After a steady relationship that lasted several generations of the Windows operating system, Microsoft has told Intel that it wants to see other chip makers.
In a world where antitrust law was pursued logically, news like this would throw a monkey wrench into the proceedings with which the European Commission has been burdening Intel, starting with 2009’s $1.45 billion fine for providing discounts and rebates to its largest customers—a common business practice in any industry—up to the current obstacles the EC is putting in the way of Intel’s purchase of McAfee, the maker of security software.
On this side of the Atlantic, the Federal Trade Commission piled on with its own inquiry, although its investigation into Intel’s alleged abuse of its sizable market share in PC microprocessors yielded far less: a handful of concessions from Intel, but no fine and no admission of wrongdoing.
It’s unknown whether Intel offered Microsoft discounts, rebates or loyalty incentives to use its chips with its latest version of Windows Mobile, the OS Microsoft developed to run on smartphones and tablet PCs. It doesn’t seem to matter because, in an announcement that flies in the face of trans-Atlantic claims that Intel has an ironclad grip on OS chip market, Microsoft said it will be buying chips from three (count ’em) other manufacturers: Nvidia, Qualcomm and Texas Instruments.
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In Part I of this analysis of the FCC’s Report and Order on “Preserving the Open Internet,” I reviewed the Commission’s justification for regulating broadband providers. In Part II, I looked at the likely costs of the order, in particular the hidden costs of enforcement. In this part, I compare the text of the final rules with earlier versions. Next, I’ll look at some of the exceptions and caveats to the rules—and what they say about the true purpose of the regulations
In the end, the FCC voted to approve three new rules that apply to broadband Internet providers. One (§8.3) requires broadband access providers to disclose their network management practices to consumers. The second One (§8.4) prohibits blocking of content, applications, services, and non-harmful devices. The third One (§8.5) forbids fixed broadband providers (cable and telephone, e.g.) from “unreasonable” discrimination in transmitting lawful network traffic to a consumer.
There has of course been a great deal of commentary and criticism of the final rules, much of it reaching fevered pitch before the text was even made public. At one extreme, advocates for stronger rules have rejected the new rules as meaningless, as “fake net neutrality,” “not neutrality,” or the latest evidence that the FCC has been captured by the industries it regulates. On the other end, critics decry the new rules as a government takeover of the Internet, censorship, and a dangerous and unnecessary interference with a healthy digital economy. (I agree with that last one.)
One thing that has not been seriously discussed, however, is just how little the final text differs from the rules originally proposed by the FCC in October, 2009. Indeed, many of those critical of the weakness of the final rules seem to forget their enthusiasm for the initial draft, which in key respects has not changed at all in the intervening year of comments, conferences, hearings, and litigation. Continue reading →
Today comes news that Senator Kohl has sent a letter to the DOJ urging “careful review” of the proposed Google/ITA merger. Underlying his concerns (or rather the “concerns raised by a number of industry participants and consumer advocates that I believe warrant careful review”) is this:
Many of ITA’s customers believe that access to ITA’s technology is critical to competition in online air travel search because it cannot be matched by other players in the travel search industry. They claim that ITA’s superior access to information and superior technology enables it to provide faster and better results to consumers. As a result, some of these industry participants and independent experts fear that the current high level of competition among online travel agents and metasearch providers could be undermined if Google were to acquire ITA and start its own OTA or metasearch service. If this were to happen, they argue, consumers would lose the benefits of a robustly competitive online air travel market.
For several reasons, these complaints are without merit and a challenge to the Google/ITA merger would be premature at best—and a costly mistake at worst. Continue reading →
[Cross-posted at Truth on the Market]
Here we go again. The European Commission is after Google more formally than a few months ago (but not yet having issued a Statement of Objections).
For background on the single-firm antitrust issues surrounding Google I modestly recommend my paper with Josh Wright, Google and the Limits of Antitrust: The Case Against the Antitrust Case Against Google (forthcoming soon in the Harvard Journal of Law & Public Policy, by the way).
According to one article on the investigation (from Ars Technica):
The allegations of anticompetitive behavior come as Google has acquired a large array of online services in the last couple of years. Since the company holds around three-quarters of the online search and online advertising markets, it is relatively easy to leverage that dominance to promote its other services over the competition.
(As a not-so-irrelevant aside, I would just point out that I found that article by running a search on Google and clicking on the first item to come up. Somehow I imagine that a real manipulative monopolist Google would do a better job of white-washing the coverage if its ability to tinker with its search results is so complete.)
