Should Antitrust Protect Competitors Or Competition?

from the rewriting-antitrust dept

While there is plenty of breaking news to go around, tech junkies will not have missed the Department of Justice’s long-awaited announcement of their antitrust lawsuit against Google. This is just the latest in a number of government moves aimed at applying more pressure to big tech. Congress is also reviewing potential reforms to antitrust law in order to make it easier to target online platforms. During recent hearings, the House Judiciary Committee examined how these companies compete and highlighted individual competitors­­ that struggle to compete or work with dominant firms.

But in its rush to legislate market fairness into the tech world, Congress seems to be missing the point: we need to protect competition, not the competitors themselves.

The Supreme Court warned about this nearly two decades ago. As the Court explained of the Sherman Act, “[t]he purpose of the Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself.”

In other words, competition law doesn’t care what happens to small competitors, it cares that these companies have a chance to compete.

This is where Congress is treading on dangerous ground. Earlier this month, the House Judiciary Committee released an extensive report detailing their investigation into online markets. In this report, Congress finds themselves worried about what happens to individual competitors, not competition writ large.

For example, at one point the report states that “Google’s preferential treatment of its own verticals, as well as its direct listing of information in the ‘OneBox’ that appears at the top of Google search results, has the net effect of diverting traffic from competing verticals and jeopardizing the health and viability of their business.” Because of this, the report recommends Congress overturn judicial precedent on attempted monopolization, which currently requires that plaintiffs show that the company has a dangerous probability of monopolization.

But Google does not seem to be preventing vertical search engines from competing and as far as we can tell, it hasn’t monopolized this service. Their “OneBox” gives users a quick answer to a question or a product they are looking for. True, a competing vertical search engine may lose traffic, but the consumers get more search results overall. If Google could monopolize vertical search markets, then that would effectively prohibit competitors from offering better, rival services. But so long as a firm like Google can’t actually achieve that monopoly in the new market, the competitive constraints on behavior still exist.

And even if a general search feature and anticompetitive conduct led to monopolization of vertical search, antitrust law would act as a check to protect competition. The Department of Justice’s long-predicted antitrust lawsuit against Google is evidence of this. If Google has illegally acquired, attempted to acquire or maintained a monopoly, then current antitrust law will ensure that any anticompetitive harms are corrected without hurting the consumers. But if they simply outcompeted rivals by offering a more efficient product, then competition policy should not, and currently does not, worry about the individual competitors who can’t keep up.

Competition protects consumers and is critical in the online marketplace. In the fast-moving technology sector, some companies will not keep up. But Congress cannot lose focus by worrying about individual competitors. Instead, they must keep an eye out for anticompetitive behavior that prohibits competitions because the firm controls the entire market. In the end, if we artificially prop up less efficient or innovative competitors, then it will be the consumers who end up suffering.

Jeffrey Westling is a technology and innovation resident fellow at the R Street Institute.

Filed Under: antitrust, competition, competitors, doj
Companies: google

No, Telling Customers Why Your Product Is Better Than A Competitor's Is Not Trademark Infringement

from the and-judges-should-know-that dept

Every time I read an opinion like this ruling in AR Pillow Inc. v. Cottrell, a little piece of me dies. This is a ridiculously easy case, yet somehow it got all tangled up.

The litigants are rival vendors of similar products to combat baby acid reflux. For a slightly similar dispute involving trademark fights over baby products, see BabyAge v. Leachco.

The plaintiff is largely complaining about text on the defendant's website explaining why the plaintiff's product isn't as good as the defendant's. From my perspective, the explanation doesn't constitute a trademark "use" at all because the trademark is being used as a referent. See, e.g., Naked Cowboy v. CBS, 2012 WL 592539 (S.D.N.Y. Feb 23, 2012). Thus, the court should dismiss the trademark claim for non-trademark use. But if the court doesn't do that, at least it should dismiss as a nominative use. See, e.g., 1 800 GET THIN v. Hiltzik. There is absolutely no question that the defendant's reference qualifies as a nominative use under Ninth Circuit law. Yet, and here's where a piece of me dies, the opinion doesn't discuss nominative use AT ALL. What???

Instead of addressing the two most obvious grounds, the court engages in doctrinal contortions to fit this case into a standard likelihood of consumer confusion (LOCC) analysis. As I've explained elsewhere, the multi-factor LOCC test simply makes no sense when a third party is using the trademark editorially as a referent. My paradigmatic example is the Ballysucks case, where the LOCC analysis is ridiculous because the court is trying to compare a vendor with a griper who registered a "sucks" domain. The LOCC test doesn't work any better here. The judge almost seems to know that the LOCC test isn't the right test, but he doesn't seem to know what else to do.

Fortunately, the judge overcomes his shaky analysis by reaching the right result, concluding that there's insufficient evidence of consumer confusion. Yay for good outcomes. But we need to find better ways to make it clear trademark law should not play a role in situations like this. For more on that, see my Online Word of Mouth paper.

One more point: the court's technological discussions are a mixed bag. On the plus side, citing Network Automation and Matt Cutts' blog post/video, the judge rejects the plaintiff's claims over keyword metatags because Google ignores them. But then the judge launches these groaners:

"there is no evidence in the record that use of the term AR Pillow in Google or other search engine currently leads to defendant's website"

and later

"Consumers who search for AR Pillow today are not presented with defendant's website in the rankings"

Oh god, not this again. Please, let's kill this meme RIGHT NOW. Relative placement of search engine results is a HORRIBLE way to evaluate trademark disputes. First, as I explain here, the junior user doesn't control placements--the search engines do. Second, in my post on the Bitchen Kitchen litigation, I explain technological reasons why this is a terrible idea, including search results personalization, the fact that results change minute-by-minute, and the fact that different search engines rank their results differently. Judges, I beg you, please don't go down this wormhole.

Filed Under: competitors, search engines, trademark
Companies: ar pillow, cottrell

Indian Company Sues Google For Showing Competitors Ads... Even Though It Places Ads On Competitors Too

from the what's-good-for-us... dept

There have been plenty of misguided lawsuits against Google, when someone gets upset and realizes that competitors are buying AdWords on their name or other trademarks. But, of course, that shouldn't be a trademark violation (unless the resulting ad is confusing). It's just well-placed marketing. Furthermore, even if it is trademark infringement, it shouldn't be Google's liability, but the party who bought and created the ad. However, the lawsuits still keep coming -- with the latest one being in India. But what makes this one special is that the complaining company seems to be buying those types of ads itself. So while it's complaining that competitors' ads show up on searches for its own name, it had no problem buying ads on competitors' names. Why not just try competing by offering a better service, rather than worrying about how competitors advertise?

Filed Under: ads, adwords, competitors, india, trademark
Companies: google