Google Antitrust Case: Belling The Big Cats

A United States federal judge on Aug. 6 ruled against Google in an antitrust case brought by the Department of Justice (DoJ) along with 38 out of 50 American states. The case refers to very large payments made by Google to Apple and other equipment manufacturers to be the default search engine on their devices. Now the DoJ is said to be mulling drastic structural remedies, including breaking up Google. Jurisdictions across the world are feverishly scrutinising big-tech firms’ conduct and business models. Many have concluded that traditional tools provided by ex-post antitrust laws are insufficient to address the uniquely new challenges presented by such firms. Ex-post, because, in principle, no business strategy is disallowed preemptively. Actions are evaluated as anti- or pro-competitive after they have been taken and appropriate remedies applied in case an action is considered anti-competitive. Led by Europe’s Digital Markets Act (DMA), new ex-ante tools have been devised where certain practices are disallowed without reference to context. In India too, the Committee on Digital Competition Law, constituted by the Ministry of Corporate Affairs, concluded that a separate set of ex-ante rules for tech companies was needed to supplement the ex-post framework provided by the Competition Act of 2002. The draft Digital Competition Bill is heavily inspired by the DMA..Apple Loses EU Top Court Fight Over €13 Billion Irish Tax Bill.So, which approach—ex-post or ex-ante—is better for India? Recent experiences in the EU are especially illuminating in this regard. Under the DMA, in June 2023, Google was designated as a “gatekeeper” to the internet, and as such, it can no longer “self-preference,” i.e., give preference on its search pages to its own products relative to those offered by competing businesses. Complying with it has meant that Google Hotel Ads, which helps you find hotels, room rates, read reviews, and locate them on Google Maps, right there on the search page, is no longer the top result. Instead, users now see a more salient menu of options, among which Google Hotel Ads is one. One also easily sees Booking.com and Kayak.com, among others. As the letter of the law intends, this change does give increased access to Google’s rivals in hotel aggregation. But does this change create the effects that the spirit of the law intended? Competition did increase for Google Hotel Ads. Within three months of Google implementing this change in January 2024, clicks on Google Hotel Ads went down 30% in the EU versus elsewhere. Ironically, this increased competition did not mean much for enabling entry and growth of small businesses. The bulk of Google’s lost click-through traffic got diverted to other large intermediaries and online travel aggregators (OTAs) like Booking.com. How did hotels fare? The volume of direct hotel bookings went down 36%. To make reservations using Google Hotel Ads, users typically navigate to the hotel website to make their final reservation. But with the DMA-induced change, they make hotel reservations on intermediary websites like Booking.com. So hotels lose direct sales to end consumers. What happened to their profits? They have been seriously impeded since their increased dependence on intermediaries means they have to pay them more commissions, which they didn’t have to pay to Google. The DMA-induced change thus moves traffic from an aggregator whose business model does not involve intermediate costs to hotels to aggregators whose business model does. Therefore, Google’s click loss became hotels’ profit loss and other large intermediaries’ gains. In fact, the losses have been large enough that hotels have recently filed a petition to the European Commission asking them to reconsider their rules. And the gains have been large enough that the commission designated Booking.com as a new “gatekeeper” in May 2024. But doing so really does nothing to address the unintended consequences for hotels..JCB, Competition Concerns, And CCI's Power Of Investigation.What changed for consumers? The seamless experience that consumers previously had with Google Hotel Ads is often not replicated on other competing websites. So now they have to go to several sources to get the same information that they used to get all in one place. Further, since hotels have to pay a commission to the intermediaries, it is unclear right now whether prices actually increased or decreased for consumers. This story has some important lessons for India. Regulation prohibiting certain firm actions works best when those actions unequivocally harm consumers, other firms, or society at large. But this is far from obvious in digital markets, where business models can be quite complex and hugely varied. It is even more unclear in younger digital markets like India, where the consequences of different digital business models cannot yet be easily classified as good or bad, where the needs of users and small businesses are quite different from those in advanced economies, and where our institutions’ experience with regulating large enterprises is relatively low. The Competition Commission of India (CCI) began functioning only in 2009. While it has done impressive work since then, it has a long way to go. The draft Digital Competition Bill has many of the same features as the DMA. It too has a stringent list of dos and don’ts (including outlawing self-preferencing) for “systematically significant digital enterprises” operating in India. However, as the above example of the myriad consequences of prohibiting self-preferencing shows, regulations can often become tools that transfer economic surplus from one set of companies to another, with the net gains to broader society uncertain. In a rapidly growing and evolving economy like India, would it be prudent to tie our hands with such broad ex-ante regulations as those proposed by the draft bill? The proposed rules will apply to our home-grown enterprises, both private and public, stalling their growth. Are we confident that it is desirable? It would be better to enforce our existing ex-post laws more efficiently. If these laws are found to not apply to big tech business models, then a few very sharp and specific ex-ante rules can be designed. Both can happen if we make our competitors bodies nimble and endow them with deep expertise. The proposal in the draft bill to constitute a Digital Markets Unit within the CCI would do exactly that and should be implemented immediately, regardless of whether a separate digital competition law is introduced or not. .Nishant Chadha is the director of policy and research, EE, Indian School of Business and Manisha Goel is an associate professor at Pomona College and a senior economist at Econ One Research..The views expressed here are those of the author and do not necessarily represent the views of NDTV Profit or its editorial team..Google Loses EU Court Fight Over €2.4 Billion Antitrust Fine

Google Antitrust Case: Belling The Big Cats

Which approach—ex-post or ex-ante—is better for India in dealing with tech giants like Google?

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