IDEAS home Printed from https://ideas.repec.org/a/kap/ejlwec/v47y2019i1d10.1007_s10657-018-9602-y.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10657-018-9602-y
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s10657-018-9602-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Amelio, Andrea & Jullien, Bruno, 2012. "Tying and freebies in two-sided markets," International Journal of Industrial Organization, Elsevier, vol. 30(5), pages 436-446.
    2. Ioannis Lianos & Evgenia Motchenkova, 2013. "Market Dominance And Search Quality In The Search Engine Market," Journal of Competition Law and Economics, Oxford University Press, vol. 9(2), pages 419-455.
    3. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    4. Caillaud, Bernard & Jullien, Bruno, 2003. "Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
    5. Whinston, Michael D, 1990. "Tying, Foreclosure, and Exclusion," American Economic Review, American Economic Association, vol. 80(4), pages 837-859, September.
    6. Edward Iacobucci, 2008. "A Switching Costs Explanation of Tying and Warranties," The Journal of Legal Studies, University of Chicago Press, vol. 37(2), pages 431-458, June.
    7. Robert H. Bork & J. Gregory Sidak, 2012. "What Does The Chicago School Teach About Internet Search And The Antitrust Treatment Of Google?," Journal of Competition Law and Economics, Oxford University Press, vol. 8(4), pages 663-700.
    8. Jay Pil Choi, 2010. "Tying In Two‐Sided Markets With Multi‐Homing," Journal of Industrial Economics, Wiley Blackwell, vol. 58(3), pages 607-626, September.
    9. Damien Geradin & Nicolas Petit, 2006. "Price Discrimination Under Ec Competition Law: Another Antitrust Doctrine In Search Of Limiting Principles?," Journal of Competition Law and Economics, Oxford University Press, vol. 2(3), pages 479-531.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Andreas Hein & Maximilian Schreieck & Tobias Riasanow & David Soto Setzke & Manuel Wiesche & Markus Böhm & Helmut Krcmar, 2020. "Digital platform ecosystems," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(1), pages 87-98, 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. Robert Urbatsch, 2020. "Trade connections’ effect on European regions’ interest in Brexit," European Union Politics, , vol. 21(1), pages 173-179, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jullien, Bruno, 2010. "Two-Sided B2B Platforms," TSE Working Papers 11-223, Toulouse School of Economics (TSE), revised Mar 2011.
    2. David S. Evans & Richard Schmalensee, 2013. "The Antitrust Analysis of Multi-Sided Platform Businesses," NBER Working Papers 18783, National Bureau of Economic Research, Inc.
    3. Gastón Llanes & Andrea Mantovani & Francisco Ruiz-Aliseda, 2019. "Entry into Complementary Good Markets with Network Effects," Strategy Science, INFORMS, vol. 4(4), pages 262-282, December.
    4. Jullien, Bruno & Pavan, Alessandro, 2013. "Platform Pricing under Dispersed Information," IDEI Working Papers 793, Institut d'Économie Industrielle (IDEI), Toulouse.
    5. Wang, Shiying & Chen, Huimiao & Wu, Desheng, 2019. "Regulating platform competition in two-sided markets under the O2O era," International Journal of Production Economics, Elsevier, vol. 215(C), pages 131-143.
    6. Jullien, Bruno & Pavan, Alessandro & Rysman, Marc, 2021. "Two-sided Markets, Pricing, and Network Effects," TSE Working Papers 21-1238, Toulouse School of Economics (TSE).
    7. Economides, Nicholas & Tåg, Joacim, 2012. "Network neutrality on the Internet: A two-sided market analysis," Information Economics and Policy, Elsevier, vol. 24(2), pages 91-104.
    8. Lin, Xiaogang & Zhou, Yong-Wu & Xie, Wei & Zhong, Yuanguang & Cao, Bin, 2020. "Pricing and Product-bundling Strategies for E-commerce Platforms with Competition," European Journal of Operational Research, Elsevier, vol. 283(3), pages 1026-1039.
    9. Yong Chao & Timothy Derdenger, 2013. "Mixed Bundling in Two-Sided Markets in the Presence of Installed Base Effects," Management Science, INFORMS, vol. 59(8), pages 1904-1926, August.
    10. Chen, Minghua & Rennhoff, Adam D. & Serfes, Konstantinos, 2016. "Bundling, à la carte pricing and vertical bargaining in a two-sided model," Information Economics and Policy, Elsevier, vol. 35(C), pages 30-44.
    11. Amelio, Andrea & Jullien, Bruno, 2012. "Tying and freebies in two-sided markets," International Journal of Industrial Organization, Elsevier, vol. 30(5), pages 436-446.
    12. Caccinelli, Chiara & Toledano, Joëlle, 2017. "Assessing Anticompetitive Practices in Two-Sided Markets: A Comparative Analysis of four Antitrust Proceedings against Booking.com," 28th European Regional ITS Conference, Passau 2017 169452, International Telecommunications Society (ITS).
    13. Amelio, Andrea & Giardino-Karlinger, Liliane & Valletti, Tommaso, 2020. "Exclusionary pricing in two-sided markets," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    14. Zhiyong Liu & Yue Qiao, 2012. "Abuse of Market Dominance Under China’s 2007 Anti-monopoly Law: A Preliminary Assessment," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 41(1), pages 77-107, August.
    15. Pierre ANDREOLETTI & Pierre GAZE & Maxime MENUET, 2015. "Can a Platform Make Profit with Consumers' Mobility? A Two-Sided Monopoly Model with Random Endogenous Side-Switching," LEO Working Papers / DR LEO 1969, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    16. Choi, Jay Pil & Jeon, Doh-Shin, 2016. "A Leverage Theory of Tying in Two-Sided Markets," TSE Working Papers 16-689, Toulouse School of Economics (TSE), revised Oct 2019.
    17. Bianchi, Milo & Bouvard, Matthieu & Gomes, Renato & Rhodes, Andrew & Shreeti, Vatsala, 2023. "Mobile payments and interoperability: Insights from the academic literature," Information Economics and Policy, Elsevier, vol. 65(C).
    18. Bruno Jullien & Alessandro Pavan, 2013. "Platform Competition under Dispersed Information," Discussion Papers 1568, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    19. Filistrucchi, L. & Gerardin, D. & van Damme, E.E.C. & Keunen, S. & Klein, T.J. & Michielsen, T.O. & Wileur, J., 2010. "Mergers in Two-Sided Markets - A Report to the NMa," Other publications TiSEM f901d1fe-8878-444e-a685-8, Tilburg University, School of Economics and Management.
    20. Ji, Sung Wook & Choi, Young-jun & Ryu, Min Ho, 2016. "The economic effects of domestic search engines on the development of the online advertising market," Telecommunications Policy, Elsevier, vol. 40(10), pages 982-995.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:ejlwec:v:47:y:2019:i:1:d:10.1007_s10657-018-9602-y. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.