Wall Street Journal commentator, Greg Ip, reviews Thomas Philippon’s forthcoming book, The Great Reversal: How America Gave Up On Free Markets. Ip describes a “growing mountain” of research on industry concentration in the U.S. and reports that Philippon concludes competition has declined over time, harming U.S. consumers.

Read the full piece here.

A spate of recent newspaper investigations and commentary have focused on Apple allegedly discriminating against rivals in the App Store. The underlying assumption is that Apple, as a vertically integrated entity that operates both a platform for third-party apps and also makes it own apps, is acting nefariously whenever it “discriminates” against rival apps through prioritization, enters into popular app markets, or charges a “tax” or “surcharge” on rival apps.

Read the full piece here.

When she rolled out her plan to break up Big Tech, Elizabeth Warren paid for ads (like the one shown above) claiming that “Facebook and Google account for 70% of all internet traffic.” This statistic has since been repeated in various forms by Rolling Stone, Vox, National Review, and Washingtonian. In my last post, I fact checked this claim and found it wanting.

Read the full piece here.

In March of this year, Elizabeth Warren announced her proposal to break up Big Tech in a blog post on Medium. She tried to paint the tech giants as dominant players crushing their smaller competitors and strangling the open internet. This line in particular stood out: “More than 70% of all Internet traffic goes through sites owned or operated by Google or Facebook.”

Read the full piece here.

In the Federal Trade Commission’s recent hearings on competition policy in the 21st century, Georgetown professor Steven Salop urged greater scrutiny of vertical mergers. He argued that regulators should be skeptical of the claim that vertical integration tends to produce efficiencies that can enhance consumer welfare. In his presentation to the FTC, Professor Salop provided what he viewed as exceptions to this long-held theory.

Read the full piece here.

The merger between T-Mobile and Sprint has been characterized as a “4-to-3 merger” because after the merger there will be 3 national mobile network operators. Concerns have been raised regarding the effects of such mergers on competition and consumer welfare. Seeking to understand and evaluate the basis for these concerns, the International Center for Law and Economics (ICLE) undertook a comprehensive review of the economic effects of mergers and other factors affecting market concentration in the wireless telecommunications industry. The review found:

1. In general, wireless mergers resulted in increased investment both by individual companies and by the industry as a whole. This finding suggests that such mergers have consumer benefits, due to the improvements in quality of service — including availability and speed — that result from such investments. 
2. Levels of investment were highest in markets with three firms (although levels of investment in markets with four firms were not significantly lower).  
3. While the effects of market concentration on prices were “conclusively inconclusive,” when mergers result in more symmetrical competition (i.e. the resultant firms are of more equal size), competition is enhanced and consumers benefit both from improvements in quality of service and price.
4. There is no universal rule regarding the “optimal” number of mobile operators. But for a geographically large market like the U.S., with relatively low population density, it might well be three (and there is no good reason to believe that it is four).

When evaluating the merits of a merger, authorities are charged with identifying the effects on the welfare of consumers. On the basis of the studies that we review, “4-to-3 mergers” appear to generate net benefits to consumer welfare in the form of increased investment, while the effects on price are inconclusive.

Click here to download the report.

Click here to download the appendices.

These days, lacking a coherent legal theory presents no challenge to the would-be antitrust crusader. In a previous post, we noted how Shaoul Sussman’s predatory pricing claims against Amazon lacked a serious legal foundation. Sussman has returned with a new post, trying to build out his fledgling theory, but fares little better under even casual scrutiny.

Read the full piece here.

In a submission to the Australian Treasury on 12 September 2019, a group of esteemed international scholars critiqued the recently published Final Report of the Australian Competition and Consumer Commission (ACCC) Digital Platforms Inquiry. 

In its report, the ACCC claims that competition in the media, communications, advertising and other markets it investigated is “not working,”  and that substantial regulatory and legislative changes are necessary to solve—and would solve—the  problems caused by ineffective competition.  

But the premise that competition is not working is not well supported by evidence presented in the report. Meanwhile, the report’s conclusion misses the bigger picture: Government intervention is appropriate only if it produces net social benefits. Yet the ACCC almost entirely omits consideration of the adverse effects of its proposed interventions, which in many cases are likely worse than the alleged problems. As such, the report’s proposals should be treated with great caution.

The submission tackles three “significant oversights”: 

1. The ACCC’s recommendations on “platform neutrality” and the proposed creation of a “digital platforms branch” underestimate the limits of regulators’ ability to identify market failure and the major difficulties that regulators face when attempting to design markets. For instance, the ACCC recommends that Google be forced to introduce browser and search engine choice screens. Yet it is not clear that the introduction of such screens will either accelerate the entry of competitors or improve users’ experience. 
2. The ACCC’s attempts to prop up local media firms (through subsidies and other means) appears to be driven by nostalgia for a bygone, pre-modern era, rather than a rigorous assessment of the costs and benefits of media regulation. The ACCC is quick to assume that its recommendations would produce tangible benefits for consumers, but it overlooks the potential market distortions—and impediments to ongoing innovation—that might be generated in the process.
3. The report’s recommended extension of Australia’s privacy legislation completely ignores the tremendous compliance costs that doing so would impose on firms and, indirectly, on consumers. The recent introduction of privacy legislation in the EU and California suggests that these compliance costs might well outstrip the benefits to users.

The submission notes in conclusion that “The ACCC’s lackadaisical assessment of regulatory costs is all-the-more troubling given that its report focuses on an extremely dynamic industry. What is only a small regulatory cost today could severely hamper competition in the future.”

Click here to read the full submission.