Klobuchar, Cotton Competition Bill Latest To Pretend 'Big Tech' Is The Only Industry With Problems

from the myopia-is-very-fashionable dept

So we've noted a few times that the recent Congressional fixation on "big tech monopolies" is weirdly myopic. As in, the United States is absolutely jam-packed with heavily monopolized sectors including banking, telecom, energy, and air travel that simply aren't seeing anywhere near the same level of hyperventilation. While it's true that giants like Facebook, Google, and Amazon are engaged in dodgy behavior at unprecedented scale, most of the "solutions" bandied about so far are oddly selective, sometimes harmful, and routinely performative.

For example, back in June we noted how the big "antitrust reform" bills being proposed in the Senate ignored entire industries and had major carve outs that didn't make much sense. Several of the bills, for example, applied only to companies that made more than 50 million monthly active U.S. users and have a market cap of over $600 billion. They effectively ignored that countless other companies (Visa, Walmart) or industries (telecom) even exist, which is...odd.

Amy Klobuchar and Tom Cotton formally introduced their Platform Competition and Opportunity Act (the counterpart to a similar bill proposed in the House) last Friday. The bill, purportedly, helps thwart companies that capture and kill their competitors via acquisition:

"Big tech firms have bought up rivals to crush their competition, expand their market share, and to harm working Americans," said Cotton in a statement. "Sen. Amy Klobuchar and I have a bipartisan bill to block these killer acquisitions."

Existing antitrust standards require that regulators prove that a deal is anticompetitive if they want to block it. Given our fairly broken court system, significant corruption, and steadily eroded antitrust standards, that's often ridiculously difficult even in obvious cases of harm. This bill would require that tech giants (and only tech giants) have to prove a merger helps competition before it will be approved. But there are a few problems with such a narrow focus. This aggressive destruction of competitors is how countless U.S. business sectors operate, but nobody is doing a damn thing about most of those.

The bill's definition is so narrow it won't even apply to sectors like telecom, where crushing competition via acquisition has been a 30 year favored pastime. Or companies like Target or Walmart, despite the fact they compete via the, you know, internet. The bill only applies to companies that as of the bill's signing have a market cap of $600 billion, meaning that non "big tech" companies who grow overlarge later wouldn't be covered. Which is, again, a weird thing to include if you're genuinely concerned about corporate and monopoly power:

"Two companies that are currently under the $600 billion line and thus exempt from the bill are mega-retailers Target and Walmart. These companies are both worth hundreds of billions of dollars, and their e-commerce platforms are growing at a faster rate than Amazon's. But under the Klobuchar/Cotton law, it wouldn't matter if Target and Walmart overtake Amazon—they would be immune from this new antitrust action, as long as they are small enough on the day the bill is signed."

Target is headquartered in Klobuchar's home state (Minneapolis, Minnesota). Walmart is headquartered in Cotton's home state (Bentonville, Arkansas). Surely that's a coincidence, though.

So why are these proposals so weirdly narrow? In part because the only "monopolies" the discourse cares about right now are of the "big tech" variety. The few Democrats who do care about monopolization see an opportunity to leverage GOP outrage to push some fairly narrow bills under the idea that narrow and weird progress is better than no progress at all. The problem? The GOP's beliefs on "antitrust reform" are hugely performative, and they historically never show up when it's time to vote for actual reform.

The press and much of the discourse can't admit it, but the GOP doesn't genuinely care about monopolization or unchecked corporate power. There are 40 years of documented evidence showing how a primary party platform has been to enable and protect monopolies in the telecom, banking, and energy sectors.

That's not to say that a lot of what Google and Facebook have been doing isn't hugely problematic. The recent revelations of Google paying both wireless carriers and smartphone vendors not to compete in the app store space is pretty cut and dry. And the recently unredacted portions of the AG lawsuit against Google (oddly ignored under the din of Facebook news) also shows a company that was clearly and aggressively anticompetitive on the ad front. But again, most of these are behaviors the entirety of Congress are perfectly ok with across numerous other industries. We've done virtually nothing about, say, Comcast, for example.

But I'm not entirely sure that corrupt and gridlocked Congress, at least this incarnation of it, is actually capable of fixing any of these these problems in big tech or elsewhere. The bills we've seen so far offer some inconsistent help, but even here I'm doubtful that GOP and centrist Democratic policymakers have the stomach to support even piecemeal reform. I think we'll see several years of posturing on "big tech," followed by very few if any competent solutions out of Congress. Any change that arrives will likely come via lawsuit, the Lina Khan FTC, or in response to bad press. And given the limitations of all of those avenues, that's probably not going to be enough.

Filed Under: amy klobuchar, antitrust, big tech, tom cotton

Data Privacy Is The Price Of The Latest Antitrust Proposals

from the when-policies-conflict dept

In the wake of data breaches at Target and Equifax where hackers compromised the personal information of millions of Americans and the Cambridge Analytica scandal, customers and policymakers are increasingly worried about the privacy and security of our personal information online. Unfortunately, policymakers often confuse these privacy and data security concerns with broader anti-tech fervor against America’s leading technology businesses. But simply put, kitchen-sink anti-tech responses could exacerbate, not ease, concerns regarding data privacy and security.

