A hundred years ago the business tycoon Samuel Insull consolidated smaller utility companies to form the behemoth (albeit public charity-sounding), Commonwealth Edison. Because of the infrastructure needed to provide energy to an increasingly power-hunger public, Insull and others argued that Commonwealth Edison was a natural monopoly; inherently one company had to dominate the market. This battle cry enabled a mere 10 utility systems to control three-quarters of the nation’s electricity business by the time FDR was in the White House, subjecting consumers to higher rates with absolutely no competition save candles.
A series of New Deal regulations changed this, leading to decades of fair pricing to the consumer. (Until they were deregulated in the 1980s and 1990s, which is another column for another time.)
Google is a perfect example of a natural monopoly. Now every time that gets said, it inevitably gets countered by mentioning Google’s relatively small share of the smartphone market or their limited reach with their Chrome browser. I’m not talking about their other services in the slightest. I’m talking solely about their search engine. Google, which is now a verb, accounts for roughly 70 percent of the world’s searches. To put this into perspective, U.S. Steel held 67 percent of the market when it was subjected to an antitrust case in 1911.
On Google’s “Facts about Google and Competition” they state: “On the Internet, competition is one click away. Users aren’t locked in to using Google search, and the cost of switching to a different search engine is zero.” Yes. However the only asset of a search engine is its accuracy. The way their “mathematically derived opinion” i.e., the way search engines figure out what we want is by an algorithm of user data. Meaning: you want the search engine the greatest amount of people use. So it lends itself to being a monopoly by virtue of its success.
Case in point: I tried using DuckDuckGo for a week as an experiment. I lasted a whopping three hours. I just couldn’t find what I was looking for. I then submitted to the fact that evil, opaque or objectionable—I had no choice. I had to go back to Google.
It should also be noted Google is the subject of an antitrust complaint and ongoing investigation in Europe, which recognizes the significance of Internet giant’s search engine.
Why is this an issue? This week Consumer Watchdog filed a formal complaint with the Federal Trade Commission citing Section 5 of the Federal Trade Commission Act for unfair and deceptive practices. It stems from Google’s highlighting results from advertisers without a clear enough demarcation. To further their case they add analysis by the Financial Times reporting, “Five out of every six items in the panels shown on a Google search made in America are more expensive than the same items from other merchants hidden deeper in the index, with an average premium of 34 percent.”
Meaning when you search for a deliciously humiliating Christmas sweater for your cross-eyed Boxer mutt, the Google Shopping results are not the best prices as you’d expect, but premium prices of Google’s Product Listing Ads. Think of it as a pay-to-fleece for Cyber Monday.
Since Google’s search engine is by definition a natural monopoly, it should therefore be seen as a public utility, a private sector company providing a public service subjected to following certain rules.
We can start with transparency and clarity in search results.
Taking Eternal Vigilance Too Far