A Critical Assessment of the Latest Charge of Google's Anticompetitive Bias from Yelp and Tim Wu

ICLE Antitrust & Consumer Protection Research Program White Paper 2016-3

28 Pages Posted: 13 Oct 2016  

Geoffrey A. Manne

International Center for Law & Economics (ICLE)

Ben Sperry

International Center for Law & Economics (ICLE)

Kristian Stout

International Center for Law and Economics

Date Written: September 19, 2016

Abstract

Late last year, Tim Wu of Columbia Law School (and now the White House Office of Management and Budget), Michael Luca of Harvard Business School (and a consultant for Yelp), and a group of Yelp data scientists released a study claiming that Google has been purposefully degrading search results from its more-specialized competitors in the area of local search.

The basic thesis of the study is that Google purposefully degrades its local searches (e.g., for restaurants, hotels, services, etc.) to the detriment of its specialized search competitors, local businesses, consumers, and even Google’s bottom line — and that this is an actionable antitrust violation.

But the study is marred by methodological problems that, in the first instance, make it impossible to draw any reliable conclusions. Nor does the study show that Google’s conduct creates any antitrust-relevant problems. Rather, the construction of the study and the analysis of its results reflect a superficial and inherently biased conception of consumer welfare that completely undermines the study’s purported legal and economic conclusions.

As we discuss in detail in the paper, the study suffers from the following problems:

Methodological Problems

1. The study is based on an insufficiently small and narrow data set
2. The study is based on a flawed measure of consumer welfare
3. The study is designed with biased search terms and biased search intent that don’t accurately represent the way Google is used
4. The authors’ interpretation of the study’s results is unsupported by the data

Economic and Legal Problems

1. “Bias” is not inherently anticompetitive
2. There is no legal basis for imposing upon Google a duty to deal with competitors like Yelp
3. Antitrust law protects competition, not competitors’ idiosyncratic wish lists
4. Yelp hasn’t been harmed by Google — quite the opposite, in fact

Yelp, represented by the study’s authors, may find fault with Google’s search results because it would prefer something it perceives as better for Yelp. But in terms of the evidentiary, economic, and legal prerequisites for converting such a preference into a successful antitrust case, the Wu, et al. study falls woefully short.

Keywords: Google, Search Bias, Search Neutrality, Antitrust, Yelp, Foreclosure, Competition

JEL Classification: K00, K21, K23, L10, L12, L40, L41, L42, L43, O31, O33, O38

Suggested Citation

Manne, Geoffrey A. and Sperry, Ben and Stout, Kristian, A Critical Assessment of the Latest Charge of Google's Anticompetitive Bias from Yelp and Tim Wu (September 19, 2016). ICLE Antitrust & Consumer Protection Research Program White Paper 2016-3. Available at SSRN: https://ssrn.com/abstract=2850665 or http://dx.doi.org/10.2139/ssrn.2850665

Geoffrey A. Manne (Contact Author)

International Center for Law & Economics (ICLE) ( email )

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Suite 207
Portland, OR Oregon 97232
United States
503-770-0076 (Phone)

HOME PAGE: http://www.laweconcenter.org

Raymond Sperry

International Center for Law & Economics (ICLE) ( email )

110 Maryland Ave, NE
Suite 407
Washington, DC District of Columbia 20002
United States
8147245659 (Phone)
8147245659 (Fax)

Kristian Stout

International Center for Law and Economics ( email )

3333 NE Sandy Blvd., Suite 207
Suite 300
Portland, OR Oregon 97232
United States
5037700076 (Phone)
5037700076 (Fax)

HOME PAGE: http://www.laweconcenter.org

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