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The Google search case in Europe: tying and the single monopoly profit theorem in two-sided markets

Author

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  • Edward Iacobucci

    (University of Toronto)

  • Francesco Ducci

    (University of Toronto)

Abstract

This paper provides an economic and legal theory of harm applicable to the case against Google in Europe over search bias. So far, no clear legal and economic theory has yet been delineated by the European Commission, nor consensus in the literature has emerged with regard to the theory of foreclosure that could support the case, or with regard to the specific form of abuse of dominance applicable under European law. The paper shows that the law and economics of tying applies to search bias. From a legal standpoint, it is not necessary to rely on the more formalistic elements of Article 102 TFEU, or to characterize Google as an essential facility, in order to find a valid legal theory of harm. We show that Google’s conduct of linking its proprietary vertical (or specialized) search platforms to its horizontal (or general) search platform through visual prominence, as it has done with Google Shopping, fits within the legal boundaries of tying under European law. From an economic perspective, we show that the two-sided nature of both horizontal and vertical search provides compelling reasons why foreclosure of competition may be profitable, and why the single monopoly profit theorem may fail in this context. As we show in the paper, by tying vertical search to general search through visual prominence, Google can attract additional advertisers on its vertical search platform that would have possibly advertised on competing vertical search platforms without a tie. The effect of tying is a restriction on competition in vertical search that deserves antitrust scrutiny.

Suggested Citation

  • Edward Iacobucci & Francesco Ducci, 2019. "The Google search case in Europe: tying and the single monopoly profit theorem in two-sided markets," European Journal of Law and Economics, Springer, vol. 47(1), pages 15-42, February.
    • Handle: RePEc:kap:ejlwec:v:47:y:2019:i:1:d:10.1007_s10657-018-9602-y
    DOI: 10.1007/s10657-018-9602-y
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    References listed on IDEAS

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    Cited by:

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    2. Robert Urbatsch, 2020. "Trade connections’ effect on European regions’ interest in Brexit," European Union Politics, , vol. 21(1), pages 173-179, March.
    3. Yannis Katsoulacos & Svetlana Avdasheva & Svetlana Golovanova, 2021. "Determinants of the (Slow) Development of Effect-Based Competition Enforcement: Testing the Impact of Judicial Review on the Choice of Legal Standards by Competition Authorities," Journal of Industry, Competition and Trade, Springer, vol. 21(1), pages 103-122, March.
    4. Lei Huang & Yandong Zhao & Liang Mei & Peiyi Wu & Zhihua Zhao & Yijun Mao, 2019. "Structural Holes in the Multi-Sided Market: A Market Allocation Structure Analysis of China’s Car-Hailing Platform in the Context of Open Innovation," Sustainability, MDPI, vol. 11(20), pages 1-20, October.
    5. Cong Gu & Benfu Lv & Geng Peng, 2022. "Google and Alibaba s Different Stock Performances after Antitrust Investigations, the Reasons and Enlightenment," International Journal of Economics and Financial Issues, Econjournals, vol. 12(2), pages 26-36, March.

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    More about this item

    Keywords

    Tying; Two-sided markets; Single monopoly profit theorem; Abuse of dominance; Search bias; Article 102 TFEU;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation

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