Europe\\\'s big Google antitrust case

After five years of investigation, the European Union last week accused Google of antitrust violations. To comprehend the importance of this development, a review of antitrust issues is needed.
Specifics may differ somewhat, but basic antitrust principles are the same in Europe and America. Any item produced in the U.S. uses some American resources. So the people - through the government - reasonably expect that the country's resources are used in the best manner. That is because, whenever something is produced, something else is "not produced." The simple test of efficient production is that the benefit created by making a product must equal the benefit destroyed by not making an alternative product.
Introductory microeconomics teaches us that when an item (like corn) is produced by many sellers, the amount produced will be efficient or right. But when an item (like Excel) is produced by a monopolist, the quantity will be less than efficient.
Because monopoly businesses generally make more profit, there is always a tendency for some powerful sellers to become monopolist by buying competing businesses. This tendency became widespread in the USA during the 19th century. Giant companies like Standard Oil and American Tobacco became the only businesses in their respective sectors. Because laws didn't prohibit this, government was unable to prevent this trend. A famous cartoon of that era reprinted in an economics textbook shows giant snakes (representing monopoly businesses) engulfing the dome of U.S. Capitol.
Eventually, Congress responded. The first antitrust law in the USA, the Sherman Antitrust Act, was passed in 1890. This was followed by a number of laws. The Justice Department was given charge of making sure that the new laws were properly enforced and that the U.S. marketplace remained free from the negative consequences of monopolies.
It is worth pointing out that the antitrust laws do not make monopolies illegal. What they do is make illegal any attempt to become a monopoly. That means that if my business is a monopoly for natural reasons, such as no one showing up to compete with me, I am fine. But if I try to become a monopolist by eliminating or buying the competitors, or if I make it difficult for others to compete with me, I am guilty of antitrust violations.
The European case against Google, and similar cases against big companies on either side of the Atlantic, are based on the above interpretation.
Google owns the largest search engine in Europe. Europeans use it 90 per cent of the time. Google can obviously tweak its search engine in such a way that its preferred businesses show up more frequently or more prominently than competing businesses. Very much aware of this power, Google developed a scheme to increase profits. It entered other businesses and manipulated its search engine so that Google-owned companies show up in a favourable position in any search.
For example, let us say Google purchased a real estate company in Adrian and named it Google Realty. It then re-programmes its search engine in such a way that, when someone looks for a realtor in Adrian, Google Realty shows up prominently. In the eyes of antitrust laws, this is a big violation. Google Realty with the help of Google (which have same ownership) is trying to make it difficult for other realtors to enter the business or to stay in it. According to the basic Sherman Act, Google is engaged in an "attempted monopolisation."
That's basically what happened in Europe where Google gave preferential treatment to a shopping service it owns, Google Shopping. So if a shopper in Europe is looking to buy a colour TV and uses Google, Google Shopping service will be listed for the shopper more prominently than any competing shopping services. This will lead to more power and more profit for Google Shopping.
Google is facing fines that may exceed $6.0 billion. It may also be asked to change the way it does business there. In its defence, Google may say that although Europeans use it as general search engine 90 per cent of times, when it comes to shopping for specific items, companies like Amazon are ahead of Google.
When I mention the antitrust case against Microsoft, some students at Adrian College where I teach grow concerned. They think Microsoft is doing a great service to America. True, but Microsoft did crowd out other operating systems such as DOS and other software such as WordPerfect, Netscape and Lotus. And many new products could not come to daylight because of the actions of Microsoft. I also ask them to consider that, if other companies did not let Microsoft grow, we would miss the beautiful products it offers.
If antitrust laws were not created beginning in 1890, Americans today would be buying gas, cigarettes, financial services and many other things from one company. There would be no innovation or growth, and the people would be paying a lot more for inferior products.
The writer is a professor and chairman of the Economics Department at Adrian College, Michigan, USA. professorhabib@gmail.com