5 ms·

> Leveraging strong market position in one market, say search/advertising, to undercut prices in a completely different market is clear-cut anti-competitive beh

> Leveraging strong market position in one market, say search/advertising, to undercut prices in a completely different market is clear-cut anti-competitive behavior. Is it less clear how monopoly rules work if the price is "free?" If a company can offer a service for free by supplementing the cost with bundling (in a market where the going rate is "free") vs. not offering it at all, I'm not sure that's considered the same by US monopoly law (I have no idea of EU monopoly law).

s3r3nity 8y ago
It's a reasonable question - but the price can never be truly "free," because there's a cost to investment / build that product - meaning costs are non-zero. Therefore the negative profit in the short-term due to pricing is called "undercutting," as other companies (generally) don't have that luxury in the long run. You have to ask: why is it free? - A thousand engineers working on a non-revenue product for Google is like "pennies," when it might be a whole company anywhere else. - How are you funding that negative profit? Using leverage and profit from strong market position elsewhere. Therefore: anti-competitive, as other companies in the space don't have similar leverage. Now, a startup can, say, operate at negative profit and not count as "anti-competitive," because a startup most likely has fractional market share. But imagine you're building a startup in a brand new space, and Google decides to also enter that space. If you price your product at $10, and Google says "we're pricing at $0," you can imagine how no one could compete with that for the long-term. Hence why monopoly / anti-competitive rules are important.
- fixermark 8y ago
  If we're talking app stores, I think it's free because no consumer would pay for it. F-Droid is also free.
  - shock 8y ago
    I don't think this argument holds generally. For example people used to pay for GPS apps (iGO, TomTom, etc.) before Google Maps/other navi apps were available for "free" on smartphones. Google, in fact, might have destroyed a market by making Google Maps "free".
    - petre 8y ago
      > Google, in fact, might have destroyed a market by making Google Maps "free". Might is an understatement. Google destroyed the market leading to Navteq and Tele Atlas being aquired by Nokia and TomTom.
    - s3r3nity 8y ago
      Well that, AND prioritizing their Maps product above better offerings in the marketplace in search results early on in its lifecycle, when it was trying to get scale and data to improve while hurting competitors.
      - fixermark 8y ago
        I don't remember the existence of better offerings early in the Maps lifecycle that Google search prioritized Maps results over. Maybe I'm too young? There was Mapquest, and to my memory, Google came out of the starting gate with something close to feature parity with them.
        s3r3nity 8y ago
        Mapquest and Yahoo Maps were the dominant mapping platforms until Google Maps removed competitor links in the search results. [1] Google during this time was pushing for "universal search," which would break away from vertical search paradigms into a single blended set of results. This was also when traffic spiked to Google Maps and away from MapQuest / other competitors. And when you look at the data, the change in traffic is not due to users searching for "Google Maps" in the query more - but rather Google just linking to its own results more. [2] It was when I knew the whole "Don't be evil" motto was bullshit. [1] https://searchengineland.com/google-no-longer-linking-to-yahoo-mapquest-maps-10267 https://searchengineland.com/google-no-longer-linking-to-yah... [2] https://searchengineland.com/comscore-to-report-google-maps-now-number-1-16570 https://searchengineland.com/comscore-to-report-google-maps-...
        warbaker 8y ago
        Maps was always a better product, though...
- AnthonyMouse 8y ago
  > It's a reasonable question - but the price can never be truly "free," because there's a cost to investment / build that product - meaning costs are non-zero. Those are fixed costs which can be amortized in other ways. For example, Google could make both the OS and the hardware to sell together, like Apple. In fact, they do, with the Nexus/Pixel devices. Once they've done that, the OS development is a sunk cost. Giving it away to others or not has no effect on cost, or has negative cost if some of the others make contributions that you can use on your own devices without paying to develop them internally. And it grows the ecosystem your products are a part of, which is a valuable service the other vendors are providing for which some remuneration is appropriate, which could offset some or all of the cost of the software. Moreover, software costs money to develop, but how much of the development cost should be apportioned to each unit? That depends how many units there will be. Not have been -- will ever be. This value is not known and can be arbitrarily large. For something like Android it is very large. If you amortize the development cost over the number of devices there are/will be, the cost per device is negligible -- small enough it would be eaten by transaction costs if you tried to collect it. And claiming that companies can't give away software because they're large is clearly bad policy. It would imply that e.g. they can't contribute to Linux.
rayiner 8y ago
The going rate in the smartphone OS market doesn't have to be "free." Symbian charged a license fee. Microsoft charged a license fee. Google decided to release Android for free, because they could make more money using Android as a vehicle for the rest of its platform. Having done that, and pushed all the competitors out of the market by giving Android away for nothing, Google can hardly argue that it should be allowed to bundle because the "going rate" for a smartphone OS is now free.

