Can We At Least Make Sure Antitrust Isn't Deliberately Designed To Make Everyone Worse Off?

from the a-small-request dept

For decades here on Techdirt I've argued that competition is the biggest driver of innovation, and so I'm very interested in policies designed to drive more competition. Historically this has been antitrust policy, but over the past decade or so it feels like antitrust policy has become less and less about competition, and more and more about punishing companies that politicians dislike. We can debate whether or not consumer welfare is the right standard for antitrust -- I think there are people on both sides of that debate who make valid points -- but I have significant concerns about any antitrust policy that seems deliberately designed to make consumers worse off.

That's why I'm really perplexed by the push recently to push through the “American Innovation and Choice Online Act” from Amy Klobuchar which, for the most part, doesn't seem to be about increasing competition, innovation, or choice. It seems almost entirely punitive in not just punishing the very small number of companies it targets, but rather everyone who uses those platforms.

There's not much I agree with Michael Bloomberg about, but I think his recent opinion piece on the AICOA bill is exactly correct.

At the heart of the bill is an effort to prevent big tech companies from using a widespread business practice called self-preferencing, which is generally good for both consumers and competition. Think of it this way: An ice-cream parlor makes its own flavors and sells other companies’ flavors, too. Its storefront window carries a large sign advertising its homemade wares. In smaller letters, the sign mentions that Haagen-Dazs and Breyers are available, too. Should Congress force the ice-cream store owners to advertise Haagen-Dazs and Breyers as prominently as their own products?

That’s essentially what this bill would force a handful of the largest tech companies to do. For instance, Google users searching the name of a local business now get, in their search results, the option of clicking a Google-built map. But under the bill’s requirements, the search results would likely have to exclude the Google map. Similarly, Amazon would likely be prevented from promoting its less-expensive generic goods against the biggest brand names.

Lots of businesses offer configurations of products and services in ways that are attractive to customers, often for both price and convenience. Doing this can allow companies to enter — and potentially disrupt — new markets, to the great advantage of customers.

Yet the bill views such standard business conduct as harmful. It would require covered companies — essentially Amazon, Apple, Google, Facebook and TikTok — to prove that any new instance of preferencing would “maintain or enhance the core functionality” of their business. Failure to comply could lead to fines of up to 15% of a company’s total U.S. revenue over the offending period.

Now, I think there's a very legitimate argument that if a dominant company is using its dominant position to preference something in a manner that harms competition and the end user experience, then that can be problematic, and existing antitrust law can take care of that. But this bill seems to assume that any effort to offer your own services is somehow de facto against the law.

And whether or not that harms these companies is besides the point: it will absolutely harm the users and customers of these companies, and why should that be enabled by US competition policy? The goal seems to be "if we force these companies to be worse, maybe it will drive people to competitors," which is a really bizarre way of pushing competition. We should drive competition by encouraging great innovation, not limiting how companies can innovate.

Even if you don't think that the "consumer welfare" standard makes sense for antitrust, I hope most people can at least agree that any such policy should never deliberately be making consumers worse off.

Filed Under: amy klobuchar, antitrust, competition, consumer welfare, innovation, michael bloomberg

Misguided Crusade For Tech Antitrust Will Exacerbate Inequality

from the that's-not-how-this-should-work dept

After a week of congressional hearings following a 16-month, bipartisan investigation into competition in the digital marketplace, it’s clear Republican and Democratic congresspersons alike are skeptical of Big Tech. That’s fine—healthy, even. But that doesn’t make rewriting antitrust legislation to allow Congress to pick winners and losers in the marketplace a good idea.

A couple weeks ago, representatives on the House Committee on the Judiciary reconvened to discuss potential antitrust legislation and enforcement. Bipartisanship is usually a welcomed departure from petty politics, but last week, it may have established something far worse: consensus that antitrust laws should be rewritten to address Big Tech’s bigness. Without exception, all committee members expressed their desire to reign in the “gatekeepers,” but few considered the impact of their proposed solutions.

During the hearing, congressmen levelled bold accusations against the so-called monopolies, from anticompetitive business practices to outright bullying. The most ironic of these criticisms came from Democratic Representative Pramila Jayapal, who rightly highlighted a “nexus between inequality and antitrust law,” but erroneously attributed it to Big Tech. If limited access, higher prices, and worsening consumer experience afflict the digital marketplace, the culprit will be the committee’s antitrust actions — not technology companies.

