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ESSAYS ON THE FUTURE OF THE INTERNET
Edited by Berin Szoka & Adam Marcus
THE NEXT DIGITAL DECADE
ESSAYS ON THE FUTURE OF THE INTERNET
Edited by Berin Szoka & Adam Marcus
THE NEXT DIGITAL DECADE: ESSAYS ON THE FUTURE OF THE INTERNET 419
The Problem of Search Engines
as Essential Facilities: An
Economic & Legal Assessment
By Geoffrey A. Manne
\hat is wrong with calls íor search neutralitv. especiallv those rooted in the
notion oí Internet search or. more accuratelv. Google. the policv scolds` bête
noir oí the dav, as an essential íacilitv.` and necessitating go·ernment-
mandated access· As others ha·e noted. the basic concept oí neutralitv in
search is. at root. íarcical.
1he idea that a search engine. which oííers its users
edited access to the most rele·ant websites based on the search engine`s
assessment oí the user`s intent.
should do so neutrallv` implies that the search
engine`s eííorts to ensure rele·ance should be cabined bv an almost-limitless
range oí ancillarv concerns.
Ne·ertheless. proponents oí this ·iew ha·e begun to adduce increasinglv detail-
laden and complex arguments in ía·or oí their positions. and the Luropean
(ommission has e·en opened a íormal in·estigation into Google`s practices.
based largelv on ·arious claims that it has svstematicallv denied access to its top
search results in some cases paid results. in others organic results, bv
especiallv ·ertical search engines.
1o mv knowledge. no
Lxecuti·e Director. International (enter íor Law & Lconomics and Lecturer in Law. Lewis
& (lark Law School. !!!"#$!%&'(&%()%*"'*+:
´ee. e.g.. Dannv Sulli·an. )be ívcreaibte ´tvpiaity ot ívre.tigativg Coogte tor .ctivg íi/e a ´earcb
ívgive. SLAR(l LNGINL LAND. 4))56//7%$*&4%(+8(%#$(-"&'3/)4%98(&*%-8:#%97).58-8)19
'098(;%7)8+$)8(+9+''+#%90'*9$&)8(+9#8,%9$97%$*&49%(+8(%9<=>?@ A search engine`s job is
to point vou to destination sites that ha·e the iníormation vou are seeking. not to send vou
to other search engines. Getting upset that Google doesn`t point to other search engines is
like getting upset that the New \ork 1imes doesn`t simplv ha·e headlines íollowed bv a
single paragraph oí text that savs read about this storv in the \all Street Journal.``,.
A remarkable íeat. gi·en that this intent must be iníerred írom simple. context-less search
Períectlv demonstrated bv lrank Pasquale`s call. elsewhere in this ·olume. íor identiíving
search engines as essential cultural and political íacilities.` therebv mandating incorporation
into their structure whate·er cultural` and political` preíerences anv suííicientlv-iníluential
politician or law proíessors, happens to deem appropriate.
(ompeting ser·ices include. íor example. MapOuest !!!"3$5A.%7)"&'3, competing
with Google Maps,. Veoh !!!";%'4"&'3, competing with \ou 1ube, and Bing Shopping
!!!":8(+"&'3/74'558(+, competing with Google Products,.
Vertical search engines are search engines that íocus on a particular categorv oí products. or
on a particular tvpe oí search. Lxamples include Kavak !!!",$1$,"&'3, tra·el search,.
420 CHAPTER 7: IS SEARCH NOW AN “ESSENTIAL FACILITY?”
one has vet claimed that Google should oííer up links to competing general
search engines as a remedv íor its percei·ed market íoreclosure. but Microsoít`s
experience with the Browser (hoice Screen` it has now agreed to oííer as a
consequence oí the Luropean (ommission`s successíul competition case
against the companv is not encouraging.
1hese more superíiciallv sophisticated
claims are rooted in the notion oí Internet search as an essential íacilitv`-a
bottleneck limiting eííecti·e competition.
1hese claims. as well as the more íundamental harm-to-competitor claims. are
diííicult to sustain on anv economicallv-reasonable grounds. 1o understand this
requires some basic understanding oí the economics oí essential íacilities. oí
Internet search. and oí the rele·ant product markets in which Internet search
The Basic Law & Economics
of Essential Facilities
1here are two wavs to deal with a problematic bottleneck: Remo·e the
bottleneck or regulate access to it. 1he latter is the more common course
adopted in the U.S. and elsewhere. (omplex. Bvzantine and oíten counter-
producti·e regulatorv apparatuses are required to set and monitor the terms oí
access. Among other things. this pa·es the wav íor either intenselv-problematic
judicial o·ersight oí court-imposed remedies or else the creation oí sector-
speciíic regulatorv agencies subject to capture. political iníluence. bureaucratic
ineííiciencv. and ineííicient longe·itv. 1he Interstate (ommerce (ommission
and its successor agencies within the Department oí 1ransportation, and the
lederal (ommunications (ommission and its implementation beginning in
1996 oí the monstrous 1elecommunications Act, in the U.S. are paradigmatic
examples oí these costlv eííects. and it is certainlv questionable whether the
disease is worse than the cure.
Ob·iouslv. an essential íacilitv must be e..evtiat. Lííorts o·er the vears to
shoehorn ·arious markets into this categorv ha·e sometimes strained credulitv.
as it has ·ariouslv been claimed that Aspen. (olorado ski hills.
local ·oice mail
Source1ool !!!"7'.*&%)''#"&'3, business input sourcing,. and loundem
!!!"0'.(-%3"&'3, retail product search and price comparison,.
´ee Luropean (ommission. !eb bror.er cboice tor ívropeav cov.vver..
accessed Dec. 8. 2010,.
Oren Bracha and lrank Pasquale`s call íor a lederal Search (ommission` modeled on the
lederal 1rade (ommission is in íact an evbrace oí the need íor a bureaucratic apparatus to
regulate the íorced access called íor bv search neutralitv proponents. ´ee Oren Bracha and
lrank Pasquale. íeaerat ´earcb Covvi..iov: íairve... .cce... ava .ccovvtabitity iv tbe íar ot ´earcb.
