Wednesday, November 25, 2009
The Google Book Search Settlement has received a great deal of attention. In response to opposition, the original settlement has been delayed and will now be resubmitted. In this brief paper, I address three points. First, I do a quick status update on competition issues in the case. Second, I turn to a key issue that has emerged in the commentary on the competition issues, namely, what is the right way to frame the competition policy baseline for assessing whether a new arrangement such as GBS is procompetitive? That question is of general interest to the intersection of antitrust and innovation policy and given the importance of both to the health of the economy, it is critical that we get the baseline question right.
We will be misled if we simply track expansions in output. Clever cartelists will want to cartelize new industries in their infancy, as they know that a new product innovation will inevitably raise output, even if it does so by much less than we would see in the face of full competition. And innovators will want to bundle anticompetitive features with competitive ones if they know that they are simply being judged against the pre-innovation baseline.
Third, as applied to the Google Book Search settlement itself, antitrust enforcers need to disentangle the genuine benefits of the project from anticompetitive features. Obviously, that is a conventional problem in antitrust but it means here that product innovation can’t be used as a general shield against standard antitrust analysis. A single infrastructure such as the digitized book scans can be used to offer many products simultaneously and competitive benefits from one product cannot insulate anticompetitive steps in a second product using that same infrastructure.
Download the article from SSRN at the link.