Representative Jayapal and her ilk are pursuing antitrust reform because of their growing disdain for large technology platforms. Amazon, Apple, Google, and Facebook are too big and too powerful — that’s certainly arguable. These companies are far from perfect, but the application of antitrust law necessitates more than dissatisfaction with market dominance. Antitrust is built on the “consumer welfare standard,” which evaluates business conduct in the context of consumer harm. This standard has become controversial in recent years, but nevertheless has prevailed since 1979. It remains vitally important to ensure that consumers remain the focus of antitrust action, while simultaneously discouraging arbitrary and heavy-handed government interference in the market.

Though the committee and its witnesses highlighted many instances in which small businesses are worse off than their larger competitors, they failed to clearly identify consumer harm. Americans should not be swayed by any government offer to make some businesses more successful than others. Success should be determined by consumers and the market, not legislators on Capitol Hill.

Consumer harm is, however, a likely consequence of antitrust action. Many committee members and their witnesses expressed support for data portability mandates, which, similar to Europe’s GDPR and California’s CCPA, would require technology companies to provide users with access, copying, and transferring data capabilities. Data portability allows users to take their information from one platform and transfer it to a competing service, such as Twitter to Parler. This proposal received the most support because it’s innocuous. Unlike a telephone number, which still has value when transferred to another carrier, user data may not provide the same consumer power. For instance, if a consumer exports their data about buying preferences from Amazon, there isn’t much they can do with it. Another e-commerce platform may not be able to make use of the information, especially if it does not sell comparable merchandise. Most of these business silos will still exist, even if the digital barrier is broken down. As a result, data portability requirements will not be enough to reign in Big Tech.

Their next solution, structural separation, would pack a bigger punch, but would simultaneously exacerbate inequality. These restrictions would prohibit large tech companies from operating in adjacent lines of business and force divestment where these lines are crossed. For example, antitrust regulators are entertaining the possibility of separating Amazon’s inventory storage and delivery business from the larger corporation. This would result in higher, inaccessible prices in a time when contact-free delivery serves vulnerable populations. Breaking up Big Tech would have significant consequences for consumers, especially those who are cost-conscious.

These disastrous, unintended consequences have happened before. In 2012, to allay concerns about anti-competitive behavior from book publishers, Amazon was forced to raise the prices of its Kindle e-books. This had a real and burdensome effect, especially on young consumers. College students who struggle today to pay hundreds of dollars for their textbooks each semester were paying as little as $9.99 per book prior to antitrust enforcement..

Line of business restrictions would also hamper human rights. Suppose Facebook is mandated by antitrust legislation to unwind its recent acquisitions. Facebook would need to sell WhatsApp, the encrypted messaging app used by human rights advocates and victims of totalitarian regimes. Since WhatsApp does not generate meaningful revenue, a sell-off would mean that it could no longer benefit from Facebook’s scale and may necessitate functional changes. This could manifest in the form of a paid subscription model, which would be less accessible, or the introduction of advertisements, which would compromise security for those who desperately need it.

Antitrust will not create a fairer digital marketplace, but congressmen are still intent on using it to take down Big Tech. They’d like Americans to focus on gatekeeper power, but consumer welfare and equality are the real values on the line, and not in the way congressmen describe.

Rachel Chiu is a Young Voices contributor who writes about technology and employment policy. Her writing has been published in USA Today, The American Conservative, and elsewhere. Follow her on Twitter: @rachelhchiu.

Filed Under: antitrust, competition, consumer welfare

In Departing Statement, FCC Boss Ajit Pai Pretends He 'Served The People'

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

Ajit Pai's tenure wasn't devoid of value. He arguably oversaw some decent moves that will bring more spectrum to market (albeit not without some caveats and casualties), and he implemented the nation's first suicide hotline (988). But by and large it's pretty hard to not see Pai's tenure as a giant middle finger to consumer welfare, and a four year, sustained ass kissing for the nation's biggest telecom monopolies.

In his departing statement, of course, Pai gushes about what an honor it was to serve the "American people":

"Serving the American people as Chairman of the FCC has been the greatest honor of my professional life. Over the past four years, we have delivered results for the American people, from narrowing the digital divide to advancing American leadership in 5G, from protecting consumers and national security to keeping Americans connected during the pandemic, from modernizing our media rules to making the agency more transparent and nimble. It has been a privilege to lead the agency over its most productive period in recent history."

