Competition for Defaults: The Fight for Virtual Shelf Space

Abstract

In 2017, the European Commission fined Google $2.7 billion for privileging Google products in its own search results. The decision sent shockwaves throughout the US and is sure to spark renewed debate about the competitive effects of own-content search bias. To date, however, antitrust scholarship still analyzes this conduct largely within the traditional neoclassical economics framework it has always used, analogizing search bias to the placement of certain products on “prime shelf space” in brick-and-mortar stores, such as Target or Walmart. Although search rankings on a webpage do function similarly to shelving in a brick-and-mortar store, this Article argues that the analogy is incomplete. In reality, consumers are more sensitive to the placement of product options in a virtual setting, raising the stakes for “search bias” beyond what is contemplated by neoclassical economics. To explain consumers’ heightened sensitivity in the online setting, this Article employs key insights from behavioral economics — a discipline that has yet to meaningfully penetrate US antitrust analysis. Specifically, this Article is the first attempt to explain the competitive effects of search bias using the behavioral economics concept of defaults. It uses empirical evidence to argue that, when firms compete for prime virtual shelf space, they are really competing to become the “default option” for consumers. Empirical evidence increasingly shows that consumers do not behave with strict rationality when reviewing search results; instead, consumers gravitate to the highest ranked options despite potentially more relevant returns further down the page. In short, this Article suggests that default positions significantly nudge consumer decision making and reduce consumer choice in ways currently underappreciated by antitrust literature. When used by a firm with significant market power, these nudges may be powerful enough to foreclose rivals and lead to anticompetitive effects. Indeed, when nudges operate with enough force, firms may no longer be competing on the basis of their “superior skill, foresight and industry,” but instead using their market power to leverage consumer inertia and hold competition at bay.

Keywords: behavioral law and economics, antitrust, search bias, own content search bias, antitrust law, competition law, private-label brands, consumer choice, antitrust and technology