93 (ORNLLL L. RLV. 1193 2008,.
Aspen lighlands Skiing (orp. ·. Aspen Skiing (o.. ¯38 l.2d 1509 10th (ir. 1984,. aíí `d on
other grounds. 4¯2 U.S. 585 1985,.
THE NEXT DIGITAL DECADE: ESSAYS ON THE FUTURE OF THE INTERNET 421
and direct íreight ílights between New \ork and San
among manv other things, were essential íacilities necessitating
mandated access under the antitrust laws.
In these and manv other cases.
mvriad alternati·es to the allegedlv-monopolized market exist and it is arguable
that there was nothing whatsoe·er essential` about these markets.
In antitrust literature and jurisprudence. a plaintiíí would need to pro·e the
íollowing to pre·ail in a monopolization case rooted in the essential íacilities
1. (ontrol oí the essential íacilitv bv a monopolist:
2. A competitor`s inabilitv practicallv or reasonablv to duplicate the
3. 1he denial oí the use oí the íacilitv to a competitor: and
4. 1he íeasibilitv oí pro·iding the íacilitv to competitors.
Arguablv. since the Supreme (ourt`s 2004 )riv/o decision.
a plaintiíí would
also need to demonstrate the absence oí íederal regulation go·erning access.
1he )riv/o decision signiíicantlv circumscribed the area subject to essential
íacilities arguments. limiting such claims to instances where. as in the ..pev
´/iivg case. a competitor reíuses to deal on reasonable terms with another
competitor with whom it has. in íact. dealt in the past.
A kev problem with manv essential íacilities cases is the non-essentialitv oí the
rele·ant íacilitv. \hile there can be no doubt that to particular competitors.
particularlv those constrained to onlv one a·enue oí access to consumers bv
geographv or natural monopolv. a íacilitv mav indeed seem essential. the
touchstone oí U.S. antitrust law has long been consumer. not competitor.
welíare. So while. indeed. Aspen lighlands mav ha·e had diííicultv competing
with the Aspen Ski (ompanv íor consumers who had alreadv chosen to ski in
Aspen. consumers nonetheless had uníettered access to a wide range oí
alternati·e ski and other ·acation, destinations. such that the likelihood oí the
(1( (ommunications (orp. ·. Bell Atlantic (orp.. ¯¯ l. Supp. 2d 124 D. Me. 1999,.
Sun Dun ·. (oca-(ola (o.. ¯40 l. Supp. 381 D. Md. 1990,.
(enturv Air lreight. Inc. ·. American Airlines. Inc.. 59¯ l. Supp. 564 S.D.N.\. 1984,.
lor a more complete list oí essential íacilities and attempted essential íacilities, cases. as
well as an important treatment oí the essential íacilities doctrine in US antitrust law. see
Abbott B. Lipskv. Jr. & J. Gregorv Sidak. í..evtiat íacititie.. 51 S1AN. L. RLV. 118¯ 1999,.
M(I (omm`ns (orp. ·. American 1el. & 1el. (o.. ¯08 l.2d 1081 ¯
Verizon (omm`ns. ·. Law Oííices oí (urtis V. 1rinko LLP. 540 U.S. 398 2004,.
´ee. e.g.. PlILLIP L. ARLLDA & lLRBLR1 lOVLNKAMP. AN1I1RUS1 LA\ 2004 supp., at 199.
422 CHAPTER 7: IS SEARCH NOW AN “ESSENTIAL FACILITY?”
monopolization oí Aspen`s ski hills aííecting o·erall consumer welíare was
In such a circumstance. should it matter ií a particular
competitor is harmed· Is that a íunction oí antitrust-rele·ant conduct on the
part oí another íirm. or an uníortunate set oí business decisions on the part oí
the íirst íirm·
As Phillip Areeda and lerbert lo·enkamp ha·e íamouslv said oí the essential
íacilities doctrine. |it| is both harmíul and unnecessarv and should be
As another antitrust expert has described it:
At bottom. a plaintiíí making an essential íacilities argument is saving
that the deíendant has a ·aluable íacilitv that it would be diííicult to
reproduce. and suggesting that is a reason íor a court to inter·ene and
impose a sharing dutv. But at least in the ·ast majoritv oí the cases. the
íact that the deíendant has a highlv ·alued íacilitv is a reason to reiect
sharing. not to reqvire it. since íorced sharing mav lessen the incenti·e
íor the monopolist. the ri·al. or both to in·est in those economicallv
1his perennial problem-antitrust laws being used to protect competitors rather
than consumers-lies at the heart oí claims surrounding Internet search as an
1here is much tied up in the argument. and proponents ha·e oíten been careíul
to at least go through the motions oí drawing the rhetorical line back to
consumers. In its íullest expression. it is claimed that harm to competitors now
will mean the absence oí competitors later and thus an uníettered monopolv
with the intent and power to harm consumers.
It is also oíten argued that
consumers in this case Internet users searching íor certain websites or the
products thev sell, are intrinsicallv harmed bv the una·ailabilitv oí access to the
iníormation contained in sites that are denied access to the search engine`s
1he courts. howe·er. did not agree.
3A ARLLDA & lOVLNKAMP. AN1I1RUS1 LA\ ¹ ¯¯1c. at 1¯3 2002,.
R. lewitt Pate. Retv.at. to Deat ava í..evtiat íacititie.. 1estimonv Submitted to DOJ´l1(
learings on Single lirm (onduct. Jul. 18. 2006. araitabte at
)riv/o. 540 U.S.. at 408,.
´ee. e.g.. ívropeav Covvi..iov íavvcbe. .vtitrv.t ívre.tigatiov ot Coogte. SLAR(l
NLU1RALI1\.ORG. No·. 30. 2010. 4))56//!!!"7%$*&4(%.)*$#8)1"'*+ Google is exploiting
its dominance oí search in wavs that stiíle inno·ation. suppress competition. and erode
consumer choice.`,. Meanwhile. complainants ha·e gone to Lurope where a showing oí
consumer harm is not necessarv to pre·ail under its competition laws.