More to the point, these sorts of leveraging of dominance claims are premature at best and most likely woefully off-base. As I noted in commenting on the Google/Ad-Mob merger investigation and similar claims from such antitrust luminaries as Herb Kohl:
If mobile application advertising competes with other forms of advertising offered by Google, then it represents a small fraction of a larger market and this transaction is competitively insignificant. Moreover, acknowledging that mobile advertising competes with online search advertising does more to expand the size of the relevant market beyond the narrow boundaries it is usually claimed to occupy than it does to increase Google’s share of the combined market (although critics would doubtless argue that the relevant market is still “too concentrated”). If it is a different market, on the other hand, then critics need to make clear how Google’s “dominance” in the “PC-based search advertising market” actually affects the prospects for competition in this one. Merely using the words “leverage” and “dominance” to describe the transaction is hardly sufficient. To the extent that this is just a breathless way of saying Google wants to build its business in a growing market that offers economies of scale and/or scope with its existing business, it’s identifying a feature and not a bug. If instead it’s meant to refer to some sort of anticompetitive tying or “cross-subsidy” (see below), the claim is speculative and unsupported.
The EU press release promotes a version of the “leveraged dominance” story by suggesting that
The Commission will investigate whether Google has abused a dominant market position in online search by allegedly lowering the ranking of unpaid search results of competing services which are specialised in providing users with specific online content such as price comparisons (so-called vertical search services) and by according preferential placement to the results of its own vertical search services in order to shut out competing services.
The biggest problem I see with these claims is that, well, they make no sense. Continue reading →
By Ryan Radia and Wayne Crews
Today, the European Commission opened a formal antitrust investigation into Google to probe allegations that the firm rigged its search engine to discriminate against rivals. This intervention in the online search market, however, will distort the market’s evolution, discourage competitors from innovating, and ultimately hurt consumers.
Google isn’t a monopoly now, but the more it tries to become one, the better it will be for us all. When capitalist enterprises strive to earn a bigger market share, rival firms are forced to respond by trying to improve their offerings. Even if Google is delivering biased search results, it is only paving the way for competitors to break into the search market.
The European Commission is wrong to assume that Google possesses monopoly power. Google accounts for just 6 percent of all dollars spent on advertising in Europe. And even loyal Google users regularly find websites through competing search engines like Bing or through social websites like Facebook and Twitter.
Before resorting to tired old competition laws, European policy makers should remember that the Internet economy is hardly understood by anybody—including by regulators. We are in terra incognita; no one knows how information markets will evolve. But one thing is for sure: Online search technology cannot evolve properly if it is improperly regulated. Why make risky investments in hopes of revolutionizing Internet markets if marvelous success means regulation and confiscation?
The real threat to consumers is not from successful high-tech firms like Google, but from overreaching government interventions into competitive market processes. As economists have documented in scholarly journals, antitrust intervention is especially problematic in the information age, because it severely underestimates the critical role of innovation in dynamic high-tech markets. Continue reading →
Former TLF blogger Tim Lee returns with this guest post. Find him most of the time at the Bottom-Up blog.
Thanks to Jim Harper for inviting me to return to TLF to offer some thoughts on the recent Adam Thierer–Tim Wu smackdown. I’ve recently finished finished reading The Master Switch, and I didn’t have have my friend Adam’s viscerally negative reactions.
To be clear, on the policy questions raised by The Master Switch, Adam and I are largely on the same page. Wu exaggerates the extent to which traditional media has become more “closed” since 1980, he is too pessimistic about the future of the Internet, and the policy agenda he sketches in his final chapter is likely to do more harm than good. I plan to say more about these issues in future writings; for now I’d like to comment on the shape of the discussion that’s taken place so far here at TLF, and to point out what I think Adam is missing about The Master Switch.
Here’s the thing: my copy of the book is 319 pages long. Adam’s critique focuses almost entirely on the final third of the book, (pages 205-319) in which Wu tells the history of the last 30 years and makes some tentative policy suggestions. If Wu had published pages 205-319 as a stand-alone monograph, I would have been cheering along with Adam’s response to it.
But what about the first 200-some pages of the book? A reader of Adam’s epic 6-part critique is mostly left in the dark about their contents. And that’s a shame, because in my view those pages not only contain the best part of the book, but they’re also the most libertarian-friendly parts.
Those pages tell the history of the American communications industries—telephone, cinema, radio, television, and cable—between 1876 and 1980. Adam only discusses this history in one of his six posts. There, he characterizes Wu as blaming market forces for the monopolization of the telephone industry. That’s not how I read the chapter in question. Continue reading →
So now you can pay Netflix $7.99 a month and stream all the video you want? Damn cool if you ask me!
What does the Netflix decision mean for consumers—two words: More choice! This is what functional markets deliver. There was a time when if you missed an episode of your favorite show, that was it. You might have gotten lucky and caught it on its single rerun, but that was hit or miss. These days, I can watch The Office at 8 p.m. on Thursday nights. Or I can record on my DVR and watch it later that night. Or I can watch it the next day on my PC by visiting nbc.com. Or I can watch it on-demand from my cable box. Or I can wait a few months and watch it on DVD. Or, soon, via Netflix stream.
