Letter to Congress on Competition in the “Evolving Digital Marketplace”

 

September 15, 2010

Congressman Hank Johnson

1133 Longworth HOB
Washington, D.C. 20515

 

Dear Chairman Johnson:

As the Subcommittee on Courts and Competition Policy meets tomorrow on “Competition in the Evolving Digital Marketplace,” I would like to call to your attention to the growing threat to competition – Google’s high market share, high profits and potential for anticompetitive conduct that poses risks for the industry and online consumers.  Starting in 2006, Dr. Larry F. Darby found Google to have abnormally high profits, compared firms in the industry.  In 2008, for instance, the former FCC Bureau Chief and ACI Senior Scholar found Google to have five times the profitability of the top four Internet Service providers, four times the profitability of Exxon and twice the profitability of major drug companies.  There have been links suggested between Google’s high returns and high market shares, shares garnered mostly through acquisition – namely, DoubleClick and YouTube among others – and using their scale to squeeze profits from their advertising partners.

 

Today, most of the Internet’s traffic funnels through Google’s websites.  It is the dominant player in search, search advertising, online digital works and orphan books, book search, and, with the pending acquisition of ITA, potentially travel search.  A number of experts have conceded that the market may well have tipped, meaning that Google’s scale advantage and dominant position present a barrier for other competitors. This is supported by separate claims by Kinderstart, Search King and Foundem that Google manipulated its search results to guide traffic from competitive sites.  There are also claims that Google has manipulated its ad placement for similar gains. 

 

While we wish to reserve judgment on these issues at this time, we strongly urge the Subcommittee to widen its discussion on Thursday to include what appears to be a major threat of competition, market innovation and industry investment – posing consequences on other competitors, advertisers, publishers and, most importantly, online consumers.  Going forward, this issue needs the Subcommittee’s immediate attention. 

 

With Best Regards,

 

 

Steve Pociask, President

American Consumer Institute

1701 Pennsylvania Ave, NW, Suite 300

Washington, DC  20006

 

 

CC:    Hon. John Conyers Jr.             

Hon. Rick Boucher                 

Hon. Jason Chaffetz

Hon. Charles Gonzalez          

Hon. Sheila Jackson Lee         

Hon. Howard Coble

Hon. Jim Sensenbrenner Jr.    

Hon. Bob Goodlatte               

Hon. Mel Watt           

Hon. Darrell Issa                    

Hon. Mike Quigley                 

Hon. Gregg Harper

Hon. Dan Maffei                    

Hon. Jared Polis

 

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