Sen. Klobuchar’s American Innovation and Choice Online Act proposed in the Senate this month provides a clear example of how “solutions” driven by animosity towards “Big Tech” could undermine consumer privacy. Lawmakers who are currently pushing antitrust proposals to attack tech businesses are creating a scenario where companies might be unable to undertake the privacy and security features that their consumers trust and rely on.

This latest legislation would undermine existing privacy features and lead to more risky sharing with third-parties which has been at the heart of many privacy scandals. By making it illegal for the tech giants covered by the law to “restrict or impede” a business user’s access to data created through the platform or to limit portability, the result is simple—this will likely undermine companies’ attempts to improve consumer privacy such as Apple’s new App Tracking Transparency. In most cases, this bill also requires companies to share their data with rivals, even those that might have ill-intentions against the company, its consumers, or even the United States. 

Thanks to the requirements in the American Innovation and Choice Online Act, malicious businesses, including foreign companies, could exploit its data portability loophole and gain access to user information. It opens up businesses to the very actions at the heart of other previous data privacy scandals and dilutes their ability to respond with what consumers want—better security and privacy options. And as a result, Klobuchar’s antitrust proposal would likely harm users’ privacy online and create more harm to consumers than the current tenuous claims about tech giants' market behavior.

This bill won’t just harm consumer privacy, it’ll harm small businesses to boot. Under the Klobuchar bill, Amazon, Google, Microsoft, and Apple would not be able to limit the use of data by those with questionable or unethical data practices and would be greatly limited in their ability to remove fraudulent apps or other awful actors from their app stores.

These companies would generally have two options: either accept all sellers into their phones and app stores, regardless of poor data privacy and security standards, distasteful products, and customer service quality, or end these programs altogether to avoid accusations of self-preferencing and significant consequences associated with it under Klobuchar’s bill. 

Both options would mean consumers likely lose the benefits of knowing that only approved apps can access their data, while developers of these apps and other small businesses that use these services would not benefit from the consumer trust these marketplaces currently provide. 

The interoperability requirements of the bill also fail to truly provide the users themselves with the increased options. Instead, they make user data and to whom it can be ported further subject to the decisions of companies and third-parties. New opportunities for data portability between platforms can provide users more control and lower the cost of switching between services. Take the Data Transfer Project, which allows users to choose to transfer certain data like photos between project member services. This gives users more options for where they can choose to keep such information. But the Klobuchar proposal structurally doesn’t help users and would require companies to provide portability and interoperability to other companies,not to the users themselves.

Proponents of Klobuchar’s bill will likely point out that the bill establishes an affirmative defense to avoid these requirements if it would undermine privacy. However, this still would not solve all the concerns. Companies that pursue that route would face a high burden in court and the high costs associated with litigating such a case. As a result, many companies will favor compliance and handing over consumer data rather than risk the penalties if an affirmative defense fails, even if they believe consumer privacy may ultimately be undermined. In fact, the inclusion of an affirmative defense wouldn’t even be sufficient to overcome the additional privacy problems that Klobuchar’s bill would create.

Rather than resolving data privacy concerns, antitrust proposals like Senator Klobuchar’s could make keeping our information safe online an impossible task for tech companies. Policymakers should not have consumers and small businesses pay an unfair price and lose privacy protections just so they can go after big tech companies.

Jennifer Huddleston is Policy Counsel at NetChoice where she focuses on emerging technology issues like privacy, competition policy, and intermediary liability.

Filed Under: american innovation and choice online act, amy klobuchar, antitrust, competition, data portability, privacy

As We're Told That No New Social Media App Can Make It, TikTok Surpasses Facebook Downloads & YouTube Watch Time

from the huh,-look-at-that dept

While I am concerned about the power wielded by giant tech companies and am interested in creating more competition, I'm always a little perplexed by the arguments that people make that, somehow, the "big four" companies of Google, Amazon, Facebook, and Apple are so dominant that no new competitor can ever catch up to them. It's one thing to point to similar articles about Myspace that totally dismissed Facebook as a possible competitor to that platform, but it's another thing altogether to see new social media apps... actually doing pretty well.

TikTok really only launched in 2017 (yes, there were some predecessors, but what we now think of as TikTok was launched in 2017, and really only took off after purchasing Musical.ly in late 2018), by which point we were already told that Facebook and Google had locked down the market entirely. Hell, remember the original FTC complaint against Facebook didn't even mention TikTok? And then the amended complaint (after the initial one was tossed) barely mentions it and only does so to insist that it's somehow different.

But, last month it came out that in 2020, TikTok was downloaded more than Facebook. Now, you could maybe try to make the argument that this is because everyone already has Facebook on their phones, but it still is noteworthy. Perhaps even more noteworthy is another report noting that TikTok has overtaken YouTube in average watch time in both the US and UK.

That report does note that YouTube still has more viewers, and thus greater overall time watched, but on a per user basis, users are spending more time on TikTok than YouTube.