s3r3nity 8y ago

It's a reasonable question - but the price can never be truly "free," because there's a cost to investment / build that product - meaning costs are non-zero. Therefore the negative profit in the short-term due to pricing is called "undercutting," as other companies (generally) don't have that luxury in the long run. You have to ask: why is it free? - A thousand engineers working on a non-revenue product for Google is like "pennies," when it might be a whole company anywhere else. - How are you funding that negative profit? Using leverage and profit from strong market position elsewhere. Therefore: anti-competitive, as other companies in the space don't have similar leverage. Now, a startup can, say, operate at negative profit and not count as "anti-competitive," because a startup most likely has fractional market share. But imagine you're building a startup in a brand new space, and Google decides to also enter that space. If you price your product at $10, and Google says "we're pricing at $0," you can imagine how no one could compete with that for the long-term. Hence why monopoly / anti-competitive rules are important.

fixermark 8y ago
If we're talking app stores, I think it's free because no consumer would pay for it. F-Droid is also free.
- shock 8y ago
  I don't think this argument holds generally. For example people used to pay for GPS apps (iGO, TomTom, etc.) before Google Maps/other navi apps were available for "free" on smartphones. Google, in fact, might have destroyed a market by making Google Maps "free".
  - petre 8y ago
    > Google, in fact, might have destroyed a market by making Google Maps "free". Might is an understatement. Google destroyed the market leading to Navteq and Tele Atlas being aquired by Nokia and TomTom.
  - s3r3nity 8y ago
    Well that, AND prioritizing their Maps product above better offerings in the marketplace in search results early on in its lifecycle, when it was trying to get scale and data to improve while hurting competitors.
    - fixermark 8y ago
      I don't remember the existence of better offerings early in the Maps lifecycle that Google search prioritized Maps results over. Maybe I'm too young? There was Mapquest, and to my memory, Google came out of the starting gate with something close to feature parity with them.
      - s3r3nity 8y ago
        Mapquest and Yahoo Maps were the dominant mapping platforms until Google Maps removed competitor links in the search results. [1] Google during this time was pushing for "universal search," which would break away from vertical search paradigms into a single blended set of results. This was also when traffic spiked to Google Maps and away from MapQuest / other competitors. And when you look at the data, the change in traffic is not due to users searching for "Google Maps" in the query more - but rather Google just linking to its own results more. [2] It was when I knew the whole "Don't be evil" motto was bullshit. [1] https://searchengineland.com/google-no-longer-linking-to-yahoo-mapquest-maps-10267 https://searchengineland.com/google-no-longer-linking-to-yah... [2] https://searchengineland.com/comscore-to-report-google-maps-now-number-1-16570 https://searchengineland.com/comscore-to-report-google-maps-...
        warbaker 8y ago
        Maps was always a better product, though...
AnthonyMouse 8y ago
> It's a reasonable question - but the price can never be truly "free," because there's a cost to investment / build that product - meaning costs are non-zero. Those are fixed costs which can be amortized in other ways. For example, Google could make both the OS and the hardware to sell together, like Apple. In fact, they do, with the Nexus/Pixel devices. Once they've done that, the OS development is a sunk cost. Giving it away to others or not has no effect on cost, or has negative cost if some of the others make contributions that you can use on your own devices without paying to develop them internally. And it grows the ecosystem your products are a part of, which is a valuable service the other vendors are providing for which some remuneration is appropriate, which could offset some or all of the cost of the software. Moreover, software costs money to develop, but how much of the development cost should be apportioned to each unit? That depends how many units there will be. Not have been -- will ever be. This value is not known and can be arbitrarily large. For something like Android it is very large. If you amortize the development cost over the number of devices there are/will be, the cost per device is negligible -- small enough it would be eaten by transaction costs if you tried to collect it. And claiming that companies can't give away software because they're large is clearly bad policy. It would imply that e.g. they can't contribute to Linux.

rayiner 8y ago

The going rate in the smartphone OS market doesn't have to be "free." Symbian charged a license fee. Microsoft charged a license fee. Google decided to release Android for free, because they could make more money using Android as a vehicle for the rest of its platform. Having done that, and pushed all the competitors out of the market by giving Android away for nothing, Google can hardly argue that it should be allowed to bundle because the "going rate" for a smartphone OS is now free.