Coming Soon: A Predatory, Anti-Business Federal Trade Commission?

by on February 24, 2009 · 9 comments

Even an economy in shambles shall not sway the elevation to Federal Trade Commission chairmanship of Jon Leibowitz, an interventionist-minded commissioner who, like all planners, knows better than others how markets should be structured.

In several important areas, his inclinations (judging from the cheers emanating from interest groups like PIRG and Center for Digital Democracy) lean toward substituting political “discipline” for what competitive markets offer.

He supports “opt-in” with respect to behavioral advertising, which we’ve often described as not-necessarily good for a lot of reasons. We’ll come back to this later.

He supports antitrust intervention with respect to firms like Intel (and watch out, Google), and favors destructive “conditions” on mergers. Nineteenth-century, smokestack-era antitrust, rather than withering, now seems dedicated to exploiting and hobbling large-scale transactions in ways that end up creating entities that would not emerge in free markets. Several mergers lately have resulted in such artificially constrained frankensteins, or suffered catastrophic delays. Thus “competition policy” (ha!) neuters the healthy competitive response to them that could have come about. (See my FCC comment on XM/Sirius in that regard.)

On “net neutrality,” we leap beyond whether markets are adequate to discipline errant behavior; here the starting point is the nominee’s doubt that even antitrust intervention is necessarily “adequate to the task”; thus the implication that new laws may be in order.

Let’s just take net neutrality for now. There are plenty reasons I think it’s an outrage to regulate price and access on networks and infrastructure; but just for the moment, the entire concept rests upon numerous (I often feel deliberate, in my less-charitable moods) misperceptions or misrepresentations about competitive markets and capitalism. These include but are not limited to the following: (Adapted from an FCC filing I made).

• Infrastructure companies and content companies are naturally and inherently at odds.
• Competition requires political force.
• Discrimination is bad with respect to network access, and such a thing as “non-discrimination” exists.
• Net neutrality is itself not a form of picking sides (or discrimination, as it were)
• Infrastructure companies should not control content; however, content companies, in conjunction with bureaucracies backed by legislation and regulation, should control infrastructure companies.
• Government enforced net neutrality spawns “openness”; market impulses do not.
• Communications flows (video, information, calls etc.) are maximized by neglecting, even blocking, the liberalization of and enforcement of property rights in grids.
• Networks themselves cannot be regarded as a competitive unit in any sense: only the movement of bits from point A to point B on a pre-existing network counts as competition. Networks best exist as passive husks, not dynamic forms of infrastructure wealth created, managed and duplicated in response to price signals and broader economic forces.
• “Market failures” matter, government failures do not exist (indeed, they are rarely acknowledged by the interventionist class).
• Infrastructure companies’ interest lies in not selling services, in not exploiting gains from trade with content companies whatever petty transitory jealousies may exist.
• Wall Street, rivals and consumers cannot react to discipline inefficient network management or generate new bandwidth infrastructure (I always call it “bandwealth,” but will remain passive.
• Agencies like FTC and FCC are better equipped than capital markets and a global economy to discipline ill-managed networks.
• Alternative, profit-driven modes of infrastructure organization matter less than regulating the mode that exists: User ownership of grids; liberalization of non-telecom network industries to enable wide-scale, cross-industry infrastructure consortia; “splintering” into and out of the public net by private carriers, all have little role to play and may safely be ignored.
• Moreover, regulatory interference will not undermine these alternative modes of discipline, or alter technological trajectories and the future trajectory or health of communications wealth in any harmful way.

So it’s remarkable, to me at least, that at a time when the economy needs “stimulus,” that we may now be required to divert attention to contend with a new artificial, entirely man-made and unnecessary hindrance to the expansion of the communications sector.

SHARE: 9 comments

Wayne Crews / Wayne Crews is vice president for policy and director of technology studies at the Competitive Enterprise Institute, and an adjunct scholar at the Cato Institute. He started the Dysfunction Network as a side project. He is a dad of four. Wayne's work explores the impact of government regulation of private activity: Areas of interest include antitrust and competition policy, safety and environmental issues, and information age concerns like privacy, online security, broadband policy, and intellectual property. Wayne is the author of the yearly report, Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State, and he co-authored the recent reports This Liberal Congress Went to Market? a Bipartisan Policy Agenda for the 110th Congress and Communications without Commissions: A National Plan for Reforming Telecom Regulation. Prior to the assorted government bailouts now taking place, he wrote the report Still Stimulating Like It’s 1999: Time to Rethink Bipartisan Collusion on Economic Stimulus Packages. Wayne is co-editor of the books Who Rules the Net: Internet Governance and Jurisdiction (2003) and Copy Fights: The Future of Intellectual Property In the Information Age (2002). He is co-author of What’s Yours Is Mine: Open Access and the Rise of Infrastructure Socialism (2003), and a contributing author to others. He has published in the Wall Street Journal, Chicago Tribune, Forbes, Communications Lawyer, the International Herald Tribune and others. He has made various TV appearances on Fox, CNN, ABC, CNBC and the Lehrer NewsHour, and his regulatory reform ideas have been featured prominently in such publications as the Washington Post, Forbes and Investor’s Business Daily. He is frequently invited to speak, and has testified before congressional committees on various issues. Earlier Wayne was a legislative aide in the United States Senate to Sen. Phil Gramm, covering regulatory and welfare reform issues. He was an Economist and Policy Analyst at Citizens for a Sound Economy Foundation, and has worked as an economist at the U.S. Food and Drug Administration and as a Research Assistant at the Center for the Study of Public Choice at George Mason University. He holds an M.B.A. from William and Mary and a B.S. from Lander College in Greenwood, South Carolina. He was a candidate for state senate as a libertarian while at Lander.

Previous post:

Next post: