When Demotion is Competition: Algorithmic Antitrust Illustrated

Abstract

On 27 June 2017, the European Commission fined Google €2.42 billion for “abusing dominance as search engine by giving illegal advantage to own comparison shopping service.” Allegedly, Google has algorithmically manipulated the search results of products in order to promote its own platform, Google Shopping, at the expense of competitors. According to the European Commission, it has infringed Article 102 TFEU because it i) “has systematically given prominent placement to its own comparison shopping service” and ii) “has demoted rival comparison shopping services in its search results.” In a nutshell, the European Commission blames Google on two different grounds for the same thing: promotion of its own services, and demotion of its competitors’ services. But, demotion — meaning, the reduction in the ranking of some things or some individuals — is merely the exact opposite of promotion — meaning, the enhancement in the ranking of other things or other individuals. From economics perspective, both conducts are equivalent since increasing the prices to rivals’ products is similar to lowering the prices to one’s own products. Therefore, the case is essentially a case against self-promotion. No current antitrust infringement has clearly helped the Commission in its ambition of fining Google: only recourse to dubious regulatory principles in disguise (II.) and the misconception of self-promotion in algorithm-driven strategies (III.) have enabled the Commission to impose an innovation-deterring fine.

Keywords: Antitrust; Algorithms; Google; Abuse

JEL Classification: K21