As Oren Bracha and lrank Pasquale put it. Search engines. in other words. oíten íunction
not as mere satisíiers oí predetermined preíerences. but as shapers oí preíerences.` íeaerat
´earcb Covvi..iov. 93 (ORNLLL L. RLV. at 1185. Bracha and Pasquale also claim that Market
participants need iníormation about products and ser·ices to make iníormed economic
THE NEXT DIGITAL DECADE: ESSAYS ON THE FUTURE OF THE INTERNET 423
1he basic essential íacilities case against Google is that it controls a bottleneck
íor the Internet-it is the access point íor most consumers. and search results
on Google determine which websites are successíul and which end up in
More particularlv. it is argued that Google has used its control o·er
this bottleneck to denv access bv competitors to Google`s users. 1o understand
this requires a brieí discussion oí the economics rele·ant to Internet Search and
its rele·ant market.
The Basic Economics of Internet Search
Implicit in claims that Google controls access to an essential íacilitv is that
access bv some rele·ant set oí consumers or competitors, to rele·ant content is
accessible onlv or ·irtuallv onlv, through Google. It is necessarv. then. to
assess whether Google`s search results pages are. in íact. without signiíicant
competition íor the economic acti·itv at their heart. Oí course the economic
acti·itv at their heart is ad·ertising.
It is hard to concei·e oí Internet search-let alone Google`s website-as the
onlv means oí reducing search costs íor potential consumers Internet
searchers, and prospecti·e sellers. Lea·ing aside the incredible range oí
alternati·e sources to the Internet íor commerce.
oíí the top oí mv head. I can
imagine Google`s competitor websites íinding access to users bv 1, ad·ertising
in print publications and 1V: 2, using social networking sites to promote their
sites. 3, being linked to bv other websites including sites specializing in rating
websites. online magazines. re·iew sites. and the like: 4, implementing aííiliate
programs or other creati·e marketing schemes: 5, purchasing paid ad·ertising.
both in Google`s own paid search results. as well as on other. hea·ilv-traííicked
websites: and 6, securing access ·ia Google`s general search competitors like
\ahoo! and Bing. (ompetitors denied access to the top íew search results at
decisions. . |A|attaining ·isibilitv and access to users is critical to competition and
cooperation online. (entralized control or manipulation bv search engines mav stiíle
inno·ation bv íirms relegated to obscuritv.` ía. at 11¯3-¯4.
ía. at 11¯3 (oncentrated control o·er the ílow oí iníormation. coupled with the abilitv to
manipulate this ílow. mav reduce economic eííiciencv bv stiíling competition.`,.
´ee KLN AULL11A. GOOGLLD: 1lL LND Ol 1lL \ORLD AS \L KNO\ I1 16 2009, quoting
Google (LO Lric Schmidt as saving. \e are in the ad·ertising business`,.
1here is a tendencv íor \eb sites to ·iew their Internet enterprises as diííerent than their
oííline counterparts`. but. at root. most Internet sites other than branded ones attached
directlv to oííline stores, are íounded bv entrepreneurs who made a simple business decision
to plv their trade online rather than oíí. 1hat this decision mav ha·e íoreclosed easv access
to certain oííline customers. or put the entrepreneur in a position where access to customers
could be írustrated bv certain competiti·e disad·antages speciíic to the Internet. does not
con·ert these competiti·e disad·antages into special problems deser·ing oí antitrust
treatment. 1o do so would be to inappropriatelv and ineííicientlv insulate the online´oííline
business decision írom the healthv eííects oí Schumpeter`s perennial gale oí creati·e
destruction.` JOSLPl S(lUMPL1LR. 1lL PRO(LSS Ol (RLA1IVL DLS1RU(1ION 1942,.
424 CHAPTER 7: IS SEARCH NOW AN “ESSENTIAL FACILITY?”
Google`s site are still able to ad·ertise their existence and attract users through a
wide range oí other ad·ertising outlets-extremelv wide. in íact: According to
one estimate Google was responsible in 200¯ íor onlv about ¯.5° oí the
lor Google to proíit írom its business-whether as a monopolist or not-it
must deli·er up to its ad·ertisers a set oí users. Interestinglv. users oí Google`s
general search engine are mostlv uninterested in the paid results. 1hev click
through the unpaid or organic` search results bv a wide margin ahead oí paid
1here is thus an asvmmetrv. On one side oí its platíorm are
ad·ertisers who care about the quantitv and qualitv the likelihood that users
who see an ad will click through to ad·ertisers` sites and purchase something
while there, oí the users on the other side. Meanwhile. users care ·erv little
about the quantitv oí ad·ertisers and care onlv somewhat about the qualitv oí
ad·ertisers preíerring greater rele·ance to lesser. but írequentlv ignoring paid
results anvwav,. Ne·ertheless. the core oí this enterprise is search result
rele·ance. Greater rele·ance impro·es the qualitv oí searchers írom the
ad·ertisers` point oí ·iew. ensuring that ad·ertisers` paid results are clicked on
bv the users most likelv to íind the ad·ertiser`s site oí interest and to purchase
But there are problems inherent in the ambiguitv oí search terms and the abilitv
to game the svstem` that pre·ent e·en the most sophisticated algorithms írom
oííering up períect rele·ance. lirst. search terms are oíten context-less. and a
user searching íor jaguar` mav be searching íor iníormation on the car
companv. the operating svstem. the big cat. or something else.
diííerent dimension. a user searching íor Nikon camera` might be looking to
bvy a Nikon camera or might be looking íor a pictvre oí a Nikon camera to post
on his blog. Ob·iouslv ad·ertisers care ·erv much which oí these users clicks
on their paid result. At the same time. manv undesirable websites spam sites
and the like, can and do take ad·antage oí predictable search results to occupv
desirable search result real estate to the detriment oí the search engine. its users
and its ad·ertisers. Lííorts to keep these sites out oí the top results and to
ensure maximum rele·ance írom ambiguous search terms require a host oí
algorithm tweaks and e·en human inter·entions. 1hat these mav intentionallv
or inad·ertentlv, harm some websites` rank in certain search results is consistent
with a well-íunctioning search platíorm.
