Google Shopping — How the EU’s market competition policy is on the wrong track

The European Union has just levied the biggest fine in its history for essentially product innovation, and it has left many antitrust practitioners and scholars scratching our heads. The EU’s decision to fine Google $2.7 billion for displaying Google Shopping at the top of its Search page is not only misguided, it will likely be a tremendous drag on future innovation.

To understand the scope of the problem, it’s important to know how the EU decision is a tremendous break from U.S. antitrust policy. In the U.S., we have spent over 50 years grounding our policy with the principle that anti-competitive conduct requires consumers to be the ones being harmed, while harm to competitors is not enough and may even be a sign of healthy competition. Using these principle, the Federal Trade Commission took a long hard look at Google Shopping and unanimously agreed (in accordance with the staff’s recommendations) that there just wasn’t any evidence of consumer harm.

Looking at the EU case, we see a much different conversation. There is much talk about how the way that Google designs its search results page is unfair to competitors and that not enough consumers are clicking on competitors’ links. But where is the rigorous analysis of consumer harm? Where is the consumer outrage against Google’s practices?

Google Search is no longer a ten-blue links engine, it is an answer engine. This is the natural evolution of search and most search companies, not just Google, are moving in that direction. These search engines are betting on the belief that many consumers want to have answers to many of their queries as quickly and conveniently as possible.

Google Shopping is a part of this new iteration that benefits users with more relevant, useful results. The EU decision rejects this pro-consumer product design decision and forces Google to keep its product anchored to the less useful past. This decision couldn’t be better designed to put Google at a competitive disadvantage for attracting consumers.

The message the EU decision is sending is dangerous. Not only is the EU substituting its own judgment for the market’s, it’s telling innovators to be careful with how they improve their products in the future. Innovations that benefit consumers but hurt competitors are now in the crosshairs. Tech companies should be nervous about being too successful at giving consumers what they want.

Of course, we should also remember that Google Search users have choice. Not only can they switch engines if they don’t like Google Shopping, they can also simply scroll down. The only way consumers can be harmed is if they were somehow trapped using Google Shopping. Rather, consumers are clearly able to use competing products, seeing how product search competitors like Amazon and eBay are thriving.

The EU’s decision in the Google Shopping case marks a competition policy that is severely off the rails. Without the guiding principles of consumer harm and economic evidence we will end up in a world where consumers suffer and innovation is shunned instead of rewarded. However, maybe then less effective competitors might be happy.

David Balto is an antitrust attorney based in Washington, D.C.. He previously served as policy director at the Federal Trade Commission and as an attorney in the Justice Department’s Antitrust Division. He is an expert in antitrust, consumer protection, financial services, intellectual property and healthcare competition. He has been a senior fellow at the Center for American Progress and has worked with the International Center on Law and Economics, both of which receive funding from many organizations including Google. Balto has also published research and authored scholarship for Google on technology policy topics.

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