there is some growth in search on social media platforms, it is not enough to comprise the “significant substitution” necessary to be grouped into the same product market.
***
The court therefore rejects Google’s proposed query-response market and instead agrees with Plaintiffs that there is a relevant market for general search services.[1]
- C. Google Has Monopoly Power in the General Search Services Market.
The court turns now to address whether Google possesses monopoly power within the market for general search services. “While merely possessing monopoly power is not itself an antitrust violation, it is a necessary element of a monopolization charge.” Microsoft, 253 F.3d at 51 (citations omitted). “Monopoly power is the power to control prices or exclude competition.” du Pont, 351 U.S. at 391. “More precisely, a firm is a monopolist if it can profitably raise prices substantially above the competitive level.” Microsoft, 253 F.3d at 51. Importantly, a firm need not actually have earned monopoly profits or excluded competition to possess monopoly power. “[T]he material consideration in determining whether a monopoly exists is not that prices are raised and that competition is actually excluded but that power exists to raise prices or exclude competition when it is desired to do so.” Am. Tobacco Co. v. United States, 328 U.S. 781, 811
- ↑ Dr. Whinston suggested that the so-called “Cellophane fallacy” explains substitution away from Google to other platforms, like SVPs. See U.S. Pls.’ Proposed Conclusions of Law, ECF No. 838 [hereinafter UPCL], at 6–7. The Cellophane fallacy refers to “the existence of substitution between products resulting from monopoly power rather than reasonable substitutability.” Id. A commercial environment evincing a “high cross-elasticity of demand may, in some cases, be the product of monopoly power rather than a belief on the part of consumers that the products are good substitutes for one another.” United States v. Eastman Kodak Co., 63 F.3d 95, 105 (2d Cir. 1995). In other words, the dearth of true substitutes in a heavily monopolized market may lead users to substitute to “highly-differentiated,” out-of-market products. Id. In those circumstances, “[t]he existence of significant substitution in the event of further price increases or even at the current price does not tell us whether the defendant already exercises significant market power.” Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 471 (1992) (quoting Areeda & Kaplow, Antitrust Analysis ¶ 340b (4th ed. 1988)) (emphasis omitted). The court thinks that the Cellophane fallacy has little application here. Amazon is not a “poor substitute” whose use should be understood as evidence of Google’s monopoly power. UPCL at 6. All evidence points to consumers viewing Google and Amazon as complementary goods that compete in certain submarkets but not as “reasonably interchangeable by consumers for the same purposes[.]” du Pont, 351 U.S. at 395. The Cellophane fallacy is thus not applicable.
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