Murdoch’s ‘Pay Web Walls’ and Challenge of Google Raises Competition Issues

(by Andreas Stephan) The Guardian Newspaper (London) has reported on potential Competition Law issues raised by Rupert Murdoch’s planned ‘Pay Web Walls’. In particular, his admission that News Corp has been talking to other publishers about plans for web content charges, and the possibility that they may try to block Google searches of their content entirely.

See: ‘Murdoch’s plan for web pay walls ‘raises questions of anti-trust law’ (5 Nov 2009) and ‘Murdoch could block Google searches entirely’ (9 Nov 2009).

These controversial plans are an attempt to compensate for falling revenues from print media and readers’ increasing reliance on on-line news content. The nature of the communication between publishers is not known. The Guardian article warns that any coordination of business strategies in connection with pricing is likely to infringe cartel laws. In the absence of commitments from other online publishers to also introduce charges, there is a danger that readers would simply switch to other (equally reputable) news sources that are still free, resulting in reduced advertising revenues for the firm introducing the charges. However, there are also perfectly legitimate reasons why publishers might talk to each other. The Article points to the possible creation of a cross publisher payment system for articles. Such a system might produce significant efficiencies which ultimately benefit consumers.

Murdoch clearly sees search engines including Google as a threat to the press industry’s future, describing them as “the people who simply just pick up everything and run with it”.  This refers to news content picked up by Google News searches. However, News Corp have not as yet simply removed their websites from Google’s search indexes – perhaps a reflection of Google’s perceived power as the main ‘gatekeeper’ to online content.

Google’s potential market power and how it might be exercised is being hotly debated, following the Google Book Settlement. A key difficulty in establishing Google’s dominance is providing a satisfactory definition of the relevant market. Although firms pay Google to be listed as ‘sponsored links’, its main search results are determined (ostensibly at least) by objective criteria such as web traffic. The moment Google manipulates search results to make money, it risks undermining the trust that has made it such a popular resource in the first place. Relatively low barriers to entry have in the past meant that search engines have risen and fallen from grace quite quickly.

Some worry that Google’s Book Settlement might be a way of consolidating its position, making it harder for other search engines to compete with its level of content. The settlement has allowed Google to continue digitizing huge numbers of publications from US university libraries and beyond, allowing online search and access of those titles. Others downplay competition concerns, pointing out that Google Books opens access to an enormous amount of ‘new’ content that would otherwise be unavailable to consumers. A good example of this is out-of-print titles, the re-publication of which would not be economically feasible through physical book distribution channels. Moreover, prospective competitors may enter the market by first focusing on popular high-access titles. In physical book distribution, this is how supermarkets have made significant headway into the UK book retail market.

If Murdoch does indeed block Google searches of News Corp content altogether, it could be the first big test of Google’s power as ‘gatekeeper’. News Corp may one day find itself having to back track on its decision.

The antitrust issues raised by the Google Book Settlement are discussed in the current volume (9:2) of Global Competition Policy (GCP).

Andreas Stephan

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