Thursday, July 4, 2013
Posted by D. Daniel Sokol
Aaron Edlin (Berkeley) and Robert G. Harris (Berkeley) have an interesting paper on The Role of Switching Costs in Antitrust Analysis: A Comparison of Microsoft and Google.
ABSTRACT: Is Google the new Microsoft? Many think it is, and in particular there has been a chorus of competition complaints (ironically many originating from Microsoft) that assert that Google's conduct and position today is quite parallel to Microsoft's position in the "Microsoft case," the case brought by the Department of Justice in 1998.
We contend in this article, however, that there is a central difference which should remain in constant focus in any antitrust analysis. The cost of a user switching from Google Search to another search engine is trivial compared to the cost of a user switching from Microsoft Windows to another operating system in 1998. Moreover, in the Microsoft case, the government's theory was that Microsoft was taking strategic actions to maintain high switching costs by maintaining an "applications barrier to entry." There is no parallel with Google, and the implication as we shall explain is that Google Search, if it poses any threat today, does not pose the same antitrust threat that Microsoft Windows posed in 1998. In this article we explore the importance of high switching costs in the Microsoft case and in antitrust cases more generally; we shall also explain the criticality of the absence of significant costs for users switching from Google Search.