I’ve been reading the Google public policy blog. It’s not a very active blog, but it’s interesting to read about the topics that Google cares about in terms of government policy. There’s the controversial issue of ‘net neutrality’, of course, plus recent FCC spectrum auctions, and even IT law in India.

Reading the posts, Google tries to portray itself as nice and friendly, with the interests of ‘the Internet’ and the common good at heart. However, we should not forget that they are a successful multi-billion dollar business, and can be expected to behave as such. For example, there’s a post titled More online ad acquisitions = more competition. It’s about Google’s plans to acquire DoubleClick, a firm that specialises in placing advertisements on websites. Google also does basically the same thing, through its Adsense and Adwords services. There has been a bunch of consolidation going on in online advertising, as they describe in the blog post, with Yahoo and MSN and others acquiring advertising providers.

Somehow, Google manages to spin this situation into one in which there is ‘more competition’. Their argument seems to be that the aggressive acquisitions indicate fierce competition to be a leader in this market. As Google says:

It means that each of the leading Internet companies believe that they can position themselves to succeed in the online advertising space — through the free market, and without government intervention. These companies believe that there are many ways to compete in this business.

However, from an economic point of view it’s hard to believe that fewer firms equals more competition. The more independent players in a market (however big or small) the more intense the competition between them. Mergers and acquisitions will lead to higher prices than would otherwise prevail, unless there are some significant cost savings from combining the operations of two firms. Admittedly, as Google says there are other things going on in the market such as entry of new startups, but everything else equal fewer firms equals less competition, not more.