That is, if you've paid even the slightest bit of attention to Pai's tenure, a paragraph of delusion. US 5G is a disappointing mess. "Modernized" media rules is a misnomer for "gutting decades of media consolidation rules with bipartisan support." Pai's purported adoration of the American public is the biggest lie of all, given he spent most of his tenure either ignoring them or making protecting them far more difficult. Often with a total disregard for factual data, or the will of the actual public.

The shining example of this was Pai's net neutrality repeal, which not only killed net neutrality rules, but the agency's ability to hold telecom giants accountable for much of anything. The repeal took the consumer protection authority of an agency crafted to police telecom, and shoveled it to the FTC -- which lacks the resources or authority to do the job (which is precisely why the industry wanted this to happen). As an additional gift to monopolies, Pai's repeal even tried to ban states from being able to protect consumers as well, something only thwarted because the courts told him his agency lacked the authority.

To force this hugely unpopular proposal through, Pai lied repeatedly about net neutrality's impact, claiming the modest rules (by international standards) had demolished telecom sector investment. Once repealed, Pai lied just as often about how the repeal had resulted in a huge spike in investment (it hadn't). When reporters contacted Pai's FCC to fact check the agency's dodgy numbers, they were literally directed to telecom lobbyists who'd provided the false data. Reporters who asked tough questions were effectively blocklisted during Pai's tenure.

Pai's office also blocked law enforcement inquiries into the broadband industry's (and Trumpland's) use of fake and dead people to provide bogus public support for unpopular policies. And when genuine, pissed off, John Oliver viewers wrote to the FCC to complain, swamping the FCC website, FOIA data revealed that Pai's office repeatedly lied and claimed it had been the victim of a DDOS attack. The entire affair culminated in Pai dancing with a pizzagate conspiracy theorist in a video the internet would like to forget.

As such Pai's tenure wasn't just pockmarked by bad data and bad policy, it was, as is custom for the Trump era, a shining example of trolling as a government policy, where policymakers take an active enjoyment in being insufferable and hostile. Hostile to the press. Hostile to the public. Hostile to experts and expert data, especially if those experts question entrenched industry ideology or rampant US monopolization.

There's a laundry list of other examples of Pai's disdain for the public welfare and market health, including Pai's efforts to utterly dismantle decades-old (and bipartisan) media consolidation rules just so disinformation giants like Sinclair Broadcasting could get ever larger. He flubbed hurricane disaster responses, mindlessly rubber stamped giant, job and competition killing mergers, undermined his own agency's efforts to combat prison telco monopoly price gouging, refused to seriously tackle location data abuse scandals, turned a blind eye while Verizon throttled firefighters during a crisis, and so much more.

So if by "served the American public" you mean ignored them completely and actively made it harder to protect them, sure. Pai now stumbles off to work either in telecom, or at some telecom-funded think tank where he'll spend the next few decades coasting on an illusory reputation as a "free market champion" and noble destroyer of "burdensome regulation," hopeful folks forget or ignore that his primary agenda was, fairly uniformly, to act as an apologist for, and denier of, American monopolization and the laundry list of obvious problems it creates.

Filed Under: ajit pai, broadband, competition, consumer welfare, fcc, net neutrality

AT&T Jacks Up TV Prices Post Merger After Repeatedly Claiming That Wouldn't Happen

from the price-hikes-for-everyone dept

You may be shocked to learn this, but nearly all of the promises AT&T made in the lead up to its $86 billion merger with Time Warner wound up not being true.

The company's promise that the deal wouldn't result in price hikes for consumers? False. The company's promise the deal wouldn't result in higher prices for competitors needing access to essential AT&T content like HBO? False. AT&T's promise they wouldn't hide Time Warner content behind exclusivity paywalls? False. The idea that the merger would somehow create more jobs at the company? False.

This was all laid out to US District Judge Richard Leon during the trial (twice), who ignored all of the warnings and rubber stamped the deal without a single condition. At absolutely no point did Leon in his absurd ruling recognize the threat of AT&T owning both a monopoly over broadband and a massive media empire in charge of content needed by competitors. And when lawyers and economists warned him that kind of power would only lead to higher rates, he almost happily ignored them.