´ee Lrick Schoníeld. í.tivate. Pvt ívtervet .arerti.ivg at ·2] ßittiov iv |.´.. ·1: ßittiov Ctobatty.
1L(l(RUN(l. leb. 26. 2008. 4))56//)%&4&*.(&4"&'3/>FF@/F>/>?/%7)83$)%795.)9
´ee. e.g.. Neil \alker. Coogte Orgavic Ctic/ )brovgb Rate tC)R). UK SLO (ONSUL1AN1. Mav 11.
´ee Bill Slawski. . íoo/ at Coogte Miapage Overy Retivevevt.. SLO B\ 1lL SLA. Apr. 20. 2006.
THE NEXT DIGITAL DECADE: ESSAYS ON THE FUTURE OF THE INTERNET 425
Google oííers its organic search results and its other ser·ices as a solution to the
two-sided platíorm problem mentioned abo·e: In order to attract paving
ad·ertisers. Google also has to attract and match up, the ad·ertisers` target
audience. Google oííers e·ervthing it does to its users in an eííort to attract
these users and to glean iníormation írom them that íacilitates its all-important
matching rele·ance, íunction. In the process. Google generates re·enue írom
ad·ertisers eager to sell` to this audience. lor a host oí reasons. Google like
all search engines, does not charge searchers to access its ·arious ser·ices. but it
does charge ad·ertisers. Just because search is an ancillarv business to Google`s
true ad·ertising business does not necessarilv mean it is not a rele·ant market
íor purposes oí antitrust analvsis: ne·ertheless it is essential to a·oid the pitíall
oí examining one side oí a two-sided market in isolation. As Da·id L·ans
notes. |t|he analvsis oí either side oí a two-sided platíorm in isolation vields a
distorted picture oí the business.`
1wo-sided market deíinition is complex.
and little understood-especiallv bv non-experts throwing around ·arious
alleged markets in which companies like Google are said to be dominant.`
1here is actuallv substantial reason to doubt the proprietv oí a narrow market
deíinition limited to online search ad·ertising.
L·en where there are diííerent
purposes íor diííerent tvpes oí ad·ertising-e.g. brand recognition íor displav
ads and eííorts to sell íor search ads and other outlets like coupons-this is
merelv a diííerence in degree. Both are íundamentallv íorms oí reducing the
costs oí a user`s search íor a product. as we ha·e understood since George
Stigler`s seminal work on the subject in 1968.
and the rele·ant question is
whether the diííerence is signiíicant enough to render decisions in one market
essentiallv unaííected bv decisions or prices in the other.
1here is e·idence that ad·ertisers ·iew online and oííline ad·ertising as
substitutes. and this applies not onlv to traditional ad·ertisers but also Internet
companies. 1hus. in 2009. Pepsi decided not to ad·ertise during the 2010 Super
Bowl. in order to íocus instead on a particular tvpe oí online campaign. 1his
vear íor the íirst time in 23 vears. Pepsi will not ha·e ads in the Super Bowl
telecast .. Instead it is redirecting the millions it has spent annuallv to the
Da·id S. L·ans. )ro·´iaea Mar/et Detivitiov. ABA SL(1ION Ol AN1I1RUS1 LA\. MARKL1
DLlINI1ION IN AN1I1RUS1: 1lLOR\ AND (ASL S1UDILS íorthcoming,. a·ailable at
4))56//77*("&'3/$:7)*$&)LCME?=<C at p. 9.
Readers interested in a íuller treatment oí the market deíinition question surrounding
Google are directed toward Geoíírev A. Manne & Joshua D. \right. Coogte ava tbe íivit. ot
.vtitrv.t: )be Ca.e .gaiv.t tbe Ca.e .gaiv.t Coogte. 34 lARV. J. L. & PUB. POL`\ 1 2011,
íorthcoming,. írom which much oí the discussion oí Google`s markets and economics in
this essav is drawn.
GLORGL JOSLPl S1IGLLR. 1lL ORGANIZA1ION Ol INDUS1R\ 201 Uni·. oí (hi. Press 1983,
426 CHAPTER 7: IS SEARCH NOW AN “ESSENTIAL FACILITY?”
And e·en Google itselí ad·ertises oííline.
Another studv suggests
that there is indeed a trade-oíí between online and more traditional tvpes oí
ad·ertising: A·id Goldíarb and (atherine 1ucker ha·e demonstrated that
displav ad·ertising pricing is sensiti·e to the a·ailabilitv oí oííline alternati·es.
And oí course companies ha·e limited ad·ertising budgets. distributed across a
broad range oí media and promotional eííorts. As one commentator notes: Bv
2011 web ad·ertising in the United States was expected to climb to sixtv billion
dollars. or 13 percent oí all ad dollars. 1his meant more dollars siphoned írom
traditional media. with the largest slice probablv going to Google.`
Ad·ertising re·enue on the Internet is dri·en initiallv bv the size oí the
audience. with a signiíicant multiplier íor the likelihood that those consumers
will purchase the ad·ertisers` products
based on a ·iewer`s propensitv to
click through` to the ad·ertiser`s site,. Google`s competition in selling ads thus
comes. in ·arving degrees. not onlv írom other search sites. but also írom anv
other site that oííers a ser·ice. product. or experience that consumers might
otherwise íind in Google`s organic` search results. íor which Google is not
paid. lor Google`s competitors. this means seeking íorced access to its users.
But access to eveballs can be had írom a large range oí access points around the
Social media sites like 1witter and lacebook are thereíore signiíicant access
points. occupving. as thev do. a considerable amount oí Internet eveball` time.
