Google's Antitrust Behavior and the Benefits of Imperfect Competition Research Paper

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Antitrust Practices and Market Power: Google Antitrust Behavior

Economic theory expresses that competition contributes substantially to the efficient operations of markets, and hence to the improvement of a nation's wealth status. Antitrust laws seek to foster competition in the marketplace and to consequently ensure that the welfare of consumers is maximized through the provision of low-priced high-quality products. This the laws do by preventing the emergence of cartels and monopolies, which impede on competition by creating barriers to entry, with the help of which they are able to obtain market power and consequently drive market prices to favor them. Although monopolies may result from either government action or natural reasons, in which case they are referred to as government and natural monopolies respectively, most monopolies are formed through exclusivity contract arrangements, mergers, acquisitions, and collusion. Antitrust laws work at limiting these.

The Costs of Antitrust Behavior

A number of companies have engaged in anticompetitive practices in the past and found themselves having to part with substantial sums of money for running afoul of the law. Microsoft, for instance, had to pay up nearly $70 billion in fines and legal fees for bundling its Microsoft Windows product with Internet Explorer, because the antitrust division found the company's actions an impediment to competition, and a violation of the Sherman Act (Antitrust Laws, 2014).

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Kodak, which once controlled more than 90% of the camera and film industry, was in 1954 accused of 'product-tying', and hence violation of the Clayton Act, by including a fee that covered the processing and delivery expenses in the pricing structure of its Kodacolor film (Antitrust Laws, 2014). The company was, as a result, forced to license such processing to third parties (Antitrust Laws, 2014).

More recently, Google was accused of abusing its search dominance by favoring its own products over those of competitors when displaying search results. Nextag Shopping Website and customer review website Yelp have repeatedly accused Google, which controls 67% of the market, of ranking its own products above those of competitors in search results. Google's rivals cite an example in which a Google search for 'Best New York Sushi' displays Zagat, a Google-owned restaurant review site, as the first result, though this is not the information the customer is searching for (Marrs, 2012). The Federal Trade Commission (FTC) investigated these accusations under the Sherman Act of 1914, which illegalizes any kinds of trade restraints, whether indirect or direct (Marrs, 2012). Although the case went in Google's favor, the company had to incur the direct costs of….....

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