Publication of the week: Nudge

 

Today's publication of the week is "Nudge: Improving Decisions about Health, Wealth and Happiness" written by Richard H. Thaler, Professor in Economics and Behavioural Science at the Univrsity of Chicago and Cass R. Sunstein, Administrator of the White House Office of Information and Regulatory Affairs.

Behind the rather cheesy title stands a book that is highly interesting both from a private and an academic point of view. Thaler and Sunstein describe how "choice architects" can influence people's behaviour for their own good, say what they eat for lunch in the cafeteria. They advocate "libertarian paternalism", that is they want to influence people for their own good without taking away their liberty to choose something that may be less beneficial to them. In the cafeteria example, this means that desserts are not taken away entirely, but rather put in a place that makes it unlikely for people to choose to eat dessert. "Nudge" is written in a style that many would probably call "popular science", but that makes it easy for us non-economists to understand the basic economic concepts that the authers talk about and it shouldn't be too difficult to read up on the relevant academic literature if necessary.

What has all this to do with researching on EU competition law enforcement? Well, if one can influence people for their own good, should it not be possible to influence companies for their own good?  In my view, competition law is still very much a bastion of Chicago School economics (ironically originating from the same University where Thaler and Sunstein are Professors). Behavioural Economics is therefore only slowly finding its way into academics and enforcers minds. However, it may play quite a role in my PhD project, as I am striving to research how EU competition law enforcement could be improved and that leads me to think that maybe one needs to change the approach to deterring companies from infringing competition law. Speaking of which, I will try to post something more detailed about my project in the near future!

Google – The jury is still out (at least in the EU)

I wrote the post below a while ago after I read Bork and Sidak's article, but never got around to publishing it. In the meantime the google cas in the US has been closed and Google has proposed commitments to the Commission. However, it is still open if the Commission will accept these commitments.

 

Robert H. Bork  and J. Gregory Sidak have written an Article entitled “What does the Chicago School Teach about Internet Search and theAntitrust Treatment Of Google?”, a video presentation which can be seen here. The authors assess accusations concerning anti-competitive conduct made by Google’s competitors from the point of view of the teachings of the Chicago school. While the article is very well written and I highly recommend anyone interested in the Google case to read it, I would like to briefly comment on a small selection of their findings in this post.

1.      Google is not the gateway to the internet

Some of Google’s competitors claim that it is the “gateway or, more extremely put, the “gatekeeper” to the internet. The authors however argue that consumers can navigate to websites by themselves, they are not forced to use Google (or any other search engine) to open a website. Besides typing in an URL, one can also use bookmarks or the browsers’ autocomplete function as well as mobile apps. Nevertheless, this is only correct as long as the user knows exactly where he wants to go. Often this is not the case, which is exactly why search engines exist. They guide users through the internet, specifically to websites they do not know yet. Thus, search engines are the key to new business. For example, if one makes a search for “Restaurants Stockholm” with Google.se, the first hit will lead to Stockholm’s tourist portal followed by a number of restaurants supplemented by a map and trip advisor on third position. Arguably, what is displayed first by the major search engine, Google, will influence the choice made by consumers searching for a restaurant in Stockholm. Thus, while claiming that Google is the “gatekeeper” of the internet might be going too far, Google’s search results still have a significant influence on consumers’ choices especially when it concerns new products. Whether or not the placement of results negatively impacts consumers is another question, but it appears logical that the order in which Google chooses to list results does have some effect on consumers.

2.      Specialised searches benefit consumers

The authors claim that the specialised searches, which Google displays on the top of the first results page has no anti-competitive effects. Specialised searches are for example maps with a number of searched places marked or a number of news stories grouped together when searching for a person or recent event. In fact, such specialised searches are displayed by all major search engines (Bing, Yahoo, Ask.com) and thus, according to the authors, “it is reasonable to infer that this display has “competitive virtues”—it reflects consumer preferences.” (p.2) However, just because all competitors in a certain market are doing something, does not automatically mean that this also benefits consumers. Nobody would claim that consumers benefit if all gas stations agree on a set price for gasoline. Likewise, it is not necessarily beneficial for consumers if all search engines implement specialised searches. Rather, something that is implemented by all competitors can be assumed to benefit all competitors. Specialised searches can for example guide users to other products provided by the search engines, for instance maps services, as in the example above. This does not mean to suggest that specialised searches are detrimental to consumers, but merely that the assumption may be too easily made by the authors. If consumers really benefit from specialised searches would need to be researched further.