1he Pepsi de·iation oí ad·ertising re·enue írom the Super Bowl to the Internet
is not likelv to ha·e inured much to Google`s beneíit as the strategv was a
social media plav.` building on the expressed brand lovalties and peer
communications that propel social media.
In a world oí scarce ad·ertising
dollars and eííecti·e marketing ·ia social media sites. Google and all other
ad·ertisers. online and oíí. must compete with the growing threat to their
re·enue írom these still-no·el marketing outlets. Ií lacebook`s communitv oí
Larrv D. \oodard. Pep.i`. ßig Cavbte: Ditcbivg ´vper ßort tor ´ociat Meaia. AB( NL\S. Dec. 23.
´ee Dannv Sulli·an. Coogte Pv.be. Cbrove ßror.er 1ia ^er.paper .a.. SLAR(l LNGINL LAND.
No·. 21. 2010. 4))56//7%$*&4%(+8(%#$(-"&'3/+''+#%95.74%79&4*'3%9:*'!7%*9;8$9
A·i Goldíarb & (atherine 1ucker. ´earcb ívgive .arerti.ivg: Pricivg .a. to Covte·t 96 NL1
Institute \orking Paper No. 0¯-23. 200¯, araitabte at
KLN AULL11A. GOOGLLD: 1lL LND Ol 1lL \ORLD AS \L KNO\ I1 16 2009,.
Da·id S. L·ans. )be ícovovic. ot tbe Ovtive .arerti.ivg ívav.try. ¯ RLV. Ol NL1\ORK L(ON.
359. 359-60 2008,.
´ee Larrv D. \oodard. Pep.i`. ßig Cavbte: Ditcbivg ´vper ßort tor ´ociat Meaia. AB( NL\S. Dec.
23. 2009. 4))56//$:&(%!7"+'"&'3/5*8()K8-LEDF><CD.
THE NEXT DIGITAL DECADE: ESSAYS ON THE FUTURE OF THE INTERNET 427
users got more oí their iníormation through |the lacebook| network. their
Internet search engine and na·igator might become lacebook. not Google.`
1he upshot: 1o the extent that inclusion in Google search results is about
Stiglerian` search-cost reduction íor websites and it can hardlv be anvthing
else,. the range oí alternate íacilities íor this íunction is nearlv limitless.
linallv. Google competes not onlv with other general search engines and
possiblv all other íorms oí ad·ertising, but also with so-called ·ertical search
engines. 1hese are search engines and e-commerce websites with search
íunctionalitv that specializes in speciíic content: Amazon in books. music. and
other consumer goods: Kavak in tra·el ser·ices: eBav in consumer auctions:
\ebMD in medical iníormation and products: Source1ool in business-to-
business supplies: \elp in local businesses. and manv others. 1o the extent that
Internet users bvpass Google and begin their searches at one oí these
specialized sites as is increasinglv the case,. the ·alue to these hea·ilv-traííicked
websites írom access to Google`s users decreases.
(ompetition írom ·ertical search engines is important because ad click-through
rates likelv are higher when consumers are acti·elv searching íor something to
buv-just as search ad·ertising targets consumers who express some interest in
a particular search term. the eííect is magniíied ií the searcher can be identiíied
as an immediate consumer. 1hus online retailers like (Dnow that can establish
their own brands and their own na·igation channels
ha·e a signiíicant
ad·antage in drawing searchers-and ad·ertisers-awav írom Google: 1he íact
that a consumer is períorming a search on a retail site itselí con·evs important
and ·aluable iníormation to ad·ertisers that is not otherwise a·ailable írom
most undiííerentiated Google searches-it certainlv increases the chance that
the searcher is searching to buv a (D rather than learn something about the
singer. Because this readv-to-buv` traííic is the most ·aluable. there is a
possibilitv oí two separate search markets. with most high-·alue traííic
bvpassing general-purpose search engines íor product search sites like eBav and
Amazon.com. and with Google and other general-purpose search engines
ser·ing primarilv non-targeted. lower-·alue traííic. 1he implication is that. while
e·en relati·elv small-scale competition mav present a potentiallv signiíicant
threat to Google`s search business. this threat does not depend on links to these
sites írom Google`s search results. And thus these competitors ha·e a strong.
KLN AULL11A. GOOGLLD: 1lL LND Ol 1lL \ORLD AS \L KNO\ I1 1¯2-¯3 2009,.
lor example. in the thirtv davs ending on lebruarv 23. 2010. less than ten percent oí ·isits
to eBav.com originated írom a search engine. ´ee ALLXA. eßay.cov ´ite ívto.
´ee Donna L. loííman & 1homas P. No·ak. íor to .cqvire Cv.tover. ov tbe !eb. lARV. BUS.
RLV.. Mav-June 2000. at 3. 5. ¯. (Dnow was acquired bv Amazon.com in 2001.,
428 CHAPTER 7: IS SEARCH NOW AN “ESSENTIAL FACILITY?”
independent incenti·e to de·elop marketing programs outside oí Google`s
search pages-and there is good reason not to deputize Google in the process.
Is Google an Essential Facility?
Recall that the basic claim is that Google`s competitors are íoreclosed írom
access to Google`s desirable essential, marketing platíorm and therebv suííer
signiíicant harm. Oí course írom the outset. this has it backwards and this is a
core problem with the essential íacilities doctrine as a whole,.
Ií there is a problem. it should be the problem oí limited access by Coogte`. v.er.
to Google`s competitors. Sometimes the absence oí access bv competitors to
consumers is the same thing as the absence oí access bv consumers to
competitors. but it depends on how well the market has been deíined. In the
most íundamental sense Google has preciselv zero control o·er access bv
consumers meaning users who use Google to search the Internet, to
competitors: Anvone with access to a browser can access anv site on the
Internet simplv bv tvping its URL into the browser. Perhaps understanding
this. proponents oí the Internet search is an essential íacilitv` claim argue that
mere access is insuííicient. and that consumers are essentiallv ignorant about the
·aluable content on the web except bv search engines. which are subject to the
search engine`s editorial control o·er that access. 1o the tvpical Google user.
according to this ·iew. Google`s competitors are eííecti·elv non-existent unless
thev appear in the top íew search results.