There can still be reasonable concerns about practices from the big companies, if they're shown to be suppressing competition. But it seems harder and harder to buy the line that it's "impossible" for there to be new entrants in the market these days. Because that's clearly not the case.

Filed Under: antitrust, competition, downloads, new entrants, social media
Companies: facebook, tiktok, youtube

Apple Mostly, But Not Entirely, Wins Against Epic; No Antitrust Violation, But Must Tweak Practices To Comply With CA Law

from the antitrust-is-hard dept

If there's something that's been made clear over the last year or so in the world of antitrust it's that just because some people don't like big companies and their practices, that doesn't mean it's an antitrust violation. It rarely is. In the well, rather epic lawsuit that Epic brought against Apple, we initially described it as a contract negotiation by lawsuit and predicted that it didn't seem likely to actually meet the bar for an antitrust violation. It seems that District Court Judge Yvonne Gonzalez Rogers agreed with us, rejecting the antitrust claims entirely. As the judge wrote:

Given the trial record, the Court cannot ultimately conclude that Apple is a monopolist under either federal or state antitrust laws. While the Court finds that Apple enjoys considerable market share of over 55% and extraordinarily high profit margins, these factors alone do not show antitrust conduct. Success is not illegal. The final trial record did not include evidence of other critical factors, such as barriers to entry and conduct decreasing output or decreasing innovation in the relevant market. The Court does not find that it is impossible; only that Epic Games failed in its burden to demonstrate Apple is an illegal monopolist.

Key to any antitrust ruling is the market definition and everyone always wants that definition to fall in their own favor. Those bringing antitrust lawsuits like to narrow down the market to basically "exactly what this company provides and no more," while defendants try to define the market as broadly as possible. The judge rejected both Apple's and Epic's market definitions here and found something more reasonable in the middle -- but in the end the definition helped Apple much more than it did Epic.

Ultimately, after evaluating the trial evidence, the Court finds that the relevant market here is digital mobile gaming transactions, not gaming generally and not Apple’s own internal operating systems related to the App Store. The mobile gaming market itself is a $100 billion industry. The size of this market explains Epic Games’ motive in bringing this action. Having penetrated all other video game markets, the mobile gaming market was Epic Games’ next target and it views Apple as an impediment.

Further, the evidence demonstrates that most App Store revenue is generated by mobile gaming apps, not all apps. Thus, defining the market to focus on gaming apps is appropriate. Generally speaking, on a revenue basis, gaming apps account for approximately 70% of all App Store revenues. This 70% of revenue is generated by less than 10% of all App Store consumers. These gaming-app consumers are primarily making in-app purchases which is the focus of Epic Games’ claims. By contrast, over 80% of all consumer accounts generate virtually no revenue, as 80% of all apps on the App Store are free.

The ruling itself is a rather epic 185 pages, but the key point is what's above. The judge knows this is going on appeal, and it seems like the massively thorough ruling is more about covering all the bases for the 9th Circuit judges, than for the parties in the case.

Almost all of the claims are dismissed with one partial exception. The court did find that Apple violates California's unfair competition law. Epic doesn't get a complete win on this claim either. The court notes that it failed to show any unlawful practices under California's law, but some unfair ones. But even then the victory is somewhat limited, and many of Epic's claims of unfairness fail as well. The only bit that succeeded regarded Apple's anti-steering provisions. These are the rules Apple places on app store developers preventing them from telling people about ways to pay outside of the iOS App Store.

As explained before, Apple uses anti-steering provisions prohibiting apps from including “buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase,” and from “encourag[ing] users to use a purchasing method other than in-app purchase” either “within the app or through communications sent to points of contact obtained from account registrations within the app (like email or text).” Thus, developers cannot communicate lower prices on other platforms either within iOS or to users obtained from the iOS platform. Apple’s general policy also prevents developers from informing users of its 30% commission.

The court found that a step too far -- and frankly, that makes sense. It was always a really shitty thing to do in the first place, and extremely anti-consumer. And the court found that even if there weren't actual antitrust violations by Apple, the anti-steering provisions "threaten an incipient violation of an antitrust law" by restricting information from consumers.

Thus the court grants the only remedy to Epic: an injunction against such practices:

While Apple’s conduct does not fall within the confines of traditional antitrust law, the conduct falls within the purview of an incipient antitrust violation with particular anticompetitive practices which have not been justified. Apple contractually enforces silence, in the form of anti-steering provisions, and gains a competitive advantage. Moreover, it hides information for consumer choice which is not easily remedied with money damages. The injury has occurred and continues and can best be remedied by invalidating the offending provisions. In terms of balancing, Apple’s business justifications focus on other parts of the Apple ecosystem and will not be significantly impacted by the increase of information to and choice for consumers. Rather, this limited measure balances the justification for maintaining a cohesive ecosystem with the public interest in uncloaking the veil hiding pricing information on mobile devices and bringing transparency to the marketplace.

[....]

Accordingly, a nationwide injunction shall issue enjoining Apple from prohibiting developers to include in their:

Apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to IAP.

Nor may Apple prohibit developers from: Communicating with customers through points of contact obtained voluntarily from customers through account registration within the app.

