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Journal of Competition Law and Economics Advance Access originally published online on August 26, 2009
Journal of Competition Law and Economics 2009 5(3):411-438; doi:10.1093/joclec/nhp017
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© The Author 2009. Published by Oxford University Press
This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/2.5/uk/) which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited

GOOGLE AND THE PROPER ANTITRUST SCRUTINY OF ORPHAN BOOKS

Jerry A. Hausman * and J. Gregory Sidak **

Correspondence: E-mail: jhausman{at}mit.edu

JEL: K20, K21, L40, L41, L50, O34

We examine the consumer-welfare implications of Google's project to scan a large proportion of the world's books into digital form and to make these works accessible to consumers through Google Book Search (GBS). In response to a class action alleging copyright infringement, Google has agreed to a settlement with the plaintiffs, which include the Authors Guild and the Association of American Publishers. A federal district court must approve the settlement for it to take effect. Various individuals and organizations have advocated modification or rejection of the settlement, based in part on concerns regarding Google's claimed ability to exercise market power. The Antitrust Division has confirmed that it is investigating the settlement. We address concerns of Professor Randal Picker and others, especially concerns over the increased access to "orphan books," which are books that retain their copyright but for which the copyright holders are unknown or cannot be found. The increased accessibility of orphan books under GBS involves the creation of a new product, which entails large gains in consumer welfare. We consider it unlikely that Google could exercise market power over orphan books. We consider it remote that the static efficiency losses claimed by critics of the settlement could outweigh the consumer welfare gains from the creation of a valuable new service for expanding access to orphan books. We therefore conclude that neither antitrust intervention nor price regulation of access to orphan books under GBS would be justified on economic grounds.

* John and Jennie S. MacDonald Professor of Economics, Massachusetts Institute of Technology.

** Chairman, Criterion Economics, L.L.C.; Ronald Coase Professor of Law and Economics, Tilburg University, The Netherlands; President, The Coase Foundation for Law & Economics, Washington, D.C. E-mail: jgsidak{at}criterioneconomics.com. Hausman has received research funding from Google. Sidak has not. Copyright 2009 by Jerry A. Hausman and J. Gregory Sidak. All rights reserved.


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