Now we are dangerouslv close to the sort oí arbitrarv market deíinition exercise.
de·oid oí the discipline imposed bv economics. that identiíies an
anticompetiti·e problem bv narrowing the market until e·erv companv is a
monopolist o·er some small group oí consumers. Indeed. one can alwavs
deíine a market bv íocusing on idiosvncratic preíerences or product ·ariations.
Justice lortas decried this tvpe oí analvsis in his dissent in Crivvett regarding
home securitv svstems,. and it merits quoting at length:
1he trial court`s deíinition oí the product` market e·en more
dramaticallv demonstrates that its action has been
Procrustean-that it has tailored the market to the dimensions
oí the deíendants. It recognizes that a person seeking
protecti·e ser·ices has manv alternati·e sources. It lists
watchmen. watchdogs. automatic proprietarv svstems
coníined to one site. oíten. but not alwavs., alarm svstems
connected with some local police or íire station. oíten
unaccredited (SPS |central station protecti·e ser·ices|. and
oíten accredited (SPS.` 1he court íinds that e·en in the same
citv a single customer seeking protection íor se·eral premises
mav exercise its option` diííerentlv íor diííerent locations. It
mav choose accredited (SPS íor one oí its locations and a
diííerent tvpe oí ser·ice íor another.
THE NEXT DIGITAL DECADE: ESSAYS ON THE FUTURE OF THE INTERNET 429
But the court isolates írom all oí these alternati·es onlv those
ser·ices in which deíendants engage. It eliminates all oí the
alternati·e sources despite its conscientious enumeration oí
them. Its deíinition oí the rele·ant market` is not merelv
coníined to central station` protecti·e ser·ices. but to those
central station protecti·e ser·ices which are accredited` bv
1here is no pretense that these íurnish peculiar ser·ices íor
which there is no alternati·e in the market place. on either a
price or a íunctional basis. )be covrt retie. .otety vpov it. tivaivg tbat
tbe .errice. otterea by accreaitea cevtrat .tatiov. are ot better qvatity. and
upon its conclusion that the insurance companies tend to gi·e
noticeablv larger` discounts to policvholders who use
accredited central station protecti·e ser·ices. 1his (ourt now
appro·es this strange red-haired. bearded. one-eved man-with-
In Internet search as well. complainants implv a market based on the íact that
Google oííers better qualitv` access to a larger set oí Internet users than the
mvriad existing alternati·es. But claiming essentialitv based on a competitor`s
relati·e high qualitv is deeplv problematic.
1his point is oí great importance in assessing the economics oí the essential
íacilities doctrine generallv and its application to Internet search in particular. It
is clear. e·en under a íairlv expansi·e reading oí the essential íacilities doctrine.
that e·en a monopolist has no dutv to subsidize the eííorts oí a less-eííecti·e
Arguablv the Aspen Skiing case should ha·e been tossed out on this
basis. As a practical matter. the Aspen Ski (ompanv. bv entering into a joint
marketing agreement with its smaller ri·al. Aspen lighlands. allowed lighlands
to take ad·antage oí its markedlv larger producti·itv both in de·eloping ski
terrain and amenities. as well as marketing Aspen as a ski destination,. Its
subsequent decision to drop lighlands írom its marketing program íor íailing
to oííer suííicient return on its in·estment should ha·e been unobjectionable.
Similarlv. the explicit claim in cases brought against Google bv its allegedlv-
íoreclosed ri·als is that these relati·elv miniscule, sites should ha·e access to
Google`s eííecti·e and inexpensi·e marketing tool. But it is bv no means clear
that Google does or should ha·e this dutv to promote its ri·als without
compensation to Google. as it happens,. 1his is particularlv true when. as
discussed abo·e. other modes oí access exist íor competitors` acti·ities. e·en ií
|.´. r. Crivvett Corp.. 384 U.S. 563. 590-91 1966, emphasis added,.
´ee Olvmpia Lquip. Leasing (o. ·. \estern Union 1el. (o.. ¯9¯ l.2d 3¯0 ¯
´ee KLI1l N. l\L1ON. AN1I1RUS1 LA\: L(ONOMI( 1lLOR\ AND (OMMON LA\
LVOLU1ION 205-06 2003,.
430 CHAPTER 7: IS SEARCH NOW AN “ESSENTIAL FACILITY?”
these modes oí access are oí lower qualitv or higher cost. Particularlv where. as
here. the alleged bottleneck arises not out oí a combination with another íirm
or íirms but out oí unilateral conduct success in the marketplace,. the claim
that a superior access point among manv iníerior, access points should be pried
open íor the beneíit oí its competitors is specious.
It is worth noting that an alleged Google competitor. Source1ool. in the
has made a ·ersion oí this argument. alleging that
Google once engaged in proíitable commerce with Source1ool bv selling
Source1ool ads next to Google search results, and then penalized Source1ool
to its Google`s, economic detriment.
1he shape oí this argument is a
transparent eííort to remain under what is leít oí the essential íacilities doctrine
íollowing )riv/o. But notice that e·en ií it is true that Google intentionallv
ended a proíitable arrangement with Source1ool which is bv no means clear,.
the claim still doesn`t pass muster. It is almost impossible that Google could be
recei·ing less re·enue írom whate·er site has replaced Source1ool in the paid
search result spots Source1ool once paid íor. As a result. e·en ií Google were
íoregoing a pre·iouslv-proíitable relationship ritb ´ovrce)oot. it is not. in íact.
suííering anv economic harm because another ad·ertiser has stepped into
Oí course the argument that Google`s competitors are eííecti·elv absent
without guaranteed·, access to Google`s top íew search results pro·es too
much. 1here is a scarcitv oí top íew search results.` and anv eííecti·e search
engine must ha·e the abilitv to ensure that those results are the most rele·ant
possible. as well as that thev do not ·iolate ·arious qualitv. saíetv. moral or
other standards that the search engine chooses to promote. lorcing |owners
oí essential íacilities| to share access mav not enhance consumer welíare.`
Pure neutralitv` is neither possible nor desirable. and the exclusion oí certain
websites írom these co·eted positions should be deemed utterlv unpersuasi·e in
making out e·en a priva tacie monopolization case against a search engine.
