"I think you are going to see a repeat of Microsoft."and continues,
Christine Varney's blunt assessment sent a buzz through the audience at the National Press Club in Washington, DC. Varney, a partner at Hogan & Hartson and one of the country's foremost experts in online law, was speaking at the ninth annual conference of the American Antitrust Institute, a gathering of top monopoly attorneys and economists. Most of the day was filled with dry presentations like "Verticality Regains Relevance" and "The Future of Private Enforcement." But Varney, tall and professorial, did not hide her message behind legalese or euphemism. The technology industry, she said, was coming under the sway of a dominant behemoth, one that had the potential to stifle innovation and squash its competitors. The last time the government saw a threat like this—Microsoft in the 1990s—it launched an aggressive antitrust case. But by the time of this conference, mid-June 2008, a new offender had emerged. "For me, Microsoft is so last century," Varney said. "They are not the problem. I think we are going to continually see a problem, potentially, with Google."
But it is safe to assume that plenty of Googlers were jumping and screaming six months later when President Obama appointed Varney head of the Justice Department's antitrust division, making her the government's most powerful antimonopoly prosecutor. On May 11, during her first public speech on the job, Varney made it clear that her stance had not changed much since her presentation at the conference: She planned to take a forceful approach to applying the nation's antitrust laws. "In the past, the antitrust division was a leader in its enforcement efforts in technology industries, and I believe we will take this mantle again," she said. She did not mention Google by name, but there was little doubt to whom she was referring.Given the payoff that the public got from the IBM and Microsoft cases, basically zero, I can see the US taxpayer paying for yet another very long, very expensive legal battle with zero returns to their (forced) investment.
An obvious problem for antitrust in high tech industries is that the environment changes so rapidly. Some firm who looks strong and invincible today won't necessarily be strong tomorrow. The market changes so quickly that antitrust enforcers just can't keep up. Also there is pretty of competition out there. If you become dissatisfied with Google, it's very easy to move to a competitor and there are plenty of rivals are ready to snap up Google's user base at the first sign of any weakness.
It again looks like being successful is the real crime.
3 comments:
Here's a challenge.
Can you find an example of anti-trust regulation or lawsuit that produced an unambiguous increase in total welfare?
Which is to say that it did more than shift surplus away from producers to consumers, but actually solved a competition problem from which innovation and price cuts followed, that would otherwise have seen stifled competition continue.
Perhaps the question is unfair, because it is so hard to measure welfare in a dynamic market, and because the counterfactual is never observed. But I also think that a) genuine, large and persistent failures of competition are hard to find, leaving little room for regulators to add value, and b) regulators seems to focus on the thing that matters little in dynamic markets: price. But when technology is changing the source of welfare improvements is largely if not overwhelmingly in improvements in quality and functionality. getting 5% off your mobile service is small beer compared to the value of having a mobile.
There is no question at all in my mind that competition regulators destroy value - but is it possible to find one-off examples where plainly they did add value? The 1984 AT&T breakup is a somewhat obvious example - although I am doubtful because a) it was a vertical breakup b) it coincided with other deregulation and technology improvements that occurred anyway. Jerry Hausman claims mobile phone technology was viable in the 1970s and but for stifling regulation would have been introduced then. Missing markets like that very quickly overwhelm any static benefits regulators might like to think they bring.
"Can you find an example of anti-trust regulation or lawsuit that produced an unambiguous increase in total welfare?"
No. End of story.
Google like Microsoft, then can we expect a big court case, lots of publicity, a high profile decision, then, following very large sums of money being transferred under the table to the "right" politicians, absolutely no attempts being made to ever enforce those decisions.
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