28 May 2014Working Paper Summaries

Leveraging Market Power Through Tying and Bundling: Does Google Behave Anti-Competitively?

by Benjamin Edelman

This paper presents a series of incidents in which Google used tying and bundling to expand its dominance in a number of online markets and into additional markets. The author assesses whether these incidents raise concerns under antitrust law, and concludes that they do. Based on case law of technology companies that have engaged in tying and/or bundling and subsequently been subject to antitrust scrutiny, most notably Microsoft, it appears that Google's tying and bundling practices could face strong criticism for foreclosing competition. Such scrutiny is particularly important in light of Google's dominance in a number of online markets. The author also examines both current ties as well as ties Google used historically. The author concludes that Google's use of tying portends a future of reduced choice, slower innovation, lower quality, and higher prices. Key concepts include:

Google's strategic use of tying and bundling has allowed it to expand its dominance to numerous sectors adjacent to its current strongholds.
By tying its new products to its dominant products, Google can effectively compel use of its new products-even if consumers or advertisers prefer alternatives.
Google appears to impose rules that are significantly more intrusive than prior Microsoft requirements.

Author Abstract

I examine Google's pattern and practice of tying and bundling to leverage its dominance into new sectors under antitrust law principles. In particular, I show how Google used these tactics to enter numerous markets, to compel usage of its services, and often to dominate competing offerings. I explore the technical and commercial implementations of these practices, and I identify their effects on competition. I conclude that Google's tying and bundling tactics are suspect under antitrust law.