And it is not e·en the case that Source1ool. loundem.
and other competing
websites are absent írom Google: it is. howe·er. sometimes the case that these
(omplaint . )raaeCovet.Cov ííC r. Coogte. ívc.. 693 l. Supp. 2d 3¯0 S.D.N.\. 2009, No.
ía. ¹ 8.
KLI1l N. l\L1ON. AN1I1RUS1 LA\: L(ONOMI( 1lLOR\ AND (OMMON LA\ LVOLU1ION
loundem is a ·ertical search and price comparison` site in the UK. ´ee
!!!"0'.(-%3"&'".,. 1he companv is at the heart oí the search neutralitv` debate in
Internet search. It has created a website to ad·ocate its ·iews on the neutralitv issue at
!!!"7%$*&4(%.)*$#8)1"'*+. and its claims are at the heart oí the Luropean (ommission`s
in·estigation oí Google. See loundem`s discussion oí the LU action and its relationship to
loundem`s claims in ívropeav Covvi..iov íavvcbe. .vtitrv.t ívre.tigatiov ot Coogte. SLAR(l
NLU1RALI1\.ORG. No·. 30. 2010. 4))56//!!!"7%$*&4(%.)*$#8)1"'*+.
THE NEXT DIGITAL DECADE: ESSAYS ON THE FUTURE OF THE INTERNET 431
sites do not show up in the top íew organic search results and. oíten at the
same time. Google`s own competing product search results do,. But ií access to
the top íew search results is required to ensure the requisite access sought bv
Google`s competitors. the rele·ant market has been narrowed considerablv.
creating a standard that can`t possiblv be met. no matter how neutral` a search
Meanwhile. ií loundem were to disappear írom the íace oí the Larth. who.
other than its in·estors and emplovees and perhaps their landlords,. would be
harmed· 1he implicit claim ií an antitrust case is to be made, is that websites
like loundem applv a constraint on Google`s abilitv to extract monopolv rents
presumablv írom ad·ertisers,. But this is a curious claim to make while
simultaneouslv arguing that Google itselí is made better` as in. searchers are
indeed looking íor loundem in searches írom which the site mav be excluded,
bv the inclusion oí loundem in its search results thus. presumablv. increasing
Google`s attracti·eness to its users and thus its ad·ertisers,. while also claiming
that loundem would cease to exist without access to the top íew Google search
Google does not sell retail goods. and does not proíit directlv írom its own
product search oííerings which compete with loundem,. instead recei·ing
beneíit bv increasing its customer base and the eííicacv presumablv, oí paid
ad·ertisements on its search pages that include a link to its own price
comparison results. It is a remarkablv tenuous claim to make that Google
proíits more bv degrading its search results than bv impro·ing them. Ií the
contrarv claim is reallv true-ií. that is. Google harms itselí or its ad·ertisers bv
intentionallv penalizing competing sites like loundem-then that argument and
anv e·idence íor it is absent írom the current debate. And. oí course. ií Google
is. as it claims. actuallv impro·ing its product bv applving qualitati·e decisions to
demote sites like loundem and others that. Google claims. merelv re-publish
iníormation írom elsewhere on the web with precious little original content.
then Google`s eííorts should be seen as a íeature and not a bug.
Moreo·er. the extension oí the essential íacilities logic to competition between
Google and competitors like loundem. MapOuest or Kavak is extremelv
problematic. 1o the extent that Google and loundem. íor example. are
competitors. thev are competitors not in the ad·ertising space but rather in the
iníormation dissemination and retail distribution channel` space. I`m not sure
what else to call it. loundem earns re·enue bv directing customers to retail
sites to purchase goods. In this sense. loundem acts like a shopping mall.
Google does the same. onlv instead oí recei·ing a cut írom the sale. as
loundem does. Google sells ad·ertisements. 1hus. when loundem complains
about access to Google`s site. it is a competing channel oí distribution.
complaining that it needs access to its competitor`s distribution channel in order
It`s a weird sort oí complaint. It isn`t the same as the classic essential íacilities
sort oí complaint where. to simpliív. the owner oí a ·erticallv-integrated railroad
432 CHAPTER 7: IS SEARCH NOW AN “ESSENTIAL FACILITY?”
and rail transport companv pre·ents access bv other transport companies to its
railroad line. Instead this would be like railroad companv A arguing that
railroad B must gi·e A access to B`s tracks so A can sell access to those tracks
to other rail transport companies.
But e·en this doesn`t completelv capture the audacitv oí the complaint. because
íor the analogv to hold. railroad A would actuallv be asking the court to íorce
railroad B to put up a sign at the head oí its tracks allowing railroad A to oííer
to trains alreadv on B`s railroad the opportunitv to jump oíí B`s railroad and
start o·er again on A`s railroad that íollows another route-but without
knowing íor sure ií the route is better or worse until vou jump onto A`s tracks.
Something like that. Again. it`s weird.
And note. oí course. the problem that at the head oí the tracks` as in
something like the íirst. second or third organic result`, is a problematic
requirement as onlv three sites at anv gi·en time can occupv those spots-but
there mav be manv more than three íirms complaining oí Google`s conduct
and´or aííected bv the ·agaries oí its product design decisions. Or to keep with
the shopping mall analogv. it`s like the owner oí anv oí a number oí small. new
shopping malls requiring the owner oí a large. established shopping mall to
permit each oí the new mall`s owners to set up a bus line to íerrv shoppers to
the new mall as thev enter the established mall. L·en where the established
mall has a geographic. reputational and resource ad·antage. no one would argue
that this access was essential to eííicient commerce. and the cost to the
successíul incumbent would be maniíestlv too high.
