of any alleged preferential treatment of Google’s services. The Bureau did not find adequate evidence to support the conclusion that this conduct has had an exclusionary effect on rivals, or that it has resulted in a substantial lessening or prevention of competition in a market.
And on search distribution agreements:
Google competes with other search engines for the business of hardware manufacturers and software developers. Other search engines can and do compete for these agreements so they appear as the default search engine…. Consumers can and do change the default search engine on their desktop and mobile devices if they prefer a different one to the pre-loaded default…. Google’s distribution agreements have not resulted in a substantial lessening or prevention of competition in Canada.
And here is the crucial point of the CCB’s insight (which, so far, everyone but Russia seems to appreciate): Despite breathless claims from rivals alleging they can’t compete in the face of their placement in Google’s search results, data barriers to entry, or default Google search on mobile devices, Google does actually face significant competition. Both the search bias and Android distribution claims were dismissed essentially because, whatever competitors may prefer Google do, its conduct doesn’t actually preclude access to competing services.
The True North strong and free [of meritless competitor complaints]
Exclusionary conduct must, well, exclude. But surfacing Google’s own “subjective” search results, even if they aren’t as high quality, doesn’t exclude competitors, according to the CCB and the other regulatory agencies that have also dismissed such claims. Similarly, consumers’ ability to switch search engines (“competition is just a click away,” remember), as well as OEMs’ ability to ship devices with different search engine defaults, ensure that search competitors can access consumers.
Former FTC Commissioner Josh Wright’s analysis of “search bias” in Google’s results applies with equal force to these complaints:
It is critical to recognize that bias alone is not evidence of competitive harm and it must be evaluated in the appropriate antitrust economic context of competition and consumers, rather [than] individual competitors and websites… [but these results] are not useful from an antitrust policy perspective because they erroneously—and contrary to economic theory and evidence—presume natural and procompetitive product differentiation in search rankings to be inherently harmful.
The competitors that bring complaints to antitrust authorities seek to make a demand of Google that is rarely made of any company: that it must provide access to its competitors on equal terms. But one can hardly imagine a valid antitrust complaint arising because McDonald’s refuses to sell a Whopper. The law on duties to deal is heavily circumscribed for good reason, as Josh Wright and I have pointed out:
The [US Supreme] Court [in Trinko] warned that the imposition of a duty to deal would threaten to “lessen the incentive for the monopolist, the rival, or both to invest in… economically beneficial facilities.”… Because imposition of a duty to deal with rivals threatens to decrease the incentive to innovate by creating new ways of producing goods at lower costs, satisfying consumer demand, or creating new markets altogether, courts and antitrust agencies have been reluctant to expand the duty.
Requiring Google to link to other powerful and sophisticated online search companies, or to provide them with placement on Google Android mobile devices, on the precise terms it does its own products would reduce the incentives of everyone to invest in their underlying businesses to begin with.
This is the real threat to competition. And kudos to the CCB for recognizing it.
The CCB’s investigation was certainly thorough, and its decision appears to be well-reasoned. Other regulators should take note before moving forward with yet more costly investigations.
Last week I linked to my new study on “search bias.” At the time I noted I would have a few blog posts in the coming days discussing the study. This is the first of those posts.
A lot of the frenzy around Google turns on “search bias,” that is, instances when Google references its own links or its own content (such as Google Maps or YouTube) in its search results pages. Some search engine critics condemn such references as inherently suspect and almost by their very nature harmful to consumers. Yet these allegations suffer from several crucial shortcomings. As I’ve noted (see, e.g., here and here), these naked assertions of discrimination are insufficient to state a cognizable antitrust claim, divorced as they are from consumer welfare analysis. Indeed, such “discrimination” (some would call it “vertical integration”) has a well-recognized propensity to yield either pro-competitive or competitively neutral outcomes, rather than concrete consumer welfare losses. Moreover, because search engines exist in an incredibly dynamic environment, marked by constant innovation and fierce competition, we would expect different engines, utilizing different algorithms and appealing to different consumer preferences, to emerge. So when search engines engage in product differentiation of this sort, there is no reason to be immediately suspicious of these business decisions.