I can’t help but wonder if this makes moot all the handwringing about the FCC’s desire to place conditions on the online services a merged Comcast-NBC Universal can offer. Come on, Netflix has blown up the whole cable TV model. Continue reading →
[This guest post is by Joshua Wright (George Mason University) and Geoffrey Manne (International Center for Law & Economics), who blog regularly at Truth on the Market]
We’ve been reading with interest a bit of a blog squabble between Tim Wu and Adam Thierer (see here and here) set off by Professor Wu’s WSJ column: “In the Grip of the New Monopolists.” Wu’s column makes some remarkable claims, and, like Adam, we find it extremely troubling.
Wu starts off with some serious teeth-gnashing concern over “The Internet Economy”:
The Internet has long been held up as a model for what the free market is supposed to look like—competition in its purest form. So why does it look increasingly like a Monopoly board? Most of the major sectors today are controlled by one dominant company or an oligopoly. Google “owns” search; Facebook, social networking; eBay rules auctions; Apple dominates online content delivery; Amazon, retail; and so on.
There are digital Kashmirs, disputed territories that remain anyone’s game, like digital publishing. But the dominions of major firms have enjoyed surprisingly secure borders over the last five years, their core markets secure. Microsoft’s Bing, launched last year by a giant with $40 billion in cash on hand, has captured a mere 3.25% of query volume (Google retains 83%). Still, no one expects Google Buzz to seriously encroach on Facebook’s market, or, for that matter, Skype to take over from Twitter. Though the border incursions do keep dominant firms on their toes, they have largely foundered as business ventures.
What struck us about Wu’s column was that there was not even a thin veil over the “big is bad” theme of the essay. Holding aside complicated market definition questions about the markets in which Google, Twitter, Facebook, Apple, Amazon and others upon whom Wu focuses operate—that is, the question of whether these firms are actually “monopolists” or even “near monopolists”—a question that Adam deals with masterfully in his response (in essence: There is a serious defect in an analysis of online markets in which Amazon and eBay are asserted to be non-competitors, monopolizing distinct sectors of commerce)—the most striking feature of Wu’s essay was the presumption that market concentration of this type leads to harm.
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As he noted, Adam Thierer’s lead article in the most recent Cato Policy Report is called “The Sad State of Cyber-Politics.” It goes through so many ways tech and telecom companies are playing the Washington game to win or keep competitive advantage.
It’s a nice set-up to a Washington Post opinion piece from this weekend in which TownFlier CEO Morris Panner talks about the growing riches accruing to Washington influencers:
We are creating so much regulation – over tax policy, health care, financial activity – that smart people have figured out that they can get rich faster and more easily by manipulating rules on behalf of existing corporations than by creating net new activity and wealth. Gamesmanship pays better than entrepreneurship.
Thierer sees some hope for the tech sector, for a few reasons:
Smaller tech companies have thus far largely resisted the urge [to engage with Washington]. Hopefully that’s for principled reasons, not just due to a shortage of lobbying resources. Second, the esoteric nature of many Internet and digital technology policy discussions frustrates many lawmakers and often forces them to lose interest in these topics. Third, the breakneck pace of technological change makes it difficult for regulators to bottle up innovation and entrepreneurialism.
Panner’s broader piece calls for “a national campaign to create transparency in our legislation and a national moratorium on the creation of commissions, regulators and czars. It is time for Congress to do the hard job of saying what lawmakers mean in clear and easy-to-understand language.” He continues, “We should reject bills that are thousands of pages or that delegate vast authority to unelected regulators.”
That would be a start.
Adam Thierer’s claim that I am redefining monopoly in my Wall Street Journal piece is sowing confusion and misleading the public. Hence this corrective.
A monopoly is any firm that has a dominant share in the market for a given good or service (legal definitions range between 40% – 70%) resulting in power over that market. That is the beginning and the end of the definition. There is no further requirement that the firm be evil, gigantic, have caused consumer harm, be long-lasting, or anything else.
What Adam is thinking about is what a lawyer would call an “actionable” or “unlawful” monopoly; or perhaps a monopoly that violates s. 2 of the Sherman Act. But I never said in the Wall Street Journal that the Internet monopolies are unlawful. The point was that these are firms in the early age of monopoly, indeed in a kind of Golden Age.
To be more specific, by the economic and legal definition, in one or more markets, Google, Apple, Facebook, and eBay are pretty clearly monopolists. Google has market power over search. Apple, portable music players and iTunes downloads. Facebook, social media sites. eBay, online auctions.
Amazon and Twitter are closer cases; it all depends on market definition. Twitter’s market may be small, but the size of the market isn’t the point.
The key is understanding — and this is where a law degree can come in handy — that monopoly by itself is not unlawful in the United States. It is abuse of monopoly that is actionable. Continue reading →
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.