As discussed abo·e. sites like loundem do indeed ha·e access to Google`s end
users ·ia anv number oí kevwords on Google`s site. 1vpe UK price
comparison site` into Google and a number oí Google competitors come up
including loundem and Google`s own price comparison site is seeminglv
absent,. 1he claim thus becomes one that is either inappropriatelv aggregated
íor all search terms on a·erage that mav direct users to loundem. loundem is
eííecti·elv denied access to the top search results`, or else o·erlv narrow we
preíer customers to íind us bv tvping Nikon camera` into Google. not bv tvping
price comparison Nikon camera` into Google`,. In anv case. access is in íact
a·ailable íor these competitors. and the indispensable requirement íor
in·oking the |essential íacilities| doctrine is the una·ailabilitv oí access to the
essential íacilities`: where access exists. the doctrine ser·es no purpose.`
Meanwhile. it is diííicult to see how rele·ance and thus eííiciencv, could be
well-ser·ed bv a neutralitv principle that required a tool that reavce. search costs
to inherentlv ivcrea.e those costs bv directing searchers to a duplicate search on
another site. Ií one is searching íor a speciíic product and hoping to íind price
comparisons on Google. whv on earth would that person be hoping to íind not
Google`s own eííorts at price comparison. built right into its search engine. but
)riv/o. 540 U.S. at 411.
THE NEXT DIGITAL DECADE: ESSAYS ON THE FUTURE OF THE INTERNET 433
instead a link to another site that requires another se·eral steps beíore íinding
Seen this wav. Google`s decision to promote its own price comparison results is
a simple product pricing and design decision. protected bv good sense and the
)riv/o decision at least in the U.S.,. Unlike the majoritv oí its ·ertical search
competitors and bv design. Google makes no direct re·enue írom users clicking
through to purchase anvthing írom its shopping search results. and this allows it
to oííer a diííerent and. to manv consumers. a signiíicantlv better, set oí
results. 1he page has paid search results onlv in small boxes at the top and
bottom. the iníormation is all algorithmicallv generated. and retailers do not pav
to ha·e their iníormation on the page. lor this product design-bv deíinition
oí great ·alue to users in eííect lowering the price to them oí their product
search,-to merit Google`s in·estment. it is necessarv that its own. more-
rele·ant and less-expensi·e results recei·e prioritv. Ií this is generating
something oí ·alue íor Google it is doing so onlv in the most salutarv íashion:
bv oííering additional resources íor users to impro·e their search experience`
and thus induce them to use Google`s search engine. 1o require neutralitv` in
this setting is to impair the site`s abilitv to design and price its own product.
L·en the ..pev ´/iivg decision didn`t go that íar. requiring access to a joint
marketing arrangement but not obligating Aspen Ski (ompanv to alter its prices
íor skiers seeking to access onlv its own slopes.
And the same analvsis holds íor assessments oí Google`s other oííerings maps
and ·ideos. íor example, that compete with other sites. Look íor the nearest
McDonalds in Google and a Google Map is bound to top the list but not be
the exclusi·e result. oí course,. But whv should it be anv other wav· In eííect.
what Google does is gi·e vou the \eb`s content in as accessible and appropriate
a íorm as it can-design decisions that. Google must belie·e. increase qualitv
and reduce eííecti·e price íor its users. Bv oííering not onlv a link to
McDonalds` web site. as well as ·arious other links. but also a map showing the
locations oí the nearest restaurants. Google is oííering up results in diííerent
íorms. hoping that one is what the user is looking íor. 1here is no economic
justiíication íor requiring a search engine in this setting to oííer another site`s
rather than its own simplv because there happen to be other sites that do.
indeed. oííer such content and would like cheaper access to consumers,.
Search neutralitv and íorced access to Google`s results pages is based on the
proposition that-Google`s users` interests be damned-ií Google is the easiest
wav competitors can get to potential users. Google must pro·ide that access.
1he essential íacilities doctrine. dealt a near-death blow bv the Supreme (ourt
in )riv/o. has long been on the ropes. It should remain moribund here. On
the one hand Google does not preclude. nor does it ha·e the power to preclude.
users írom accessing competitors` sites: all users need do is tvpe
íoundem.com` into their web browser-which works e·en ií it`s Google`s
434 CHAPTER 7: IS SEARCH NOW AN “ESSENTIAL FACILITY?”
own (hrome browser! 1o the extent that Google can and does limit
competitors` access to its search results page. it is not controlling access to an
essential íacilitv` in anv sense other than \al-Mart controls access to its own
stores. Google search results generated bv its proprietarv algorithm and íound
on its own web pages` do not constitute a market to which access should be
íorciblv granted bv the courts or legislature.
1he set oí claims that are adduced under the rubric oí search neutralitv` or the
essential íacilities doctrine` against Internet search engines in general and. as a
practical matter. Google in particular. are deeplv problematic. 1hev risk
encouraging courts and other decision makers to íind antitrust ·iolations where
none actuallv exist. threatening to chill inno·ation and eííiciencv-enhancing
conduct. In part íor this reason. the essential íacilities doctrine has been
relegated bv most antitrust experts to the dustbin oí historv. As Joshua \right
and I conclude elsewhere:
Indeed. it is our ·iew that in light oí the antitrust claims arising
out oí inno·ati·e contractual and pricing conduct. and the
apparent lack oí anv concrete e·idence oí anticompetiti·e
eííects or harm to competition. an eníorcement action against
Google on these grounds creates substantial risk íor a íalse
positi·e` which would chill inno·ation and competition
currentlv pro·iding immense beneíits to consumers.
Geoíírev A. Manne & Joshua D. \right. Coogte ava tbe íivit. ot .vtitrv.t: )be Ca.e .gaiv.t tbe
Ca.e .gaiv.t Coogte. 34 lARV. J. L. & PUB. POL`\ at 62.
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