High-Profile Study Turns Up the Antitrust Heat on Google

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By Brad Stone

June 29— Google is facing a new high-profile adversary in the roiling fight over whether its monolithic search engine violates antitrust law: Columbia Law School professor and noted Internet theorist Tim Wu.

The author of the influential book The Master Switch: The Rise and Fall of Information Empires co-wrote a paper asserting that Google is engaging in anticompetitive behavior by prominently serving up its own content, like restaurant reviews and doctors office phone numbers, in search results.

Wu is an unlikely person to join the antitrust chorus against Google. He's often been an ally of the company over the years. Before an unsuccessful run for lieutenant governor of New York state last year, Wu worked as an unpaid Google fellow in 2008 and served as a senior advisor to the Federal Communications Commission in 2011 and 2012, helping draft Internet traffic regulations that Google favors. Wu coined the term “network neutrality,” and a 2008 Businessweek story credited him with partly inspiring Google's open mobile strategy in Android.

The new study, which was presented at the Antitrust Enforcement Symposium in Oxford, U.K., over the weekend, says the content Google displays at the top of many search results pages is inferior to material on competing websites. For this reason, the paper asserts, the practice has the effect of harming consumers. Wu co-authored the study with Michael Luca, an assistant professor at Harvard Business School, and data scientists at the local reviews site Yelp, which has been one of Google's primary opponents in the global antitrust fight. Wu was paid by Yelp for his work on the paper.

The research seeks to undermine Google's primary defense against the charges filed in Europe, where competition regulators have formally established a case that Google violates antitrust law. Google says it has created a better experience for users by bundling its own answers at the top of search results to questions like “What time is it in London?” or “What's the weather in Berlin?” The paper acknowledges that in many cases, Google's answers to such questions are handy for users. But when the query is subjective-“What's the best pediatrician in San Francisco?”-Google points to its own results first, which, Wu and his colleagues allege, hurts consumers.

To demonstrate the point, data scientists at Yelp ran a series of blind A/B tests, showing 2,690 Internet users two sets of search results in response to queries about local businesses. One half got the typical Google results: On the top of the page, there were seven links that pointed to Google's own content (usually listings on the social network Google Plus.) The other half were shown pages modified by an Internet plug-in, which replaced the original results with external listings that the Google algorithm itself had organically selected as the most relevant.

According to Yelp's findings, users were 45 percent more likely to click on the merit-based search results. “Google appears to be strategically deploying universal search in a way that degrades the product so as to slow and exclude challengers to its dominant search paradigm,” the paper concludes. Wu says the findings were a “game changer” for him and convinced him of Google's wrongdoing. “It's a legal exercise of monopoly if it hurts competitors while helping consumers, but if it hurts consumers while also hurting competitors, then there is no justification for the conduct,” he says.

Google declined to comment publicly on the paper. But two people familiar with the company's thinking criticized the paper for assuming that more clicks equates to better search results. For example, users searching for “the best pediatrician in Brooklyn” may be more satisfied by Google's list of doctors with accompanying phone numbers than with links to other websites that they then have to click on and wait for as each one loads. These people also note that Yelp listings are often prominently displayed on the first page of search results and that Yelp's business does not appear to have suffered by Google privileging its own material. Yelp's stock is up nearly threefold since it went public in 2012. Consumers could also turn to competing search engines like Bing, go directly to sites like Yelp or open an app on their smartphone.

Wu doesn't think that exonerates Google. “Given that general Google search faces limited and in some countries no direct competition, I think it can get away with weakening or degrading the product, and suffer little consequence,” he says. “In fact, in antitrust cases, the ability to do things that effectively eliminate consumer welfare like offering a degraded search can be evidence of market or monopoly power.”

Wu describes the research as a “righteous cause.” He says, “I have great respect and admiration for Google as a company, and feel that 90 percent of what they do makes life easier or better. In this case, I am convinced that Yelp's data is showing a deviation from those principles, and I agreed to write the paper to make that point known to the world.”

To contact the author on this story: Brad Stone at bstone12@bloomberg.net

To contact the editor on this story: Mark Milian at mmilian@bloomberg.net

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