Read the following and answer the questions below: The federal government can take legal action against a firm under antitrust laws if the government believes that the firm has created a monopoly. The U.S. Federal Trade Commission (FTC) spent two years beginning in 2011 investigating whether Google had violated antitrust laws before concluding that it hadnt. The European Union, which is an organization of 28 European countries, has similar rules against firms forming monopolies. The European Commission enforces these rules. In early 2011, Microsoft filed a complaint with the European Commission that Google was using its dominant position as an Internet search engine to exclude competitors. In 2013, Google reached a settlement with the European Commission in which the firm agreed to clearly label any search results that directed users to sites that Google owns. Still, many critics argued that both the FTC and the European Commission should take further actions against some of Googles practices. But is Google a monopoly? Clearly, Google is not the only Internet search option available. Yahoo! has for a number of years operated a search engine, Microsoft operates the Bing search engine, and there are a number of smaller search engines. Critics point out, though, that Google has a dominant market share of 70 percent in the United States and 90 percent in Europe. Can the other search engines effectively compete with Google? Microsoft argues that Google has taken steps to create an effective monopoly: [Google] understands as well as anyone that search engines depend upon the openness of the Web in order to function properly…. Unfortunately, Google has engaged in a broadening pattern of walling off access to content and data that competitors need to provide search results to consumers and to attract advertisers. Microsoft was particularly concerned that Google was limiting the access of other search engines to YouTube, which Google owns: Without proper access to YouTube, Bing and other search engines cannot stand with Google on an equal footing in returning search results with links to YouTube videos and that, of course, drives more users away from competitors and to Google. Microsoft also complained that Google was limiting the access of other search engines to many of the books that Google had scanned and made available on the Web. Google, naturally, takes a different view of its position. The company argues that its dominant market share is due to the higher quality of its search engine, not any attempts the company has made to reduce the access of other search engines to online content. In a response to the FTC investigation, Google noted: We want [users of search engines] to stay with us because were innovating and making our products betternot because [they are] locked in. Many economists consider a firm to have a monopoly if other firms are unable to compete away its profit in the long run. Some economists argue that rapid technological advances affecting search engines and other aspects of the Internet make it unlikely that Google would be able to maintain its current level of profitability indefinitely. The debate over whether other search engines can compete with Google or whether it is effectively a monopoly is likely to continue. A newspaper article has the headline Google Says Its Actually Quite Small. According to the article: Google rejects the idea that its in the search advertising business, an industry in which it holds more than a 70 percent share of revenue. Instead, the company says its competition is all advertising, a category broad enough to include newspaper, radio and highway billboards. Questions Why does Google care whether people think it is large or small? Do highway billboards actually provide competition for Google? Briefly explain.
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