Archives For tradecomet

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.

CLICK HERE TO DOWNLOAD THE PAPER


TradeComet’s antitrust suit against Google has been dismissed by the S.D.N.Y. Court in which the case was being heard.  The opinion is available here.

The holding:

Google has now moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(3) for improper venue based on a forum selection clause in the parties’ advertising contracts. Because TradeComet’s claims fall within the scope of the relevant forum selection clause that requires that this action be brought in California, and because enforcing that clause would be neither unreasonable nor unjust, Google’s motion to dismiss is granted.

Of course this does nothing to the substantive claims, but it does require that they be brought–if they are brought again at all–in Santa Clara County, CA (as the forum selection clause dictates).

Of more interest to law . . talking . . guys may be the following:

TradeComet contends that the forum selection clause is unconscionable because—it claims—Google enforces it selectively, it is found within a contract of adhesion, and it would force TradeComet to litigate its claims in Google’s “backyard.”

To me these claims are meritless on their face.  The court also had no trouble dismissing them and here–citations omitted–is the court’s complete response to the claims:

However, TradeComet offers neither evidence to support its allegation of selective prosecution nor legal authority indicating that such behavior—if true—would make a forum selection clause unconscionable and thus unenforceable. Additionally, the fact that the August 2006 Agreement may or may not be a contract of adhesion does not invalidate its forum selection provision.  Finally, although litigating these claims in California rather than New York likely will be more burdensome for TradeComet, which has its principal place of business in New York, there is no suggestion that it would be so difficult as to deprive TradeComet of a fair opportunity to litigate its claims.

I only wish the court had pointed out that Google enters into an incredible number of these agreements.  Whatever burden ex post it places on each of Google’s counterparties that the terms be identical between the contracts and that they specify Google’s “backyard” as the venue for any litigation, the magnitude of the burden it would impose on Google to separately negotiate and track terms for each advertiser and to litigate each agreement in a different court is several orders of magnitude larger.  I can see no reason whatever that a court should ever entertain an argument to invalidate such terms.  The unconscionability argument is, well, unconscionable.

UPDATE:  Aruna Viswanatha at Main Justice is also on the case, as it were.