The Anti-Competitive Effects Of Foreclosure Behavior By Search Engine Platforms

The unique economic characteristics like two-sided,cross-network externalities(indirect network effects),advantages of big data monopoly,asymmetric prices for users and advertisers in search engine market have led to the fact that the online search market is almost monopoly all over the world,while search bias and “exclusive choosing” implemented by Google and other dominant search engine platforms are the typical abusive behavior in the current search engine market,these abuses not only severely weaken the effective competition of the search engine market,but also damage the utility of search engine market participants,including users and advertisers,therefore they have become the hot issues of antitrust law in many countries.Due to the special commercial model of search engine platforms,the anti-trust policy cannot be completely applied to the platform economy,so there are considerable controversies about how to reason these two behavior are illegal,and how to adopt antitrust policies on these two types of abuse.This article will focus on search bias and exclusive choosing,they are the typical abuses by dominant search engine.In the study of search bias,we will explore the strategic incentives and anti-competitive effects of search bias by establishing the Hotelling model.In addition,we will adopt the dynamic factor innovation investment in the basic model to analyze whether search bias will weaken the innovation of its own vertical search engine after holding the market power,that is also the innovation effect of search bias.In the study of the strategic incentives and competitive effects of exclusive choosing implemented by search engines,we improve the competitive bottleneck model based on the characteristics of asymmetric price structure and the asymmetric cross-network externalities in search engine market,in order to make the competitive bottleneck model more suitable for the search engine platform study.Through establishing these two models,we not only analyse the strategic incentives and anti-competitive effects of search bias and exclusive choosing,but also explore the endogenous factors of two abusive behavior implemented by dominant search engine,we will provide the key point of antitrust review and the basis for the illegal judgment based on the results of the analysis.Finally,we will put forward the antitrust policy recommendations on the abuse of the search engine.Integrated search engine platforms have a strong incentive to implement anti-competitive search bias compared with the non-integrated search engines.Presently,many general search engines also develop the vertical search service,it results in whether the dominant integrated search engine platform will take advantage of its general search to bias against its competitiors in the organic search results and whether search bias will harm competition have become the hot issues of antitrust law enforcement.Generally,search bias means that search engines prioritize their content or content related to their interests through search algorithms,thereby placing their competitors' content in an unfavourable position.This paper will establish the Hotelling model to contrast the bias incentives of non-integrated search engines and integrated search engines and analyse the anti-competitive effects of search bias.It reveals that when the search engine's own vertical search engine is symmetric with its competitors' and there is no substitute relationship between sponsored links and banners,non-integrated search engines do not have the incentive to implement search bias,while they will set the traffic distribution thresholds to satisfy the maximization of user utility.However,the integrated search engine has strong incentives to undertake search bias,it leads to the loss of competitors user traffic and market foreclosure,bias will seriously harm the welfare of users and advertisers on both sides of platforms.When users do not have preference of product differentiation between vertical search engines' content,search bias will stifle innovation of vertical search engine's content.Therefore,antitrust agencies should focus on the degree of competition between different businesses in the search engine market and the online advertising market,attention the user's preference of the product differentiation between vertical search engines to analyse whether search bias will stifle innovation incentives of vertical search.Therefore,antitrust law should prohibit the anti-competitive bias implemented bydominant search engine.When search bias of the dominant search engine harm the competition seriously,the antitrust agency should combine the behavioral remedies promised by search engines with the structural remedies proposed by the antitrust agency to maintain market competition and innovation.The “exclusive choosing” conducted by dominant search engine has a serious impact on the platform competition.Search engines have the typical business supported by advertising,therefore,in order to maintain its monopoly position in the search engine market,the dominant search engine usually provides the third parties,including advertisers,with a "exclusive choosing" agreement on exclusive contracts,which will hinder competitors from obtaining the necessary income to maintain its business.This paper will analyze the strategic incentives and anti-competitive effects of exclusive dealing in the search engine market by the competitive bottleneck model,it reveals that when the marginal cost of the service provided for the advertiser is low,the cross-network externalities of advertise's side is high,the consumer's product differentiation is high,the exclusive choosing does not bring obvious price decrease to the advertisers,dominant search engine has a strong incentive to implement exclusive choosing,“multi-homing” as the most important competitive factor in the platform markets will be eliminated if the dominant search engine adopts exclusive contracts,it will also harm the competition,innovation and total social welfare seriously.However,if the search engine are not dominant,the "exclusive choosing" does not necessarily hurt social welfare.Therefore,when reviewing the exclusive choosing implemented by the search engine platforms,the antitrust agency should focus on the marginal service cost of the search engine,the cross-network externalities of the advertiser's side,the product differentiation of the consumers and the benefits of advertisers.Antitrust angencies should adopt the reason rules and take a strict ban of the exclusive choosing by dominant search engine which harms the market competition seriously.Due to the high concentration of search engine markets and the abuse of search engine is common in various countries around the world,we will offer the following anti-trust policy suggestions: Firstly,we should change the law enforcement attitude towards the search engine market and adopt aggressive and strict anti-monopoly enforcement;Secondly,antitrust angencies should focus on the abuses that result in the market foreclosure effect;Thirdly,anti-monopoly review of search engine abuses needs to consider the unique competitive elements of this market;Finally,anti-monopoly remedies for search engines' abuse should combine the structural and behavioral remedies together.Since the domestic search engine market has been administratively protected for a long time,so domestic search engine companies lack the international competition,it has resulted in these companies not only lack the innovation incentives,but also the competitive advantages,thus it brings these problems: domestic search engine market not only has the "exclusive choosing" and maliciously blocking other links because of the high concentration structure,but also has the problem of bidding rank,fake advertisments,so we will offer different policy recommendations under the Chinese search engine market environment: Firstly,we should regard search engine market as an important field of Internet regulation;Secondly,the laws should be clearly unified and take the protection of consumer as the most important point;Thirdly,antitrust angencies should strengthen the function of promoting market competition as the orientation when propose the policies and impose strict prohibitions on these abuses;Finally,structural remedy should be adopted to Chinese search engine market and the ralated agencies should implement active enforcement to regulate it.