Vertical Integration and Antitrust in Search Markets

Abstract

This paper studies the integration of an upstream firm in the market for Internet search with downstream services. In 2011, Google integrated its comparison site for flight fares (Google Flights) and restaurant ratings (from a recent acquisition of Zagat) into Google's search results. I find that Google's integration of Google Flights led to a reduction in clicks to competing travel agencies for general searches. The acquisition of Zagat's restaurant ratings led to an increase in clicks, regardless of the content of the search term. The contrasting findings may be explained by the fact that Google Flights provides price information and therefore directly competes with other online travel agents while Google Zagat provides quality information, which may encourage more search on competing review sites.

Keywords: antitrust, tying, online, Internet, consumer search, vertical integration, Google

JEL Classification: L40, L86