Frankly, this seems like the right outcome overall. Apple's restrictions on companies providing information to their users was always pretty shady. But the rest of the antitrust claims were pretty silly in the first place.

Another interesting tidbit in the opinion suggests that Epic's arguments may have gone a step too far and undermined a stronger antitrust case that it could have made:

While the Court has found that evidence suggests Apple’s 30% rate of commission appears inflated, and is potentially anticompetitive, Epic Games did not challenge the rate. Rather, Epic Games challenged the imposition of any commission whatsoever

Oops.

Either way, this has to be seen as a pretty big victory for Apple, and I'm confused by some reports saying it's a "major win for Epic Games." It's not.

But, of course, this is just the District Court. There is no way that Epic is not going to appeal this ruling.

Filed Under: antitrust, california, competition, fortnite, unfair competition
Companies: apple, epic

FTC Tries Tries Again With An Antitrust Case Against Facebook

from the but-the-evidence-of-a-monopoly? dept

As you'll recall, back in December, the FTC filed an antitrust case against Facebook, arguing that Facebook abused a dominant market position to acquire Instagram and WhatsApp for anticompetitive reasons, and that it puts in place anti-competitive polices that harm other companies that it is unable to acquire. At the end of June, the court dismissed the case, saying that the FTC never actually showed any evidence that Facebook is a monopoly -- which is a key part of any antitrust case. However, the judge gave the FTC a chance to amend. Yesterday (the deadline to file the amended complaint), the FTC took another shot at it and filed its amended complaint.

The new complaint is longer (and actually mentions TikTok, which the original didn't!). But is it any stronger? Well, at least the complaint has a more coherent narrative to it, after the original really phoned it in. The complaint tells the story of how Facebook effectively missed the smartphone revolution, and that threatened to enable competitors to gain a stronger foothold in social media with a mobile-first approach. The thing that strikes me, however, is how the "evidence" here actually seems to argue against antitrust violations -- as it shows just how fragile Facebook's position was not that long ago, and how easily someone else might have overtaken Facebook. The fact that Facebook was aware of these competitive threats isn't an admission of antitrust behavior, but rather just the fact that the senior executive suite at Facebook has read Clay Christensen and understands the nature of the Innovator's Dilemma and how disruptive innovation works.

That said, there is more evidence in this complaint that Facebook deliberately sought to undermine competition at a variety of different points. And if the FTC can convince the court that (1) the market definition it has is correct, and (2) that Facebook has monopolistic power in that market, perhaps it can move the case forward. But, again, the complaint focuses heavily on the Instagram and WhatsApp acquisitions, both of which happened many years ago -- at a time when Facebook was nowhere near as big or powerful as it is today. And, importantly, there aren't really examples of them doing the same thing recently. Indeed, we keep seeing new entrants showing up in the social media market -- including Snap, TikTok, and Clubhouse. Those all undermine the argument that Facebook can stop competitors.

But, honestly, parts of the complaint seem to contradict itself. For example, it says that Facebook was a monopoly since 2011 (which it needs to say to cover the Instagram acquisition period):

Facebook holds monopoly power in the provision of personal social networking in the United States and has held such power continuously since at least 2011. Multiple sources of evidence demonstrate that Facebook has monopoly power with respect to U.S. personal social networking services. First, Facebook has maintained a dominant share of the relevant market for U.S. personal social networking from 2011 until the present day. Second, direct evidence indicates that Facebook has monopoly power with respect to U.S. personal social networking services. Further, Facebook’s monopoly power is durable due to significant entry barriers, including direct network effects and high switching costs.

But, in the very same complaint, it says:

By late 2011, Mr. Zuckerberg and other executives realized that Facebook Blue offered a relatively poor experience for mobile users, and that this made Facebook’s monopoly position more vulnerable than it had ever been. In addition, Facebook struggled to translate its social advertising model onto mobile devices. The transition to mobile required Facebook to transform the manner in which its advertisements were displayed: as Mr. Zuckerberg described it, [REDACTED]

Given these mounting consecutive failures, Facebook justifiably feared that its personal social networking monopoly, and its enormous advertising profits, would be threatened by a mobile-first competitor emerging and gaining traction by connecting users in innovative ways and exploiting mobile phones’ photo or messaging capabilities.

So... it's a monopoly, but that monopoly is so fragile that a bunch of new mobile apps from tiny startups threatened to undermine the entire thing? That... doesn't sound like a dominant position, let alone a "monopoly" one.

The market definition section is equally... strange. It insists that "mobile messaging services" are distinct, and not considered to be in the same market as Facebook and its "personal social networking." Um, but Whatsapp is... a mobile messaging service, and a big part of the complaint is about Facebook buying Whatsapp. So, it's hard to see how that makes much sense.

