Is It Time to Sell Google?

Yesterday The European Union sued Google under its competition law. This lawsuit shows either that the European Union understands nothing about the way technological acceleration affects competition or that the EU is biased against American companies or both.

The complaint is that Google has monopoly power in search and that it abuses this power by favoring its own services, like its own travel reservation business, in  the links it provides to queries.   But with a few taps on a keyboard or a click of a mouse, consumers can easily switch from one search engine to another, casting doubt on the EU’s claim that Google has monopoly power.   More importantly, technological acceleration makes it very unlikely that Google could maintain an entrenched monopoly in search over the long haul.  As people spend more time on their smart phones and less time at their computer, Google’s form of search is increasingly displaced by apps.  Another threat to Google is Facebook, which uses the connections of its social network to customize search and advertisements.

The difficulty of maintaining entrenched monopoly in accelerating technologies is not unique to Google. Exponential improvements in computation now regularly lead to the displacement of market leaders. IBM looked unassailable until the PC turned up, and it was overthrown by Microsoft, which itself looked unassailable until computation turned to the cloud. The Department of Justice pursued both companies as they had begun to lose their dominance.  My  advice is to sell any high tech company when the United States brings an antitrust suit, not because the company will be harmed by the suit, but because by the time the government understands a tech business well enough to sue it, the world has moved on.

Even if Google had a monopoly, it should ideally be guilty under competition laws only if its actions lack a business justification. But trying to build its brand by partially integrating one of its services with another has a business justification.

Europe’s effort may well reflect a much worse kind of bias—that of a political entity who would like to slow down a foreign producer, even one that benefits its own consumers. Europe is particularly liable to the envy that can drive such xenophobia, since its economy has singularly failed to produce the innovative startups  of today that become the technological giants of tomorrow.

Some commentators have suggested that parochial bias cannot be driving Europe because some American companies, like Microsoft, support the EU’s complaint.   But competitors will take advantage of any law they can, whatever the purpose or motives of its enforcers.  Such pressure to abuse competition laws is often a greater danger than the abuse of monopoly power.  And unlike private monopoly, government power does not face the self-correcting forces of the market.