Google & Competition Law V

Another addendum: In a paper posted earlier this month, University of Chicago law school lecturer David Evans considers the "Antitrust Economics of Free":

Antitrust Economics of Free

This article examines antitrust analysis when one of the possible subject products of an antitrust or merger is ordinarily offered at a zero price. It shows that businesses often offer a product for free because it increases the overall profits they can earn from selling the free product and a companion product to either the same customer or different customers. The companion product may be a complement, a premium version of the free product, or the product on the other side of a two-sided market. The article then shows how antitrust and merger analysis should proceed when the subject is either the free product or the companion product. A key point is that the existence of a free good signals that there is a companion good, that firms consider both products simultaneously in maximizing profit, and that commonly used methods of antitrust analysis, including market definition, probably need to be adjusted to properly analyze two inextricably linked products. When antitrust or merger analysis involves a free product, the analysis of consumer welfare and injury also needs to account for customers of both the free product and its companion product since any change in market conditions for customers of one product affects the customers of the other product. Much of the analysis of the article is also relevant to other common situations in which price is set less than marginal cost.

Interestingly, Evans cites an American case where the court accepted the very argument that I considered in my original posts: that it is not possible to have an antitrust market for something that is given away for free. The case is Kinderstart v. Google, 2007 WL 831806 (N.D. Cal.). I'll have to take a look at that one...