Fast forward a year or so and AT&T is already imposing another significant hike on its TV customers (both traditional and streaming). New and existing users are seeing price hikes upwards of $10 to $15 per month. It's the second price hike in less than a year. And despite being the broadcaster in this equation, AT&T blamed the hikes on broadcasters:

"In the email to customers that one customer shared with Ars, AT&T blamed the price increase on rising programming costs. Of course, AT&T itself is partly responsible for rising programming costs because it now owns Time Warner. AT&T told a federal judge last year that its acquisition of Time Warner would "enable the merged company to reduce prices," but it's been the opposite in reality."

Funny, that. One of the reason for the hikes is AT&T needs to pay down debt from its 2015 acquisition of DirecTV ($67 billion) and the 2018 acquisition of Time Warner ($86 billion). AT&T thought it could simply just merge its way to video advertising market dominance. But after hiking prices to recoup this debt, consumers are fleeing AT&T's services at an alarming rate. While AT&T is an incredible political tactician, it's just another example of how the government-pampered monopoly can't help but do a face plant any time bare-knuckled competition is required.

The saga again points to a US regulatory and legal system that has effectively given up on consumer protection or enforcing antitrust law, and the end result couldn't be more obvious (or so you'd think).

Filed Under: competition, consumer welfare, doj, fcc, fees, merger, prices, promises, tv
Companies: at&t

Charter Spectrum Once Again 'Competes' By... Raising Prices

from the nickel-and-dime dept

When Charter Communications (Spectrum) proposed merging with Time Warner Cable and Bright House Networks in 2016, the company repeatedly promised that the amazing "synergies" would lower rates, increase competition, boost employment, and improve the company's services. Of course like countless telecom megamergers before it, that never actually happened. Instead, the company quickly set about raising rates to manage the huge debt load. And its service has been so aggressively terrible, the company almost got kicked out of New York State, something I've never seen in 20 years of covering telecom.

Fast forward to 2019, and despite surging competition from streaming video providers, Charter is once again raising rates on numerous services. Broadband and TV services will all be seeing major price increases next month, as will the company's hardware rental surcharges and the universe of misleading fees the industry uses to covertly jack up the advertised rate post sale. That includes the company's "broadcast TV fee," which is really just a small part of the cost of programming hidden below the line in the form of a (now) $13.50 monthly additional charge:

"With this price change, you will now pay $13.50 a month for broadcast TV fees, which is up from $11.99 a month. This will add up to $162 a year to your bill just watch free over-the-air TV you could get with an antenna."

Note: that fee had already seen a $2 bump early this year.

That Charter's response to increased streaming video competition and record cord cutting is to raise rates tells you plenty about both the level of competition it sees in broadband, and the regulatory oversight of the sector. These hidden fees in particular are something the FCC (under both parties) has been happy to turn a blind eye to. Much in the same way both parties have rubber stamped a long line of telecom and media megamergers that, time and time again, have only really netted one thing: greater sector consolidation, higher rates, fewer jobs, and worse service.

Giants like Comcast and Charter have one ace in the hole when it comes to the streaming video wars to come. They are enjoying growing monopolies over broadband access thanks to the slow, steady implosion of many US telcos. That limited competition has let Comcast respond to cord cutting and streaming by imposing arbitrary and punitive usage caps and overage fees that are incurred when its broadband users use a competitor's services (say Netflix) but not their own TV offerings. This lets them simultaneously cash in on -- and hinder -- streaming competitors.

Charter's banned from doing this due to a few flimsy conditions affixed to its 2016 merger, but those conditions expire in just a few years, meaning you can expect an even fatter broadband bill over the horizon. The FCC having just effectively neutered its oversight authority over telecom at telecom lobbyist behest certainly isn't likely to help, nor is the death of FCC privacy and net neutrality consumer protections.

Filed Under: competition, consolidation, consumer welfare, mergers, monopoly, prices
Companies: charter communications, spectrum

Judge In AT&T Merger Ruling Had Zero Understanding Of The Markets AT&T Now Dominates

from the net-neutraliwha? dept

So, we already discussed how the Judge that let the AT&T merger proceed showed a comically narrow reading of the media and telecom markets when he approved AT&T's $86 billion Time Warner merger without a single condition. At no point in his 172-page ruling (pdf) did U.S. District Court Judge Richard Leon even utter the phrase "net neutrality," showing a complete failure to understand how AT&T intends to use regulatory capture, vertical media integration (ownership of must-have content like HBO) and its stranglehold over broadband markets in synergistically anti-competitive ways.