No reason to be immediately suspicious – but there could, conceivably, be a problem. If there is, we would want to see empirical evidence of it—of both the existence of bias, as well as the consumer harm emanating from it. But one of the most notable features of this debate is the striking lack of empirical data. Surprisingly little research has been done in this area, despite frequent assertions that own-content bias is commonly practiced and poses a significant threat to consumers (see, e.g., here).
My paper is an attempt to rectify this. In the paper, I investigate the available data to determine whether and to what extent own-content bias actually occurs, by analyzing and replicating a study by Ben Edelman and Ben Lockwood (E&L) and conducting my own study of a larger, randomized set of search queries.
In this post I discuss my analysis and critique of E&L; in future posts I’ll present my own replication of their study, as well as the results of my larger study of 1,000 random search queries. Finally, I’ll analyze whether any of these findings support anticompetitive foreclosure theories or are otherwise sufficient to warrant antitrust intervention.
E&L “investigate . . . [w]hether search engines’ algorithmic results favor their own services, and if so, which search engines do most, to what extent, and in what substantive areas.” Their approach is to measure the difference in how frequently search engines refer to their own content relative to how often their rivals do so.
One note at the outset: While this approach provides useful descriptive facts about the differences between how search engines link to their own content, it does little to inform antitrust analysis because Edelman and Lockwood begin with the rather odd claim that competition among differentiated search engines for consumers is a puzzle that creates an air of suspicion around the practice—in fact, they claim that “it is hard to see why results would vary . . . across search engines.” This assertion, of course, is simply absurd. Indeed, Danny Sullivan provides a nice critique of this claim:
It’s not hard to see why search engine result differ at all. Search engines each use their own “algorithm” to cull through the pages they’ve collected from across the web, to decide which pages to rank first . . . . Google has a different algorithm than Bing. In short, Google will have a different opinion than Bing. Opinions in the search world, as with the real world, don’t always agree.
Moreover, this assertion completely discounts both the vigorous competitive product differentiation that occurs in nearly all modern product markets as well as the obvious selection effects at work in own-content bias (Google users likely prefer Google content). This combination detaches E&L’s analysis from the consumer welfare perspective, and thus antitrust policy relevance, despite their claims to the contrary (and the fact that their results actually exhibit very little bias).
Several methodological issues undermine the policy relevance of E&L’s analysis. First, they hand select 32 search queries and execute searches on Google, Bing, Yahoo, AOL and Ask. This hand-selected non-random sample of 32 search queries cannot generate reliable inferences regarding the frequency of bias—a critical ingredient to understanding its potential competitive effects. Indeed, E&L acknowledge their queries are chosen precisely because they are likely to return results including Google content (e.g., email, images, maps, video, etc.).
E&L analyze the top three organic search results for each query on each engine. They find that 19% of all results across all five search engines refer to content affiliated with one of them. They focus upon the first three organic results and report that Google refers to its own content in the first (“top”) position about twice as often as Yahoo and Bing refer to Google content in this position. Additionally, they note that Yahoo is more biased than Google when evaluating the first page rather than only the first organic search result.
E&L also offer a strained attempt to deal with the possibility of competitive product differentiation among search engines. They examine differences among search engines’ references to their own content by “compar[ing] the frequency with which a search engine links to its own pages, relative to the frequency with which other search engines link to that search engine’s pages.” However, their evidence undermines claims that Google’s own-content bias is significant and systematic relative to its rivals’. In fact, almost zero evidence of statistically significant own-content bias by Google emerges.
E&L find, in general, Google is no more likely to refer to its own content than other search engines are to refer to that same content, and across the vast majority of their results, E&L find Google search results are not statistically more likely to refer to Google content than rivals’ search results.
The same data can be examined to test the likelihood that a search engine will refer to content affiliated with a rival search engine. Rather than exhibiting bias in favor of an engine’s own content, a “biased” search engine might conceivably be less likely to refer to content affiliated with its rivals. The table below reports the likelihood (in odds ratios) that a search engine’s content appears in a rival engine’s results.
