Canadian Research Illustrates Flaws in Antitrust Laws Worldwide

A technological war is being transformed into a legal battle in the case of Google in Europe and in the US.

Google must defend itself against charges that it has abused its dominant market position to the detriment of users, who spend 3.4% of their Internet time using search engines. According to Marie-Josée Loiselle, associate researcher at the Montreal Economic Institute, the case of Google and the upcoming nomination of a new Commissioner at the Competition Bureau of Canada offer an opportunity to take stock of what the MEI describes as “certain flaws in antitrust laws.”

In an economic note titled Flawed Competition Laws: the Case of Google published this week with the MEI, Ms. Loiselle explains that competition is not reducible to a list of companies or their market shares. It is rather the number of potential competitors that counts. In the highly coveted high tech sector, there is “no shortage of pretenders to the throne,” the MEI says.

“The application of competition laws to the high tech sector is particularly delicate, especially because of the speed at which the sector evolves. A company can have a quasi-monopoly one moment, and a few short years later be displaced by a new technology. That’s what happened to IBM with personal computers, and to Sony and its Walkman, and more recently to the MySpace networking site. I don’t think we should penalize a company because it revolutionizes the market and gets consumers to flock to its new product,” says the report’s author.

The MEI continues the argument:

Furthermore, cases of “regulatory capture” can occur when less efficient industry players try to fight a dominant company using the legal system instead of doing so by reducing their prices or offering better products. This has the consequence of distracting the company from its innovative activities since it must pay out large sums of money to defend itself before the courts. At the end of the day, the real losers from such a slowdown in innovation are consumers.

Google has been feeling the heat from several countries, most notably the US, in recent years due to the incredible wealth of information and power it holds being the world’s most ubiquitous internet search engine.

UPDATE: Adjusted for accuracy; MEI provided this research independently of Google.

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