Also, the attempts to distinguish Facebook from other companies -- like Twitter, LinkedIn, Reddit, Pinterest, and more only seem to serve to highlight... just how much competition Facebook really has:

Personal social networking is distinct from, and not reasonably interchangeable with, specialized social networking services that are designed for, and are utilized by users primarily for, sharing a narrow and highly specialized category of content with a narrow and highly specialized set of users for a narrow and distinct set of purposes. As a result, users employ these services primarily to maintain or communicate with a distinct or narrow set of connections—like engaging in professional networking—and not to connect with friends and family and share the experiences of their personal daily lives. Examples include networks that focus on professional (e.g., LinkedIn) or interest-based (e.g., Strava) connections. Other examples of services that users view as appropriate for limited sharing with a narrow set of connections include some online dating services and Nextdoor, a service which focuses on facilitating sharing only among users that reside in close physical proximity to one another.

Personal social networking is distinct from, and not reasonably interchangeable with, online services that focus on the broadcast or discovery of content based on users’ interests rather than their personal connections. Prominent examples are Twitter, Reddit, and Pinterest. These services do not focus on connecting friends and family: Twitter focuses on enabling users to stay informed about topics that interest them, while Reddit facilitates conversations centered around topics of interest to the participants. As a result, users employ these services primarily to stay informed about and discuss events relevant to their interests (e.g., Twitter), or engage in conversations with communities of mostly anonymous people who share a particular interest (e.g., Reddit), rather than to connect with friends, family, and other personal connections. Therefore, such services are not reasonable substitutes for personal social networking services. In a similar vein, Pinterest allows users to browse content by conducting searches based on their interests, and allows connections based on such interests, but does not focus on connecting users with friends and family and therefore is not an adequate substitute for personal social networking services that do so.

The attempt (in this complaint and absent from the last one) to deal with TikTok seems particularly... weak.

TikTok is a prominent example of a content broadcasting and consumption service that is not an acceptable substitute for personal social networking services. TikTok users primarily view, create, and share video content to an audience that the poster does not personally know, rather than connect and personally engage with friends and family. The purpose for which users employ TikTok, and the predominant form of interaction on the platform, is not driven by users’ desire to interact with networks of friends and family.

I mean, this just feels totally arbitrary. They're not establishing the actual competitive market here. They're basically defining the market as "exactly what Facebook does, and only if someone else does all Facebook does." But that's not how competition works. Competition often looks like just one feature of an existing provider, and then leverages that to grow bigger and to expand. And the FTC complaint just doesn't deal with that at all. Indeed, if you look at the way Facebook has been responding to TikTok, the idea that it's not competitive is simply laughable. I can't imagine that Facebook execs are breathing easy about TikTok's success now that the FTC insists that it's a totally different market.

I still think it's possible that there could be a compelling antitrust argument against Facebook. But this one still feels phoned in. It feels like it's taken a popular narrative, and just assumed it's obvious if they put enough words around it, but without actually showing that it's true.

Filed Under: antitrust, competition, ftc, market definition, social media
Companies: facebook

California Regulators Say T-Mobile Lied To Gain Sprint Merger Approval

from the synergies dept

To gain regulatory approval for its $26 billion merger with Sprint, T-Mobile made numerous promises. One was that the deal would immediately create jobs (there've been 5,000 layoffs so far). Another was that the company would work closely with Dish Network to help them build a fourth wireless network that would replace Sprint, theoretically "fixing" the reduction in competition the deal created. As predicted, that plan isn't working out well either.

Dish and T-Mobile have been fighting like cats and dogs since the deal was finalized. Instead of helping Dish Network grow, T-Mobile has been poaching Dish customers with promotions specifically targeting Dish. T-Mobile also promised to keep its older 3G, CDMA network operational for Dish to use until 2023 (giving it time to build out its own 5G network), but Dish has been accusing T-Mobile of turning that network off on January 1, 2022, far earlier than originally promised. Dish argues that millions of its Boost Mobile branded wireless subscribers could lose access to service in the new year.

This week California regulators sided with Dish and effectively accused T-Mobile of lying to gain merger approval:

"T-Mobile's false and misleading statements under oath indicated, among other things, that T-Mobile would make its CDMA network "available to Boost customers until they were migrated to Dish Network Corporation's LTE or 5G services" and that Dish would have up to three years to complete the migration, the ruling said. The CPUC can impose penalties against T-Mobile of up to $100,000 for each offense."

In short Dish says T-Mobile simply isn't living up to its merger commitments. In turn, a T-Mobile blog post effectively accuses Dish is just making everything up, and insists Dish is simply too cheap to give its wireless users discounted 4G and 5G phones to avoid problems when T-Mobile's 3G network shuts down. California regulators, including Administrative Law Judge Karl Bemesderfer and a CPUC commissioner, appear inclined to believe Dish Network based on their review of T-Mobile's pre-merger promises:

"Their ruling said there is "a reasonable basis to conclude that T-Mobile... misrepresented material facts and misled the commission" with statements under oath. The ruling said that when the CPUC allowed the merger, it "relied on the specific false statements, omissions, and/or misleading assurances T-Mobile gave regarding its use of [Sprint's] PCS spectrum and its repeated references to a three-year customer migration period without a degraded experience... it appears that these false statements, omissions and/or misleading assurances and the related time references were intended to induce the commission to approve the merger."

