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Presentations & Interviews The argument over Big Data is split. Some argue Big Data makes a small number of platform companies extremely powerful. These companies have so much . . .
The argument over Big Data is split. Some argue Big Data makes a small number of platform companies extremely powerful. These companies have so much data and such resources that they can damage competition, erode our privacy and maybe even distort our democracy.
But not everyone shares this view. Others say the data giants are so gigantic because they serve us so well. We value what they offer and most of us don’t mind paying for it with our privacy. The ‘big is bad’ theory is not only wrong, it’s dangerous.
ICLE President Geoffrey Manne is one of the loudest critics. He argues that Big Tech opponents have failed to identify clear harms to consumer welfare and calls for an evidence-based approach using an error-cost framework. He also questions the wisdom of trying to shoehorn broader social and political concerns into the narrow economic remit of antitrust law.
In this episode of Competition Lore, Geoff explains why we need to be wary of claims about privacy intrusion as anti-competitive, why network effects should be seen as good not bad, and why the argument that large data-sets prevent new entry is overblown. He doesn’t buy the idea that big business effectively lobbies government to stifle regulation and he muses that the European crackdown on powerful platform companies may be anti-US protectionism at work. For him, the so far restrained approach of the US authorities is the right one. The risks of getting it wrong, he argues, are just too great.
The full episode is embedded below.
Written Testimonies & Filings FTC Hearings on Competition & Consumer Protection in the 21st Century. Comments of the International Center for Law & Economics: The Rise of Neo-Brandeisian Competition Policy: Populism and Political Power and the Threat to Economically Grounded, Evidence-Based. Competition Law and Consumer Protection Regulation. Submitted August 20, 2018.
In 1995, then-FTC-Chairman Pitofsky convened a set of hearings — the Global Competition and Innovation hearings (“Pitofsky Hearings”) — aimed at investigating the implications for antitrust law, economics, and policy of “increasing globalization and rapid innovation.”2 As the Pitofsky Hearings report noted:
These changes create new possibilities and raise new problems for consumers, businesses, and government agencies. It is in everyone’s interest that government understand these developments in order to make sure that the marketplace continues to work competitively for businesses and consumers.
Two decades later — a near eternity in Internet time — the same changes are proceeding apace, and the need for greater understanding remains; arguably, it is even more acute today.
By the 1990s, the global marketplace had already grown dramatically, and technology startups were beginning to test new regulatory and legal fault lines. Today we face an even-more-tightly integrated world market, along with the intensification of international tariff disputes, the creative imposition of non-tariff trade barriers (including antitrust enforcement), and the increased brazenness of politicized industrial policy implementation that expanded global competition brings.
Meanwhile, several of the tech companies that were at most fledglings (if they existed at all) in 1995 have grown to become some of the most highly valued companies in the world. Their success — and the dramatic evolution of the world economy it has brought about — has engendered a new wave of hand wringing over firm size, industry structure, the social consequences of economic and technological change, and the proper role of antitrust and consumer protection law in addressing them.
Chairman Simon and the Commission should be commended for undertaking these hearings. Greater understanding of the antitrust and consumer protection implications of significant economic developments is always welcome. In particular, there remains much about the welfare implications of competition policy decisions surrounding innovation that we still don’t understand.
Yet, while some of the business, economic, and legal specifics are novel, important, and worthy of investigation, the core policy issues we face today are nothing new, and they weren’t new even in the 1990s. The innovation that drives economic growth, while generally beneficial, nonetheless inevitably causes adverse effects for some businesses and/or the interests of some social commentators, and this has resulted in attempts to politicize antitrust in order to protect those businesses and/or social interests. What is troubling is how little we seem to remember of what we do know, even as slightly different versions of the same antitrust debates continue to recur.
Fundamentally, what we know is this: First, unless and until a demonstrably better alternative is offered (and none has been, either today or over the course of antitrust’s 100-year history), the consumer welfare standard — warts and all — is the appropriate touchstone for antitrust enforcement and adjudication. Whether specific firm conduct or enforcement decisions promote consumer welfare is, of course, always up for discussion. But that antitrust law, enforcement decisions, and policy should not intentionally incorporate or be informed by inherently idiosyncratic and inevitably politicized public policy preferences is beyond doubt.
Second, competition and consumer protection policy should be economically grounded and evidence-based. Similarly, decisions regarding policy changes should be based on rigorous, economically robust, and constantly tested empirical knowledge. But it is insufficient to point to even well-supported empirical claims regarding aggregated market effects or specific case outcomes as the basis for (often-dramatic) policy prescriptions. Rather, decisions regarding competition and consumer protection policy must be undertaken with a robust understanding of the institutional structures and agency processes by which they are implemented.
