Consumer Watchdog Finds Consumers Pay More Because of Google’s Search Monopoly

Mon, Nov 25, 2013 at 11:41 am

    Consumer Watchdog Finds Consumers Pay More Because of Google’s Search Monopoly

    SANTA MONICA – Google is taking advantage of its monopoly position in search to charge merchants more for placement in Google Shopping, causing higher prices for consumers, a Consumer Watchdog study has found.

    The nonpartisan, nonprofit public interest group is filing the study, made Nov. 11 and Nov. 12, with the European Commission as part of the group’s comments on a proposal to settle the Commission’s antitrust investigation of Google.

    “Google used classic monopolistic tactics to largely clear the field of competitors

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    and then changed its business model to maximize its profits by charging merchants for placement,” said John M. Simpson, Consumer Watchdog’s Privacy Project Director. “Merchants then charge consumers more for the product to cover their payment to Google.”

    Consumer Watchdog studied product results returned through Google Shopping on the Internet giant’s Universal Search and compared prices for the same item listed on three competing comparison shopping engines (CSEs), Shopzilla, Pricegrabber and Nextag. Checking prices for 14 items this month, Consumer Watchdog found Google listings as much as 67 percent higher. In eight of 14 cases lower prices were available on a competing CSE, the study found.

    Read the study here: http://www.consumerwatchdog.org/resources/googlereport112513.pdf

    “Once the field was effectively clear of much of the competition from other CSEs, Google changed its business model. Google Product Search became Google Shopping and merchants were required to pay to be included in the results,” the study said. “Economic theory holds that a business exercising monopoly power will maximize its profits and force prices higher for consumers. Consumer Watchdog’s test comparing prices through Google Shopping with those offered on competing CSEs found higher prices through Google in eight of 14 cases.”

    Some have suggested that Google’s business tactics enabled by its monopoly position only damage competing services. In fact, Consumer Watchdog said Google hurts consumers in two ways. First, Universal Search populates the top of the results page mainly with results from Google’s own services. This moves the Internet giant closer to an ecosystem where real consumer choice no longer exists. Second, as the Consumer Watchdog test shows, consumers are paying higher prices because of Google’s behavior.

    “Google is behaving exactly as is expected of a monopolist in the exploitive phase of market dominance,” said Simpson.

    The study concluded:

    “Google has developed a substantial conflict of interest. It no longer has an incentive to steer users to other sites, but rather to its own services. It is becoming even more effective at this and has a greater incentive to engage in manipulation now that it is

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    merging data collected across all its services. The only way to deal with this conflict is to remove it. There needs to be a separation of Google’s different services and assets. At a minimum any remedy must insist that Google use an objective, nondiscriminatory mechanism to rank and display all search results – including links to Google products.

    “However, to remedy the damage that has already been done, competing services should be listed ahead of Google services in search results for the next five years.”

    A June 2010 Consumer Watchdog, study, Traffic Report: How Google Is Squeezing Out Competitors and Muscling Into New Markets, documents how Google began emphasizing its own services in search results when it launched Universal Search.

    Read that study here: http://www.consumerwatchdog.org/resources/TrafficStudy-Google.pdf

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    Visit Consumer Watchdog’s website at: www.ConsumerWatchdog.org

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    This post was written by:

    John M. Simpson

    - who has written 414 posts on Inside Google.


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