Again, simply blocking this deal and finding some other way to prop up Sprint (without eliminating a direct competitor) was always the simpler, cleaner, option. Instead, the Trump DOJ and FCC constructed this elaborate and likely doomed alternative which (ironically for a party with a purportedly "hands off" and "government never works" mindset), involves having government try to nanny a cumbersome arrangement to fruition for the better part of a decade. With Dish consistently losing both wireless and TV subscribers, it's not clear Dish will even remain viable enough for that to work.

Dish is a company with no experience in wireless, with a history of being cheap and difficult to work with, that has to not only build out a world class 5G network in a few years, but has to make a network so popular with consumers it successfully leeches subscribers from AT&T, Verizon, and T-Mobile. And it has to do it without financially imploding as it continues to hemorrhage wireless and TV subscribers. And US regulators, not exactly the model of consistent oversight, would need to hold all companies involved meaningfully accountable should they miss build-out metrics.

I still tend to think the entire deal was performative theater providing flimsy justification to approval a deal experts made very clear would reduce competition, raise prices, and harm jobs. It was pushed by folks whose only real interest was reducing competition so the remaining three players could inevitably jack up prices. And while I do think Dish is making a good show of it (because they have to), I still tend to think this could end with Dish selling its trove of valuable spectrum (once deal restrictions end), making tens of billions, then throwing a few peanuts at any flimsy regulatory penalties on their way to the exit.

Filed Under: antitrust, california, competition, doj, fcc, jobs, layoffs, lies, review
Companies: dish, sprint, t-mobile

Stop The Antitrust Gerrymandering

from the make-stronger-arguments, dept

The social media app TikTok was reported to have passed more than 3 billion total downloads in July and was the most downloaded app in the first half of the year. This growth is impressive as it not only was banned in India but is the first app not owned by Facebook to pass 3 billion downloads. Yet in the recent antitrust cases from the Federal Trade Commission (FTC) and the states attorneys general against Facebook, there is little mention of the popular app.

This omission is reminiscent of politicians gerrymandering or drawing political lines to benefit their parties’ candidates in re-election. Attorneys general and federal agencies have also relied on excluding competitors or narrowly defining markets to make their cases against Google and Facebook.

The FTC led lawsuit against Facebook provides a case in point. The lawsuit accuses Facebook of having a monopoly over “personal networking services.” The FTC argues that products like LinkedIn or Twitter are different from Facebook and shouldn’t be considered as a personal networking service. TikTok with its 3 billion downloads fails to warrant a mention.

Even with these exclusions, the FTC contends that Facebook only controls approximately 60 percent of the market yet omits whatever company or companies control the other 40 percent. Unsurprisingly the judge was unconvinced of the claim that Facebook controlled 60 percent of the market and gave the FTC 30 days to amend the complaint to show their work.

As other cases against Google move through the process, they will likely face the same struggles at convincing judges due to their gerrymandering. The most recent case filed against Google for allegedly holding a monopoly on app stores in the Android mobile operating system is another example.

The lawsuit immediately fails to pass any logical test since Android is not the only, let alone the dominant, mobile platform in the United States. Apple’s iOS has the majority of users in America and is facing its own antitrust lawsuit from Epic games over its supposed app store monopoly. The states try to get around this by claiming the market is specifically "licensable" operating systems, which excludes iOS, but that only highlights how this is gerrymandering the definition to get to a desired outcome.

Even ignoring Apple, the Android system is extremely open allowing users to download a variety of app stores and even allowing for “sideloading” or downloading apps directly from the developers without need of an app store. The “Freedom Phone” which uses the Android operating system and purports to protect users from “big tech” comes preloaded with its own app store for example.

The problem with these narrow definitions is that it asks judges to ignore the world in which we actually live for ones constructed for the purpose of showing targeted tech companies are monopolies.

Other lawsuits contend that Google holds a monopoly over search when Bing and DuckDuckGo are easily accessible to anyone with an internet connection at no cost. Or that Google faces stiff competition from Facebook, Amazon, and a host of other companies to say nothing of more traditional advertisements.

Like political gerrymandering, elected officials filing these cases seem to believe there is political gain for being tough on big tech. But as with poorly drawn political maps, judges are proving more skeptical. Judges play an important role in protecting a fair in neutral system from political pressure. This is true for both elections and antitrust.

Eric Peterson is the Director if the Pelican Institute for Technology and Innovation. He currently lives in New Orleans

Filed Under: antitrust, ftc, gerrymandering, market definition
Companies: facebook, google

The FTC Is Driving Away Good Economists In Favor Of Political Henchmen

from the let-them-speak dept

Shut up and get in line — that's the message Federal Trade Commission Chair Lina Khan recently broadcasted to FTC staffers. Within her first month as a new commissioner, Khan ordered a stop to all public speaking for "an all-hands-on-deck moment." Evidently, she wants the FTC speaking with only one voice — her own. The gag order is going to run out the top economists and harm the FTC's long-term effectiveness.

Khan rose to academic stardom at a young age as a vocal critic of Big Tech, especially Amazon. In her most famous writing, Amazon's Antitrust Paradox, she argued for stronger antitrust enforcement even when companies are lowering prices for consumers. Khan's preferred antitrust approach would be a complete overhaul of the current antitrust system and would require a lot of work. However, even if one agrees with Khan that antitrust needs to be rewritten and that this is an all-hands-on-deck moment, Khan's current regime will make that impossible by running out her employees, especially Ph.D. economists.

