Antitrust Practices and Market Power - Research Paper Example

ANTITRUST PRACTICES AND MARKET POWER The case appearing on New York Times on FEB. 5, shows how Google was taken through anelaborate investigation by European Union competitors over allegations of antitrust practices. Google is one the global search engines in the information and communication industry hence remains targeted for fierce rivalry by other in European market where it exhibit almost monopoly (Acemoglu,2009). The Case was brought against Google over potential abuse of its monopoly position on internet search in the European Union, where it is said to enjoy an estimated over 90% of search traffic.

In May 2012 Almunia said that a key commission concern was that "in its general search results, Google displays links to its own vertical search services differently than it does for links to competitors" which is a violation of the stipulated antitrust regulations in European Union (Claire and Mark, 2014). This business malpractice boosted the market power of Google’s over its competitors and was considered a source of market failure. Critical economic analysis supported the antitrust claim against Google as the potential price maker which is characteristic of monopoly market structure.

In real sense, Google’s competitors fought for oligopoly market structure in which strict adherence to antitrust practices are highly revered for reduced barrier to entry by other potential firms(Bavasso, 2003). In defense for the firm, Daniel Knapp who is the director of advertising research at the advisory firm IHS in London said that Google was no longer just a search company and such concessions won’t have a material impact on Google. These are some of the statements that explore how Google had established imperfect competition against the other players (Claire and Mark, 2014).

The case was therefore meant to reduce natural monopoly and the costs it put on its smaller competitors with economic profits. Such antitrust behavior boosts emergence of imperfect competition with more market power which reduces the revenue of the noncompetitive small firms. The case brought against Google by regulations of European Union attracts such pecuniary costs in terms of fine which Google was compelled to pay in case the issue was ruled. It is also worth to note that such antitrust misconduct significantly affected the public image of Google as a non-pecuniary (Acemoglu, 2009).

The case of Google was put under potential consequences like a $5 billion fine or a ruling to make major changes to its company structure or its products. The case is classified under Sherman Act which imposes severe penalties on any person that monopolize, or attempt to monopolize. Monopolies and oligopolies have the deadweight loss effect to the society. This means they make prices and regulate output with significant effect on consumer who has to pay more at limited supply. They don’t price based on marginal cost but seek to equate this to marginal revenue for maximum profit.

This has led to significant market failure in which distribution of resources is skewed and retrogressive. A typical case is with Google which has overwhelmed its competitors in Search Engines with critics pointing out its technical hitches and increasing pressure to handle expanding market (Bavasso, 2003). However, monopoly is acceptable in the event that the product under question is for security purposes like arms and military equipment suppliers. In this case, the government ensures safety from possible proliferation of weapons if it were the case under perfect market condition.

References Acemoglu, D. (2009). Introduction to modern economic growth. Princeton: Princeton University Press. Bavasso, A. (2003). Communications in EU law: Antitrust, market power, and public interest. Boston: Kluwer Academic Publishers. Claire Cain Miller and Mark Scott (2014). Google Settles Its European Antitrust Case; Critics Remain. The New York Times. Feb. 5, 2014 http://www.nytimes.com/2014/02/06/technology/google-reaches-tentative-antitrust-settlement-with-european-union.html