The announcement on 15 April 2015 that the DG Comp is moving its investigation of Google’s alleged abuse of its dominant position in the online search market to the next phase by sending out a Statement of Objections, brings to the fore again one of the most challenging and interesting themes in antitrust law: the balance between innovation and competition.
As for the various Microsoft cases, this one as well may be seen as a dispute amongst rival innovators. One allegedly using its power in the upstream market of online search (where it holds a 90% share) to promote its own innovating product (here, “Google Shopping”, a so called comparison shopping service ); on the other side smaller, non integrated providers facing difficulties in reaching consumers with their competing offers, due to supposed obstruction by Google.
The Commission’s preliminary conclusions are that the way Google’s rivals services appear in search result pages does not reflect their merits . As the Commission puts it, “incentives to innovate for rivals are lowered as they know that however good their product, they will not benefit from the same prominence as Google's product”.
But this sort of case always raises another issue: limiting the use of market power of innovating companies (that may have obtained their large market shares as the very result of the success accorded by consumers to their innovations, i.e. as reward of their efforts) may also result in lesser incentives to innovate: the dominant players’ incentives.
Another way at looking at the matter is to think of different groups of affected consumers. A first group is made up of those who are currently in the market for comparison shopping services, the market where the alleged abuse occurs: these are the consumer who would be deprived access to alternative (and possibly better) products they would otherwise purchase. A second group of consumers is made up of those who will enter the relevant market (or surrounding markets) in the longer term. This latter group may be incapable of exploiting the benefits of all possible innovations if a decision condemning the dominant player for such a practice would result in the abandonment or in a reduction of investment in research and development.
Which of these conflicting interests deserves to prevail? What is the appropriate test to balance the restriction of competition on one side and the detriment to innovation on the other? How can we go about predicting and measuring long term effects on R&D efforts?
Despite the uncertainties inherent in these sorts of evaluations (giving rise to a never ending debate on what is the appropriate policy), the initiative of DG Comp seems to be grounded on a very peculiar feature of European antitrust law: a set of criteria for balancing matters originally designed in the 1957 Rome Treaty for restrictive agreements, but in recent times applied as a general rule and thus also in evaluating abuses of dominance.
This is the requirement that, when it comes to assessing the countervailing value of efficiencies, a “fair share of the resulting benefits” must be given to consumers. The Commission has so far interpreted this clause as meaning that the consumers to be taken into consideration are the current consumers of the product of service where the abuse occurs (the victims of the abuse must be compensated). This in turn means that long run benefits alone (like those stemming from increased R&D investment by the dominant firms which would accrue possibly to future consumers, but not enjoyed by the current victims of the abuse) should not be included in the balancing exercise.