Imagine yourself as a recent Ph.D. in economics from a hotshot university. You're 30 years old, and you just spent 6 years in graduate school, earning $20,000. Before that, you may have spent two years as a research assistant to a professor, earning just as little. You're a top student in your program and have lots of career options in front of you. You could go work at Amazon or Netflix and earn $200,000 a year, base salary. After living on a strict diet of research and Top Ramen in graduate school, that sounds pretty good.

Traditionally, federal agencies, like the FTC, compete for the best economists the same way universities compete. They can't match the pay of an Amazon, but they can offer economists a valuable perk: the ability to do research and engage with the scientific community as part of the job.

For many economists, who have already demonstrated their passion for research by writing a dissertation and completing a Ph.D., doing research is a huge perk that most private companies don't offer. The FTC knows this. In their own job postings for PhD economists, the FTC explicitly emphasizes their economists' ability to do research. To date, that hiring strategy has worked pretty well for them. Many economists at the FTC are top-notch researchers, with thousands of citations, an impressive feat for a full-time researcher at a university. When the FTC hires new PhDs, they are saying "you can work in public service and still be a successful researcher."

Khan's recent policies signal the FTC is now less committed to research and independent thinking. Public academic seminars, where economists present their findings to colleagues throughout the profession, are a key part of the research and publication process. If you cut off economists' ability to present their research and get feedback, you cut off the ability to do research.

The real damage will take some time to show itself. Even if the gag order does not run out the current economists, who may be loyal to the FTC after years, the order will still hurt the agency over time. Any successful agency needs to hire quality employees year in and year out. If this policy persists, the FTC will have trouble down the line hiring and retaining high-quality employees, especially economists.

Khan might not think she needs these economists right now; after all, she has made clear she opposes the economic approach to antitrust. But when the FTC takes companies to court, as we can expect it will do even more often under Khan, it needs expert witnesses to persuasively argue its case. The private companies pay $1,000 per hour for economists at the top of the profession. The FTC must hire top talent too.

If you were against antitrust enforcement and wanted to ruin the FTC from within, Khan's strategy would be nearly perfect. Step 1: Run out all the competent lawyers and rigorous, scientific economists. Step 2: Bring forth a bunch of cases that are poorly argued and lack an economic defense. Step 3: Lose those cases at the current Supreme Court and set a bunch of precedents against the FTC.

Brian Albrecht is an assistant professor of economics at Kennesaw State University. He holds a Ph.D. in economics from the University of Minnesota. He is a Young Voices contributor and writes a weekly economics newsletter (pricetheory.substack.com). Follow him on Twitter: @briancalbrecht.

Filed Under: antitrust, economists, ftc, lina khan, panels, presentations, research

The Government 'Fix' For The T-Mobile Merger Continues To Look Like A Convoluted Mess

from the synergies-indeed dept

Remember when the FCC rubber stamped the Sprint T-Mobile merger without even looking at impact analysis? Remember when a long line of economists and experts noted the merger would likely erode competition, raise rates, and kill jobs -- and both U.S. regulators and the court system completely ignored them? And remember when the FCC and DOJ both cobbled together a "fix" to this problem by trying to throw some spectrum at Dish Network, a proposal we noted was likely to fail?

You'll never guess how things are going.

First, T-Mobile's promise (still available on the company's website) that the deal would provide a flood of new jobs wound up being bullshit. The company has laid off 5,000 workers and counting -- likely more once they eliminate the second redundant Sprint headquarters. Deal critics estimated that the deal could result in anywhere between 10,000 to 30,000 lost jobs over a period of several years, and we're already well on our way toward that goal.

Second, the DOJ/FCC fix for the deal leaned heavily on the idea that T-Mobile would help Dish run a Mobile Virtual Network Operator (MVNO) on T-Mobile's network while Dish spent the next seven years building its own, full 5G network. But the two sides immediately proved completely incapable of getting along, with Dish running to both state and federal regulators to complain that T-Mobile had already started reneging on several of its promises (like shuttering its 3G/CDMA network, still used by Dish wireless subscribers, earlier than Dish had expected).

This week those hostilities culminated in Dish effectively giving T-Mobile a demotion and hiring AT&T as the company's primary network partner. The 10 year, $5 billion deal gives AT&T wholesale revenue, and Dish customers access to AT&T's network in more rural and hard to reach places. That in turn gives Dish more time to try to complete a viable fourth wireless network and meet the deployment obligations set out by the FCC (reaching 70% of the population by 2025).

While telecom trade mags seem content to pretend this shouldn't be a big deal, other experts continue to express meaningful doubts that Dish will ever become a meaningful fourth major competitor. Or that they'll face any meaningful penalties should they fail to reach their deployment promises:

"If T-Mobile is able to shirk this regulatory obligation with impunity, what’s to prevent future consent orders from being ignored?” Hal Singer, an economist who testified against the merger approval tells The Verge..."The decree always gave Dish an easy out,” Singer says. “The real target of the regulation was T-Mobile. And now T-Mobile is getting to slither out."