Arguments abound that we should ratchet up antitrust and consumer protection enforcement in various ways in order to tackle hot-button issues like excessive concentration, insufficient privacy protection, fake-news, wealth inequality, and the like. But few of them rest on solid empirical evidence, and fewer still (if any) seriously address whether or how defects in policy and enforcement decisionmaking processes may have led to the claimed problems and whether or how altering those processes would correct them. Such arguments should not simply be ignored, but nor should they be taken seriously unless and until they are rigorously supported by economic, empirical, and institutional analysis.
Click here to read the full comments.
TOTM It is sometimes said that the most important question in all of economics is “compared to what?” UCLA economist Harold Demsetz — one of the most important regulatory economists of the past century — coined the term “nirvana fallacy” to critique would-be regulators’ tendency to compare messy, real-world economic circumstances to idealized alternatives, and to justify policies on the basis of the discrepancy between them. Wishful thinking, in other words.
Today the European Commission launched its latest salvo against Google, issuing a decision in its three-year antitrust investigation into the company’s agreements for distribution of the Android mobile operating system. The massive fine levied by the Commission will dominate the headlines, but the underlying legal theory and proposed remedies are just as notable — and just as problematic.
Read the full piece here.
Regulatory Comments Properly considered, there is no novel conflict between promoting the flow of information and protecting intellectual property rights online. While the specific mechanisms employed to mediate between these two principles may differ, the fundamental principles that determine the dividing line between “legal” and “illegal” content and its distribution offline can and should be respected online, as well.
We would like to thank you for the opportunity to comment on these important and timely issues. In the preamble to this Notice of Inquiry (“NOI”) the NTIA notes that is responsible for “protecting and promoting an open and interoperable internet, advocating for the free flow of information, and strengthening the global marketplace for American digital products and services.” We agree with the implicit assumption of this statement that it is possible to both promote an open Internet as well as protect the interests of American creators.
With this in mind, we would like to offer some comments on how best to assess the oft-asserted tension between policies that purport to maximize freedom online and those that seek to protect the interests of rightsholders.
It is undeniable that, in some cases, the unfettered flow of information can contribute to the infringement of the intellectual property rights of American citizens and companies, and that this is contrary to NTIA’s mission to promote the marketplace for American digital products and services. But it is also undeniable that the protection of intellectual property rights can promote both the creation of information and its dissemination. Our intellectual property laws reflect the congressional and judicial balancing of these dynamics: There is little reason to think that the legislative and legal principles that determine when content or its distribution is illegal offline apply any less when content is distributed online.
The flow of information is, in fact, never “unfettered.” When considering the free flow of information online, the goal should be the same as it is offline: to increase the flow of legitimate information and to decrease the flow of illegitimate information.
Properly considered, there is no novel conflict between promoting the flow of information and protecting intellectual property rights online. While the specific mechanisms employed to mediate between these two principles may differ — and, indeed, while technological change can alter the distribution of costs and benefits in ways that must be accounted for — the fundamental principles that determine the dividing line between “legal” and “illegal” content and its distribution offline can and should be respected online.
Click here to read the full article.
Presentations & Interviews Despite the Federal Communication Commission’s decision in December 2017 to eliminate the common carrier regulations for Internet services — the so-called net neutrality rules the FCC created in 2015 — the net neutrality debate rages on. Gus Hurwitz, Brent Skorup, and Geoffrey Manne discuss this new front in regulation, federalism, and grassroots activism.
Despite the Federal Communication Commission’s decision in December 2017 to eliminate the common carrier regulations for Internet services — the so-called net neutrality rules the FCC created in 2015 — the net neutrality debate rages on. The Trump FCC preempted states’ authority to regulate the Internet, yet governors in six states have attempted to enforce net neutrality principles via executive order and three states have passed “baby net neutrality bills.” Several more state bills are pending. Can state agencies regulate Internet services? What are the legal and practical impediments? What are the consequences of businesses operating under inconsistent regulations amongst the states and at the federal level? Gus Hurwitz, Brent Skorup, and Geoffrey Manne discuss this new front in regulation, federalism, and grassroots activism.
Scholarship High-tech and network industries have a long history of evoking populist scrutiny. New technologies frequently disrupt incumbent, often less centralized, business models and interfere with existing relationships between sellers and consumers.
High-tech and network industries have a long history of evoking populist scrutiny. New technologies frequently disrupt incumbent, often less centralized, business models and interfere with existing relationships between sellers and consumers. Inevitably, the paradigmatic small-town buggy manufacturer displaced by technological advance directs his ire against the large, distant car companies that make the automobiles responsible for his demise. Even consumers and business owners who benefit from enhanced efficiency or entirely new and beneficial products often end up feeling dependent on them. Adding to that a distrust of firms that operate in geographies or at scales that are distant from typical consumer experiences, critics express their concerns about firms with a single heuristic: big is bad.