Leon focused almost exclusively on bickering between AT&T and DOJ-hired economists over whether the merger would result in higher rates for consumers (which, if you've watched AT&T do business should be a foregone conclusion). But because U.S. antitrust law is already ill-equipped to help police these kinds of vertical integrations, DOJ economists were locked into very specific confines of economic theory, even if it should be obvious to everybody and their uncle that AT&T will use its ownership of CNN, HBO, and other media properties to jack up licensing costs for streaming competitors.

Of course higher costs for licensing (which in turn means higher costs for consumers) is just one way AT&T intends to leverage its greater scale anti-competitively. It also couldn't be more clear that with net neutrality rules out of the way, AT&T has an absolute arsenal of creatively anti-competitive tools at their disposal, whether that means hijinks at interconnection points (something else Leon likely has never heard of), to the use of usage caps to "zero rate" AT&T's own content, while still penalizing competitors like Netflix.

Amusingly, even many of the Wall Street analysts that have routinely cheered on this kind of behavior were quick to point out how Leon appears entirely oblivious to these additional layers of potential pitfalls. For example Wall Street analyst Craig Moffett, who once heralded broadband usage caps as the pinnacle of modern technological achievement, was quick to point out in a research note to clients that Leon had completely missed the forest for the trees:

"The DOJ focused entirely on the risks that would arise from joint ownership of DirecTV and Turner’s cable networks (recall that they even proposed divestiture of one or the other as a preemptive remedy)," said Moffett. "And, therefore, so did Judge [Richard] Leon. Neither ever even raised the issue of whether there might be a more material competitive harm arising from the combination of Turner programming and an ISP."

"The theoretical harm here is obvious," he says. "A wireless or wired ISP, now unfettered by net neutrality regulations, could, in theory, advantage its own content over the content of others, either by zero rating (that is, not counting owned-and-operated content against monthly data caps), by prioritizing (the old fast lanes/slow lanes chestnut), or even by adopting a regime of content exclusivity."

Many analysts believe Leon's myopic ruling set precedent that will result in the DOJ being less likely to police future, major deals in this space, whether it's T-Mobile's competition and job eroding merger with Sprint, or Comcast's latest $65 billion effort to acquire Fox. This slow but steady consolidation in both the media and telecom space will, slowly but surely, mean less overall competition in broadband, fewer diverse options in terms of local reporting, and higher rates for everybody in the chain.

ISPs (and their ocean of dollar per hollar policy folks) have been immensely successful in claiming that ISP oversight must be stripped away if ISPs are to compete on a "level playing field" with Silicon Valley in the ad and streaming wars to come. But as some were quick to note, this intentionally ignores ISPs hold a natural monopoly over the broadband last mile, making the regulatory approach to dealing with ISPs notably different than companies like Facebook (which you can, with a few minor exceptions, choose not to use):

"But neither Facebook nor Google owns the ultimate distribution layer of the consumer connection to the internet. They aren’t the world’s largest telecom company. Neither is Netflix or Amazon or any of the other companies AT&T and Time Warner are afraid of. (Yes, I know Google owns Google Fiber, but that has been more failure than success.)

Tech companies might have vertically integrated the creation and production of content with consumer-facing apps and services, but they all depend on internet connections to reach their audiences. And those connections are increasingly wireless. AT&T and Time Warner aren’t trying to catch up to Netflix by merging; they’re trying to step ahead of them in line by marrying Time Warner’s content to AT&T’s network."

Again, this idea that natural broadband monopolies require different and tougher rules because they're different is something ISPs like to play dumb about. But again, the idea that the domination of media and broadband in concert could be a real problem (especially for startups and small businesses) isn't something Leon bothers to seriously think about at any point in his 172 page ruling. Despite the fact that the obvious harm caused by letting a handful of companies dominate the pipes to the home and the content running over it is becoming painfully apparent in the Comcast era.

As companies like AT&T, Comcast and Verizon beef up with media acquisitions in the hopes of challenging Google and Facebook in the media space, the rules governing the potential downsides of these deals are being routinely stripped away. Whether that's the death of net neutrality (which also gutted the lion's share of FCC authority over ISPs) or the steady assault on decades-old media consolidation rules, for too many are dumbly looking the other direction as these companies try and build a decidedly dystopian broadband and media future.

Filed Under: antitrust, competition, consumer welfare, doj, merger, net neutrality, richard leon, zero rating
Companies: at&t