The first two columns of the table demonstrate that both Google and Yahoo content are referred to in the first search result less frequently in rivals’ search results than in their own. Although Bing does not have enough data for robust analysis of results in the first position in E&L’s original analysis, the next three columns in Table 1 illustrate that all three engines’ (Google, Yahoo, and Bing) content appears less often on the first page of rivals’ search results than on their own search engine. However, only Yahoo’s results differ significantly from 1. As between Google and Bing, the results are notably similar.
E&L also make a limited attempt to consider the possibility that favorable placement of a search engine’s own content is a response to user preferences rather than anticompetitive motives. Using click-through data, they find, unsurprisingly, that the first search result tends to receive the most clicks (72%, on average). They then identify one search term for which they believe bias plays an important role in driving user traffic. For the search query “email,” Google ranks its own Gmail first and Yahoo Mail second; however, E&L also find that Gmail receives only 29% of clicks while Yahoo Mail receives 54%. E&L claim that this finding strongly indicates that Google is engaging in conduct that harms users and undermines their search experience.
However, from a competition analysis perspective, that inference is not sound. Indeed, the fact that the second-listed Yahoo Mail link received the majority of clicks demonstrates precisely that Yahoo was not competitively foreclosed from access to users. Taken collectively, E&L are not able to muster evidence of potential competitive foreclosure.
While it’s important to have an evidence-based discussion surrounding search engine results and their competitive implications, it’s also critical to recognize that bias alone is not evidence of competitive harm. Indeed, any identified bias must be evaluated in the appropriate antitrust economic context of competition and consumers, rather than individual competitors and websites. E&L’s analysis provides a useful starting point for describing how search engines differ in their referrals to their own content. But, taken at face value, their results actually demonstrate little or no evidence of bias—let alone that the little bias they do find is causing any consumer harm.
As I’ll discuss in coming posts, evidence gathered since E&L conducted their study further suggests their claims that bias is prevalent, inherently harmful, and sufficient to warrant antitrust intervention are overstated and misguided.
Josh and I have just completed a white paper on search neutrality/search bias and the regulation of search engines. The paper is this year’s first in the ICLE Antitrust & Consumer Protection White Paper Series:
If Search Neutrality Is the Answer, What’s the Question?
Geoffrey A. Manne
(Lewis & Clark Law School and ICLE)
and
Joshua D. Wright
(George Mason Law School & Department of Economics and ICLE)
In this paper we evaluate both the economic and non-economic costs and benefits of search bias. In Part I we define search bias and search neutrality, terms that have taken on any number of meanings in the literature, and survey recent regulatory concerns surrounding search bias. In Part II we discuss the economics and technology of search. In Part III we evaluate the economic costs and benefits of search bias. We demonstrate that search bias is the product of the competitive process and link the search bias debate to the economic and empirical literature on vertical integration and the generally-efficient and pro-competitive incentives for a vertically integrated firm to discriminate in favor of its own content. Building upon this literature and its application to the search engine market, we conclude that neither an ex ante regulatory restriction on search engine bias nor the imposition of an antitrust duty to deal upon Google would benefit consumers. In Part V we evaluate the frequent claim that search engine bias causes other serious, though less tangible, social and cultural harms. As with the economic case for search neutrality, we find these non-economic justifications for restricting search engine bias unconvincing, and particularly susceptible to the well-known Nirvana Fallacy of comparing imperfect real world institutions with romanticized and unrealistic alternatives
Search bias is not a function of Google’s large share of overall searches. Rather, it is a feature of competition in the search engine market, as evidenced by the fact that its rivals also exercise editorial and algorithmic control over what information is provided to consumers and in what manner. Consumers rightly value competition between search engine providers on this margin; this fact alone suggests caution in regulating search bias at all, much less with an ex ante regulatory schema which defines the margins upon which search providers can compete. The strength of economic theory and evidence demonstrating that regulatory restrictions on vertical integration are costly to consumers, impede innovation, and discourage experimentation in a dynamic marketplace support the conclusion that neither regulation of search bias nor antitrust intervention can be justified on economic terms. Search neutrality advocates touting the non-economic virtues of their proposed regime should bear the burden of demonstrating that they exist beyond the Nirvana Fallacy of comparing an imperfect private actor to a perfect government decision-maker, and further, that any such benefits outweigh the economic costs.
RSS - Posts