Think about it. Dish is bleeding both TV and wireless subscribers at an alarming rate. It has little real experience in wireless. The company's CEO, Charlie Ergen, is purportedly a terrible boss. The company is routinely at the heart of industry feuds, be they the spat with T-Mobile, or a steady parade of retransmission arguments. Dish also has a long history of hoovering up wireless spectrum, promising amazing things, then not really delivering (just ask T-Mobile circa 2018 or so).

Yet for any of this to succeed, Dish needs to remain financially viable, deploy a top-shelf nationwide 5G network, ensure that network is popular with consumers, keep state and federal regulators happy by meeting all of its deployment goals on time, then nab meaningful market share from a U.S. telecom sector extremely resilient to being challenged in any way by upstart competitors or disruption. It's certainly possible, and a meaningful fourth competitor would be a great outcome were it to actually work, but history and the odds simply aren't in Dish's favor.

I still tend to think this entire transaction was intended from the start to be theater aimed at justifying approval of a deal that should have been blocked outright. Dish may genuinely think it can succeed here (given the collapse of its satellite TV business, its options are either shift to wireless or die), but I doubt AT&T would invest heavily in this venture if it thought that it would ever result in Dish becoming a meaningful threat to the company's market share. There are just too many things that need to line up for this to succeed at any real scale, including the need for competent and consistent U.S. regulatory oversight and accountability (good luck with that).

This could end with Dish stringing feckless US regulators along for six years (the window in which it's prohibited from selling its spectrum), then selling its vast and valuable spectrum troves when things get too hard--using a small portion of that cash to pay off its legal bills and whatever pathetic government fine results. Or, as some on Wall Street are speculating, Charlie Ergen could make a weak show of things before ultimately selling everything to AT&T as he retires and walks off into the sunset, leaving the wireless industry more consolidated than ever.

At which point, if telecom megamerger history holds, everybody who supported this deal or was involved with it in any way (regulators, think tankers, lobbyists, executives) will take their cut of the proceeds then walk off pretending none of this ever happened. And when the impact of consolidation directly results in endless layoffs and higher prices for consumers and businesses, all of those same folks will shrug and pretend that's just a very strange coincidence.

Filed Under: antitrust, competition, mergers, mvno, telco, wireless
Companies: at&t, dish, t-mobile

Broadcom Gets a Wrist Slap For Monopolizing Cable Box, Modem Markets

from the do-not-pass-go,-do-not-collect-$200 dept

While most folks didn't notice ahead of the holiday weekend, the FTC on Friday announced it would be giving chipmaker Broadcom a bit of a wrist slap after the agency found it had become an "illegal monopoly." In the FTC's complaint (pdf), the agency notes that Broadcom "illegally monopolized" both the cable modem/gateway and cable set top box markets by preventing its customers from buying products from other vendors. It did this by forcing both OEMs and service providers into long-term agreements that prevented them from purchasing chips from Broadcom's competitors, then bullying them if they went off script:

"These agreements required customers to purchase, use or bid Broadcom’s chips on an exclusive or near-exclusive basis. Broadcom entered these exclusivity and loyalty agreements with at least ten OEMs, including those with the most extensive engineering and design capabilities and the strongest ties to service providers. And Broadcom entered similar agreements with major U.S. and other service providers. By entering exclusivity and loyalty agreements with key customers at two levels of the supply chain, Broadcom created insurmountable barriers for companies trying to compete with Broadcom."

The charges follow similar accusations in Europe. As we've long noted, the cable set box market has long been a monopolized mess on several layers. One, on the way Broadcom controls chipsets. But also in the way that cable giants generate $21 billion annually forcing consumers to rent cable boxes that would be far cheaper to buy outright. Fortunately streaming has put a dent in at least some aspects of this problem, even though cable TV with a traditional set top box remains the dominant delivery avenue for television for now (Broadcom also provides chipsets for streaming hardware).

According to the FTC Broadcom won't be seeing any financial penalty for its efforts to monopolize the modem and cable box chipset market, but a new FTC order (pdf) bans the company from doing so moving forward (for however long the FTC can bother to pay attention):

"Under the proposed consent order, Broadcom will be prohibited from entering into certain types of exclusivity or loyalty agreements with its customers for the supply of key chips for traditional broadcast set top boxes and DSL and fiber broadband internet devices. Broadcom also must stop conditioning access to or requiring favorable supply terms for these chips on customers committing to exclusivity or loyalty for the supply of related chips. And the proposed order prohibits Broadcom from retaliating against customers for doing business with Broadcom’s competitors."

The 4-0-1 vote (new FTC boss Lina Khan did not participate) is just a small dent in a larger problem in both telecom, cable, and the shifting cable TV market. Namely the lack of overall competition in broadband (which opens the door to unnecessary usage caps and other dodgy efforts to hamstring streaming competitors), as well as persistent gatekeeper issues, like the ongoing practice of forcing consumers to shell out thousands in rental fees for crappy cable set top boxes and streaming hardware alike.

Filed Under: antitrust, cable modem, cable set top box, competition, ftc, monopoly