On Tuesday, the European Commission opened a formal antitrust investigation into Google to probe allegations that the firm rigged its search engine to discriminate against rivals.
However, competition policy analysts at the Competitive Enterprise Institute warn that the European Commission's intervention in the online search market will distort the market's evolution, discourage competitors from innovating, and ultimately hurt consumers.
CEI Vice President for Policy Wayne Crews comments that Google isn't a monopoly now, but the more it tries to become one, the better it will be for us all. When capitalist enterprises strive to earn a bigger market share, rival firms are forced to respond by trying to improve their offerings, so even if Google is delivering biased search results, it is only paving the way for competitors to break into the search market.
"Before resorting to tired old competition laws, European policy makers should remember that the Internet economy is hardly understood by anybody including by regulators," Crews contends. "We are in terra incognita; no one knows how information markets will evolve. But one thing is for sure: Online search technology cannot evolve properly if it is improperly regulated. Why make risky investments in hopes of revolutionising online markets if marvelous success means regulation and confiscation?"
CEI Associate Director of Technology Studies Ryan Radia notes that, "The real threat to consumers is not from successful high-tech firms like Google, but from overreaching government interventions into competitive market processes. As economists have documented in scholarly journals, antitrust intervention is especially problematic in the information age, because it severely underestimates the critical role of innovation in dynamic high-tech markets.
"The European Commission is wrong to assume that Google possesses monopoly power," Radia continues. Google accounts for just six per cent of all dollars spent on advertising in Europe. And even loyal Google users regularly find websites through competing search engines like Bing or through social websites like Facebook and Twitter.
"In the information age, ingenuity not market power is the key to success. America's high-tech sector is strewn with former market leaders who were no match for the relentless forces of creative destruction. Rapid, unpredictable change is the hallmark of the modern digital economy. Google may be on top in many high-tech markets today, but it won't stay there for long unless it keeps innovating and delivering a superior search product."