3.      Google is not blocking competitors

In their third section, the authors further reject various claims made by Google’s competitors, concerning the blocking of services such as Youtube and Google books from the search results of competitors as well as agreements with hardware manufacturers about the standard search engine pre-installed on their devices. The authors claim that: "By definition, some search engine must be the consumer’s default search engine on computers and devices, because consumers value having a pre-installed search function on their newly purchased computers or phones.” (p.23) Unfortunately, no statistical evidence referring to the preference of consumers with regard to pre-installed default search engines is cited by the authors. In any case, one could argue that pre-installed search engines on computers could be compared to the pre-installed browser discussed in the Microsoft case in the EU. Could users not be presented with a choice screen during setup of their device in which they choose the search engine they would like to use as a default?

The criticisms of the article discussed here show that the jury is still out on the Google case and that more research is perhaps necessary to show if and if so, which of Google’s activities are anti-competitive.

Some fun for the weekend...

Happy Friday everyone! On Fridays I will try to post a list of links for competition law nerds to read over the weekend. So, here we go.....

US Antitrust Cheatsheet

The UK may become the first Member State in which private enforcement of competition law is actually attractive.

Alexander Italianer speaks on levelling the playing-field and innovation in technology markets

DG Comp is looking for a Chief Competition Economist

Publication of the week: Public and Private Regulation: Mapping the Labyrinth

Trying to revive this blog, I will try to create some categories that reappear every week, hopefully even on the same day, but I guess that will depend on my workload from week to week. Anyway, one category is the "publication of the week". Here, I plan to showcase books and articles that have caught my attention in the past week. Up first is Andrea Renda and Fabrizio Cafaggi's paper on public and private regulation, available for download here. I had the pleasure of attending two lectures Andrea gave at Stockholm University today and I was deeply impressed by his insights into the economics of competition law.

His paper deals with a slightly different, but related area; the question of if and how the state should regulate. In the words of the authors: "In this paper, we try to propose a theoretical framework that could guide public policymakers in assessing whether, and in what form, private regulation can prove the most appropriate form of policy intervention." It does thus not directly concern competition law enforcement, but can surely be related to it, as it can be questioned if private regulation could to a certain extend replace or compliment the enforcement of competition law carried out by competition authorities. 

Revival

Hi all, I'm thinking of reviving this blog in the near future, and hope to be a bit more consistent in my blogging (easier said then done). I will probably try to focus most of my attention on EU competition law, which is what I am writing my PhD thesis on, but occasionally I may also include posts about other issues in EU law. I still very much consider myself to be a student of EU law and will probably do so for some time to come (you can never stop learning, right?), so I will keep the name of the blog. I hope to be back soon with some new posts, but right now I need to get back to my thesis, as I have a deadline to keep :-).

Silly names for EU mechanisms

The mechanism for Rapid Border Intervention Teams (RABIT), assisting MS's under circumstances of a sudden influx of asylum seekers, have been ridiculed given its rather silly name. There is, however, another mechanism with a far more unfortunate name.

Repost from Kosmopolito: Short guide to lazy EU journalism

Just found this on Kosmopolito. Great Laugh!

Short guide to lazy EU journalism

The unofficial rulebook for lazy EU journalism. 20 invaluable tips for your career in EU journalism.

1. Not sure how the EU works or what institutions are involved? –> Just write “Brussels”.

2. Germany is generally seen as important in EU politics and journalists know how to frame it: If Germany is active in a certain policy domain just write something about  “German dominance” and if you work for British newspaper add  some subtle references to the war. If  Germany is passive in a given policy area just write that Germany abandons the EU and it clearly adopted a unilateral strategy, if you work for a British newspaper you could add something about the war.

