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R. Shyam Khemani, Aug 22, 2014
At the core of the widely acknowledged economic and social benefits accruing from the internet are the internet search engines such as Bing, Google, and Yahoo!, among several others. These search engines act as intermediaries by providing timely and relevant information sought by internet users, and connect those users to suppliers of various products and services.
In the development and evolution of the internet information search industry, there have been marked increases in the number of search engines as well as churning, i.e., entry-exit and changes in their respective ranks. This is to be expected in new, dynamic, fast-changing and innovative industries, especially as the internet and related service providers are generally viewed as still being in the “infancy” stage of development. Without this dynamic competitive process (which the Austrian economist, Joseph Schumpeter termed “creative destruction”), there would be less or no technological change and progress. During any given time period, some firm(s) are likely to emerge as leader(s), while others may decline in their market position or exit. This process is especially characteristic of the internet search engine industry.
Google has emerged as a leading internet search engine in several countries. Various allegations of anticompetitive practices have prompted investigations by different competition authorities. In this regard, we note that most of the investigations are in response to complaints by rivals rather than consumers—contrary to a basic tenet of the objectives of competition law: To protect and promote the competitive process in order to maximize consumer welfare, but not to protect competitors.
In this connection, it is critical for any competition authority investigating alleged dominance and abuse of dominant market position to ascertain if a firm’s market position—such as Google’s—is a result of anticompetitive business practices in violation of competition law and, further, to establish whether there are appreciable adverse effects on consumers; namely, the principal users of the internet search engine. Equally, competition authorities need to ascertain if a firm’s alleged dominant market position stems from “superior competitive performance” over rivals. Finally, they must ensure that competitors are not misusing competition law to: (i) impose costs through unnecessary litigation, (ii) tarnish the leading firm’s reputation, and/or (iii) detract its management from better serving its customers.
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Competition, Innovation, and Dynamic Change in the Internet Information Search Industry
