ICYMI: ICLE’s Manne Takes On The Flaws In Foundem’s Cries For Competitive Intervention
International Center for Law & Economics Executive Director Geoff Manne recently published a detailed look at serial antitrust complainant Foundem, and found their claims of so-called harm critically flawed.
Beyond their pleadings for government intervention in competition, the founders of Foundem currently run an anti-Google consultancy, and “this consulting work, some of which was funded by Google’s competitors, has helped to keep the Raffs afloat,” as the New York Times Magazine noted.
More specifically, Foundem founders have “been paid since March 2011 to act as a special adviser to one of the Microsoft-linked lobby groups, Icomp,” first meeting with the group “early 2009, before filing Foundem’s complaint in Brussels.”
Geoffrey Manne, “The Real Reason Foundem Foundered,” International Center For Law & Economics
Foundem’s Claims Don’t Hold Up To Antitrust Scrutiny – Improvements That Benefit Consumers But Impact Competitors Are Not Problematic. “Of course, absent injury to consumers, there is no coherent antitrust principle that would properly endorse a company’s decisions when they happen to benefit a particular competitor, but condemn the same decisions when they happen to harm it. Conduct that leads to a decrease in traffic for Foundem but improves Google for consumers is not necessarily anticompetitive or otherwise problematic — any more than was the conduct that benefitted Foundem in the first place.” (Geoffrey Manne, “The Real Reason Foundem Foundered,” International Center For Law & Economics, 5/18)
Any Business Model, Like Foundem’s, That Depends Exclusively On One Distribution Channel Takes On “Significant Risk” Pending Changes And Improvements. “A content provider that makes itself dependent upon another company for distribution (or vice versa, of course) takes a significant risk. Although it may benefit from greater access to users, it places itself at the mercy of the other — or at least faces great difficulty (and great cost) adapting to unanticipated, crucial changes in distribution over which it has no control. This is a species of what economists call the ‘asset specificity’ problem.” (Geoffrey Manne, “The Real Reason Foundem Foundered,” International Center For Law & Economics, 5/18)
Given The Hundreds Of Algorithmic Updates Google Makes Every Year, Depending Entirely On Search Engine Traffic Was “A Bit Foolish To Say The Least.” “It was entirely predictable, and should have been expected, that Google’s algorithm would evolve. It was also entirely predictable that it would evolve in ways that could diminish or even tank Foundem’s traffic. As one online marketing/SEO expert puts it: ‘On average, Google makes about 500 algorithm changes per year. 500! And each and every one of them threatens to wipe your website from the face of Google search results, very much like Panda update did to so many different sites. … [C]ounting on search engine traffic as your primary traffic source is a bit foolish to say the least […].'” (Geoffrey Manne, “The Real Reason Foundem Foundered,” International Center For Law & Economics, 5/18)
Even In Light Of Their Dependence On Google Search Traffic, There’s No Evidence They Ever Seriously Tried To Improve The Site Design Or Marketing. “Foundem’s entire approach to addressing the challenges the site faced was rooted in resisting change, not adapting to it. In fact, there is no indication (even in their own, detailed “timeline” of events) that the Raffs ever applied their coding skills to updating the site’s user interface, adjusting the site’s business model, or enhancing or expanding its functionality in response to changing market conditions — even as consumers were consistently demanding more and sleeker services tailored to advanced browsers, mobile phones, digital assistants, and smart home devices. It’s also not evident that the Raffs ever did much to market their site, nor even that they experimented seriously with Google’s paid search when it seemed organic search was becoming insufficient to drive traffic.” (Geoffrey Manne, “The Real Reason Foundem Foundered,” International Center For Law & Economics, 5/18)