dragon slot machine Breaking Up Google Would Be a Big Mistake
There’s no question that Google dominates the world of internet search. But in attempting to open up this critical industry to more competition, the government is pursuing a cure worse than the disease. If the government is successful at breaking up Google, history tells us that consumers and many enterprises tied to our vast and flourishing internet may ultimately pay a price.
Judge Amit P. Mehta of the D.C. Federal District Court ruled earlier this year that Google, which the Justice Department claims controls over 90 percent of online search, illegally maintained a monopoly by paying manufacturers such as Apple to make Google the default search engine on their products. Last week, the Justice Department and a group of states presented the judge with a plethora of proposed remedies. Not only should Google be required to stop paying others for default status, it must also sell Chrome, its popular web browser. It would also be barred from making itself the default search engine on its own products and disallowed from preferring its own products in search results.
The entire point of antitrust law is to promote competitive markets. Antitrust remedies are not designed to punish a wrongdoer but rather to correct the effects of a monopoly. The test for a successful remedy is whether the market becomes more competitive, with higher output or a better experience for consumers.
At this point, the Justice Department has not sufficiently explained why its proposed actions are an appropriate remedy. Some of the proposals were not addressed at any length in the judge’s opinion in the Google trial at all. Others would split up complementary products, which often leads to poorer quality outcomes and higher coordination costs, both of which would be passed on to consumers. If the government gets everything it wants, the result could remove some of the features that have made Google products so successful and result in a fractured system that requires greater user effort to get inferior results.
History has shown us that courts are generally poor instruments for restructuring industries. Too often they simply make firms less competitive. The record of success is particularly poor in situations involving highly innovative companies that, like Google, have developed mainly by internal growth, rather than through acquisitions.
Breaking up Standard Oil in 1911 created firms too small to be as efficient as their predecessor was, which coincided with an increase in the price of gasoline mainly caused by increased demand. And breaking up United Shoe Machinery in 1968 was followed soon after by that firm’s closure as an independent entity.
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