Google Antitrust Lawsuit

What You Need to Know about Google’s Antitrust Lawsuit

November 21, 2020

 

Tobias Baer shares an article on the latest Google news and the regulation of Big Tech. He explores the impact of Google’s algorithms on e-commerce and the commercialization of the internet. 

In spite of its limited scope, the DOJ’s antitrust complaint against Google already highlights three fundamental issues of e-commerce and the commercialization of the internet. The first is about industrial organization – how to create a digital market structure that isn’t monopolized through natural network and scale effects? The second issue is the bundling of services especially in areas where due to information asymmetry, consumers don’t see the true cost of their decisions (as they pay with their data) and hence are highly vulnerable to exploitation. The third issue is the important role of design as a key trigger of human behavior – an aspect where governments still are playing catch-up with the latest insights of psychology and behavioral economics.

Before offering two specific solutions to the problem, I want to briefly explain these three issues.

Monopolization of e-commerce

The DOJ’s allegations of anticompetitive behavior is the latest evidence that the internet, rather than democratizing seller and buyer relationships and giving more power to consumers by getting rid of the “middle man”, has enabled the creation of powerful new quasi-monopolies. Such creation of dominating platforms is driven not only by network effects (e.g., just as we benefit from everyone speaking the same language, it also benefits us to communicate through the same channel or app) but also because of an inherent need for risk management, as I’ve argued in an earlier article. I learned already in Industrial Organization 101 that in such situations regulations need to create a market structure protecting a balance of forces between sellers and buyers – sadly my teacher did not explain exactly how to do this for the internet (which back then was in its infancy)!

 

Key points include:

  • The high cost of bundling
  • The psychology of design
  • A regulated code of conduct

 

Read the full article, What Google’s antitrust lawsuit means, on LinkedIn.