Utah’s Attorney General Sean Reyes, who once hoped for a seat on the five-member Federal Trade Commission, is co-leading a coalition of 36 other states pursuing a lawsuit against tech giant Google (a unit of Alphabet).
Characterized as bipartisan, the state attorneys general accuse Google Play of violating U.S. antitrust laws by adopting exclusionary practices supposedly hamstringing rival app stores’ access to software developers and to prospective app customer-users.
“Google’s monopoly is a menace to the marketplace,” the lawsuit claims. Not so fast.
Whilst it may be splitting hairs, Google is not a monopolist in any marketplace, including search engines and software apps, in the economics textbook sense. Google does not account for 100% of the sales of any good or service.
To be sure, Google is big, perhaps even dominant, in some markets. But such dominance is expected because consumers assign higher values to platforms that connect them to larger numbers of apps and to other users of the same apps. Economists call them “network goods.”
Second, many antitrust scholars (including me) agree with the late federal judge Robert H. Bork that the laws were intended to protect consumers against high prices and other abuses of market power. Mr. Reyes’ lawsuit barely mentions consumers and focuses on the substantial harm Google Play allegedly has done “to competing app distribution channels.”
Harm to rivals — a hallmark of a competitive market process allowing companies to succeed or fail by serving customers well or badly — is not something about which the antitrust laws or their enforcers should be concerned. Unfortunately, though, public officials frequently are captured by special interests that strive to win benefits for themselves in courtrooms or before regulatory agencies that they are unable to win in a freely functioning marketplace.
Indeed, reasons can be found for concluding that the Reyes-led action actually was instigated by Epic Games, a North Carolina company 40% owned by Chinese tech giant Tencent, that spearheads something called “Project Liberty.” Epic and its fellow group members repeatedly have sued Apple and Google, charging both with interfering unlawfully with Epic’s own app distribution platform.
Google and Apple have adopted very different business models for developing and distributing apps. Google Play is one of many app stores based on an open-source Android operating system; Apple’s apps require an Apple (iMac, iPhone or iPad) device.
Millions of apps are available to billions of consumers on both device types globally, hardly evidence of exclusionary practices by any company. Larger numbers of apps can be downloaded to Android devices because developers can choose to distribute software directly to consumers through their own websites, third-party app stores, or Google Play. In the latter case, Google, like most market intermediaries (“middleman”), charges developers a modest fee.
In the digital world, like “old” economy platforms (printed newspapers or the stock exchanges first seen in the coffee houses of London and Amsterdam are good examples) primarily supply trust, helping to reassure buyers and sellers that transactions will be secure and go through as expected. Allowing consumers to rate software applications generates real-time feedback to developers and other users about functionality, reliability, ease of use and other performance metrics is one way of establishing the essential digital trust nexus.
As a matter of fact, public opinion polls consistently rank Google as the world’s most trusted brand, certainly much more trustworthy than the news media, the U.S. Congress, the IRS, or any other institution of government.
Google Play and other app stores (e.g., Galaxy, Amazon) compete with one another for app developers, user downloads, and with Apple’s App Store for software designed to run on that company’s devices. Consumers are free to choose the device and operating system that fits their needs best. Distributing apps globally requires intermediating transactions between large numbers of developers and potential users, which favors platform size. App developers tend to be innovative individuals or small firms that do not have access to the marketing and distribution expertise — or the reputational capital — necessary to engage and serve large customer bases.
Mr. Reyes’s lawsuit threatens many tech companies on Utah’s “silicon slope” by making it more difficult to distribute apps tailored to Utah’s specific circumstances of time and place. A search for “Utah” on Google Play pulls up at least 250 apps: Intermountain Healthcare, the Bank of Utah, Zions Bank, news and weather outlets, tourist destinations, local police departments, and many more.
Mr. Reyes’s job is not to carry water for a North Carolina company at the expense of Utah’s app developers and users. To reiterate, the antitrust laws were intended to protect consumers, not the competitors of Google Play or any other commercial enterprise.
William F. Shughart II, research director of the Independent Institute, is J. Fish Smith Professor in Public Choice at Utah State University’s Huntsman School of Business. He was an economist at the FTC from 1979 to 1983.