3. Found a short reference in a paper which talks about your country? –> Is is an evil plan to undermine democracy

4. General rule: No need to distinguish between different European institutions and organisations. Who cares whether it is the Council of Europe, the European Council, the Council of the EU, the European Commission, the Court of Justice of the European Union or the European Court of Human Rights . –> Just write something about eurocrats and unelected foreign European judges interfering with your beloved country. [thanks Andrew!]

5. You are in Brussels and there are several events happening at the same time?  –> Well, this is a clear sign that the EU does not address the important issues! (Important issue = event you attend)

6. Unsure what is happening in the EU? –> Don’t bother ringing someone in Brussels. Just make something up about bananas or recycle a story you read half a year ago. If you are ambitious call the press department of one of the parties in your capital or use a recent party pamphlet.

7. Did you come across a controversial statement or an opinion of an MEP or any national MP? –> Start your article with “EU plans to…” or “Country X wants to…” Any MEP or committee must be prefaced by “senior,” “influential” or “key” as long as he/she/it says something confrontational. [thanks Tim Jones]

8. Facts are overrated. Don’t bother checking the original EU policy documents. There is no need to understand differences between white or green papers, a report or a regulation or a directive. It is much easier to write about ‘crazy ideas of EU bureaucrats’.  If you have an idea for a good EU story don’t let facts ruin it. Plus, nobody will check if a EU story is true. Everyone knows that the EU is boring and evil. Moreover, the single aim of the EU is to produce unnessary regulation (generally known as ‘red tape”).

9. Use “EU bureaucrats” or “Brussels bureaucrats” as often as possible. A more experienced lazy journalist would simply refer to ‘Eurocrats‘. (Thanks Gawain) Useful adjectives in this context include “unelected”, “unaccountable”, “corrupt”, “highly-paid”, “highly-pensioned”, “lazy”. This list is not exhaustive and be adapted to your journalistic needs. You may also use “EU official” or “EU representative” especially if you follow rule 4.

10. Don’t mention that ministers might have a veto over EU policy –> Just write about how the EU destroys national sovereignty.

11. You think that the EU is a bit too complex and everything takes a bit too long? –> Well just focus on zero sum games especially during summits.  One country wins, one country looses. That is life. That’s the EU. Simples.

12. A good headline is key. So always go for the pun or the the odd ‘eurocrats’, ‘empire’ reference. And the fight is always between europhiles and eurosceptics. Keep that in mind.

13. Symbols are more important than substance. Stories about what people had for breakfast or dinner, something about flags or anthems are great examples. Always mix personal stories about EU leaders with national prejudices. You will be surprised:  it always works.

14. EU funding is always a great story. There is corruption, waste and funny projects. However, do not mention that projects need co-financing. Also do not try to look at the positive examples, it would just spoil the story. Anyway, EU money is by definition a bad thing. So, don’t try to explain why EU funding exists in the first place.

15. The EU budget as well as the budget negotiations provide many interesting options for lazy journalists. You could write that the EU books have not been signed off for years – without mentioning the auditing rules. Or you could write something about how much money your country pays to be in the EU -  without mentioning that it may get something back. Don’t make the mistake to link to any official cost-benefit calculation. Because if they exist they are must be wrong, if they don’t exist it is generally a conspiracy.  Rather use a statement from another newspaper or dodgy think tank. Just don’t ask any questions. Never think about what the EU could do with the money, just assume that “Brussels wastes all the money it gets”.  Budget negotiations are zero sum games, so rule 11 applies. There is no such thing as the “European interest”.

16. The single market means competition which might include foreign companies winning tenders in your country. If that happens just focus on the foreign element of that company. Make some claims about corruption.  Write about how many jobs will be lost. No need to mention that new jobs will be created. If you are an ambitious lazy journalist write about how EU competition laws are made to destroy your local economy.

17. Don’t bother learning a foreign language. It is not useful in EU journalism. You can always rely on international news agencies.

18. Subscribe to all ‘think tanks’ and ‘business associations’ which are highly regarded among your collegues. From time to time, just ‘write’ (copy/paste) short articles. Don’t include links to your sources.

19. Context is overrated. Headlines are more important. Just go for the best quotes – no context needed. If you have a great quote from last week, you can still use it. No need to check whether current events have moved on.

20. A beginners mistake is to engage with the opposite side or with critics of your work. So, just don’t do it.