When we think of Google, we think of the innovative internet-giant known for their search engine and loved for all kinds of application making our lives easier. The reputation of google has always been the one of a friendly company, not considering that this company is trying to cut competitors out of the market since many many years with partly illegal methods.
But what am I talking about? So try to google “laptop” or “smartphone” or basically everything you want and you gonna realize that Google presents Google-Shopping results just over all other search results. With this approach Google bundles it’s search engine with their own shopping comparison site and is, at least in the eyes of the EU-commission, stifling innovation and acting to the users detriment (EU-Commision, 2016). The mechanism, Google is using, is generally called “entry deterrence”. Entry deterrence refers to the act of leveraging a monopoly position in one market to gain a monopoly position in a second market through bundling products or services together (Whinston, 1990). In the case of Google this theory would implicate that Google has a monopoly position in the search-engine industry, which is from a statistical point of view true, and would like to transfer this monopoly to the market of price comparison (statista, 2014).
But why should that bother us and what impact does this bundling approach has on our lives? The EU-commission is highly concerned that consumers are not necessarily capable of seeing the most suitable search results in this price comparison, because Google isn’t applying their own penalty system for price comparison websites to their own price comparison Google-Shopping (EU-commission, 2015). Furthermore Google is lowering the innovation in this market, because competitive shopping comparisons are aware of the fact, that individuals will see Google’s shopping results before the ones of their own comparison website(EU-commission, 2015). A follow up question is now, what will be the consequences for Google, if the lawsuit against the EU-commission will end to their detriment?
First of all, the EU-commission wants Google to stop favoring its own product comparison service by not exposing it the their penalty system as well as listing it above the regular search results. Furthermore Google will be fined for using anti-competitive methods. Just god knows how high this fine will be, but it can be as high as 10% of Google’s revenue (Neslen, 2015). This would be approximately 6 billion euros (Neslen, 2015).
In my opinion I don’t know if Google is really affecting the competition or if it is detrimental for the general public or not. The actual point is, that Google uses the bundling in several sectors, not online in the search-shopping combination, to expand their market power and that everybody of us is forced to consume the bundle, whether we want to or not.
References:
http://europa.eu/rapid/press-release_IP-16-2532_en.htm
http://www.haas.berkeley.edu/Courses/Spring2000/BA269D/Whinston90.pdf