Although often framed in more complex antitrust terms — large firms are accused of employing anticompetitive business practices, including the development of “predatory” innovations designed to expand their reach and thwart potential competition, for example — populist antipathy is, at root, fundamentally about the “bigness” of these high-tech firms. Companies that owe their success — and their size — to clever implementations of innovative technologies are ultimately decried not for their technology or their business models but for their expansive operations. Standard Oil, AT&T (in the early 20th century), IBM, AT&T (in the late 20th century), Microsoft, and, most recently, Google, Facebook, Amazon, and (once again) AT&T have regularly found themselves in the crosshairs of antitrust enforcers for growing large by besting (and, often, buying) their competitors.
The size of these companies — among the largest in the American economy — endows them with the superficial appearance of market power, providing competitors and advocates with a rhetorical basis for antitrust action against them. But their problems also extend beyond mere allegations that they are too large: in each case, these companies have also engaged in some conduct disfavored by powerful political actors. The appearance of market power and the firms’ problematic-to-some conduct give rise to calls to use antitrust law to regulate their behavior — or, perhaps most troubling, to constrain their perceived power by breaking them up.
This article is not an apologia for the bad acts of the modern tech industry. There is no question that some of today’s largest companies have transformed society and the economy over the years (not necessarily always for the better) and have engaged in arguably troubling conduct in the process. But whatever the beliefs of those calling for the breakup of Big Tech, the question remains whether it is wise to shoehorn broader social and political concerns into the narrow, economic remit of antitrust law.
Written Testimonies & Filings We are a group of eight scholars of antitrust law and economics affiliated with the International Center for Law & Economics, a nonprofit, nonpartisan policy research center based in Portland, OR. Without taking a position on the merits of the proposed T-Mobile/Sprint merger, this letter provides a brief explication of our views on some of the important economic issues involved in the transaction’s antitrust review.
Dear Senators Grassley, Feinstein, Lee, and Klobuchar,
We are a group of eight scholars of antitrust law and economics affiliated with the International Center for Law & Economics, a nonprofit, nonpartisan policy research center based in Portland, OR. Without taking a position on the merits of the proposed T-Mobile/Sprint merger, this letter provides a brief explication of our views on some of the important economic issues involved in the transaction’s antitrust review.
At the highest level, and as discussed in more detail below, we believe that an appropriate concern for consumer welfare in the regulatory review of the transaction demands that the Federal Communications Commission (“FCC”) and the Department of Justice (“DOJ”) account for the dynamic, fast-moving nature of competition in the markets affected by the merger. Above all, this means that the agencies should shun the mechanical application of obsolete market-share and concentration presumptions that could wrongly condemn the merger.
Modern antitrust principles, sound economics, and the public interest dictate that an analysis of the proposed merger incorporate these foundational precepts:
These principles are particularly appropriate here given the clear importance to the parties’ decision to merge of their interest in launching a competitive, national 5G network. If successful, the deal could create a combined T-Mobile and Sprint that is a stronger competitor to AT&T and Verizon, which, in turn, could spur increased investment competition in the market. Realizing those objectives — which could result in enormous benefit to consumers and enhance competition in the wireless communications and broadband markets — will take time, and the process will entail business model disruption, corporate reorganization, experimentation, and significant investment.
It is crucial to ensuring that the claimed consumer benefits of this process can be realized that the proposed merger not be thwarted by regulators inappropriately focused on short-term, static effects.
TOTM The Eleventh Circuit’s LabMD opinion came out last week and has been something of a rorschach test for those of us who study consumer protection law. Neil Chilson found the result to be a disturbing sign of slippage in Congress’s command that the FTC refrain from basing enforcement on “public policy.” Berin Szóka, on the other hand, saw the ruling as a long-awaited rebuke against the FTC’s expansive notion of its “unfairness” authority.
The Eleventh Circuit’s LabMD opinion came out last week and has been something of a rorschach test for those of us who study consumer protection law.
TOTM In brief, Delrahim spent virtually the entirety of his short remarks making and remaking the fundamental point at the center of my own assessment of the antitrust risk of a possible Comcast/Fox deal: The DOJ’s challenge of the AT&T/Time Warner merger tells you nothing about the likelihood that the agency would challenge a Comcast/Fox merger.
A few weeks ago I posted a preliminary assessment of the relative antitrust risk of a Comcast vs Disney purchase of 21st Century Fox assets. (Also available in pdf as an ICLE Issue brief, here). On the eve of Judge Leon’s decision in the AT&T/Time Warner merger case, it seems worthwhile to supplement that assessment by calling attention to Assistant Attorney General Makan Delrahim’s remarks at The Deal’s Corporate Governance Conference last week. Somehow these remarks seem to have passed with little notice, but, given their timing, they deserve quite a bit more attention.
