CEI Vice President for Policy Wayne Crews talks about why antitrust actually hurts competition, and offers some ideas for regulatory reform based on his recent articles for BigGovernment.com and The Washington Times, and on his annual Ten Thousand Commandments report.
antitrust
Less than fifteen years ago, Dell computers were the hot desktop brand. In a rapidly growing market, Dell developed a unique business model which helped to price out competitors. By 2004, Dell had become the market leader in desktop computer sales. Business school case studies focused on Dell’s extraordinary success.
With this prominence, Dell found itself implicated in antitrust lawsuits brought by the FTC against Dell directly (1996), against Microsoft (1998), and most recently against Intel (2009).
Yet these antitrust lawsuits had little effect on the dynamic personal computer market. The FTC ‘s suits had the pretense of promoting competition – a measure that was unnecessary in an industry where competition is already fierce. Consider the graph above tracking the market share of various desktop brands since 1997. Note that even the industry leaders only comprise about 50% of the total market.
Dell’s decline started when it failed to perpetuate its initial successes and respond to the changing market. As the New York Times wrote yesterday, Dell is currently embroiled in a lawsuit against Advanced Internet Technologies, which alleges that Dell knowingly sold defective computers in the mid-2000s.
This should serve as a reminder to the FTC. Before jumping to accuse businesses of anti-competitive conduct, they should remember to look at the state of the actual, thriving, competition. Corporations that seem abundantly successful today often self-destruct or fall prey to unanticipated market forces tomorrow. Competitors lie in wait to take advantage of any weakness. From the New York Times:
“Dell, as a company, was the model everyone focused on 10 years ago,” said David B. Yoffie, a professor of international business administration at Harvard. “But when you combine missing a variety of shifts in the industry with management turmoil, it’s hard not to have the shine come off your reputation.”
Before diving into antitrust investigations against Google, Apple, or any other tech company, it would behoove the FTC to remember that important lesson — markets change.
Richard Morrison and Jeremy Lott team up with Marc Scribner, Iain Murray, Alex Nowrasteh and Ryan Radia to bring you Episode 91 of the LibertyWeek podcast. We respond to the President’s anti-anti-government speech, handicap the British elections, examine anger over immigration and chew over the threats to the Google-AdMob deal.
George Stigler won a Nobel Prize for his work on the economics of regulation. He wrote extensively about regulatory capture, and in fact coined the term. He was one of only a few sane souls who stubbornly insisted that regulations be judged by their actual results, not their intended results. Good intentions, however noble, are not enough. Here’s an example of Stigler at his finest:
Regulation and competition are rhetorical friends and deadly enemies: over the doorway of every regulatory agency save two should be carved: “Competition Not Admitted.” The Federal Trade Commission’s doorway should announce , “Competition Admitted in Rear,” and that of the Antitrust Division, “Monopoly Only by Appointment.”
-George Stigler, “Can Regulatory Agencies Protect the Consumer?”, from The Citizen and the State: Essays on Regulation (1975), p. 183.
It’s hardly news that the New Orleans’ Saints are going to the Super Bowl, and their ecstatic fans are busy buying up T-shirts and other paraphernalia emblazoned with the Saints’ rallying cry, “Who Dat.” That slogan is from their widely popular chant: “Who dat say dey gonna beat dem Saints.” But the National Football League claimed it owns the trademark and warned vendors to cease and desist selling non-NFL merchandise that links the Saints and “Who Dat.”
The Saints claim they have been using “Who Dat” since at least 1983, when singer Aaron Neville filmed a video with five Saints players using “When the Saints go marching in” with a “Who Dat” refrain. The modern sports-related history of the phrase is a little murky — some attribute its first use in the 1960s and 1970s as a cheer at Baton Rouge’s Southern University or to St. Augustine High School in New Orleans or Patterson High School in Patterson, LA.
Historically, the phrase was used in an 1898 song by the African-American poet Paul Laurence Dunbar titled “Who dat say chicken in dis crowd,” and the longer chant was used in minstrel shows. There’s also some anecdotal evidence that U.S. pilots in World War II when radio silence was in effect would call out, “Who dat?” and get a response, “Who dat say who dat?” and a follow-up, “Who dat say who dat say who dat?” Interestingly, some Cajuns in Louisiana also claim the phrase and say that’s how they talk — the Cajun Boudreaux-Thibodeaux jokes seem to bear this out.
What is clear is that the phrase has a long history and a long connection to the Saints — and it’s not the team that is selling the memorabilia. It’s independent merchandisers, and the stuff is supposedly flying off the shelves and carts.
How dumb can the greedy NFL be to take on the Saints’ fans and their favorite chant with a dubious claim even while they are lobbying Congress for an antitrust exemption? They seem to have figured out that the wave of negative publicity wouldn’t help their cause and backed down from their original claim that the NFL owns the trademark for the phrase:
” ‘Who Dat’ we do not claim to own by itself,” said Brian McCarthy, a spokesman for the NFL. “It’s when ‘Who Dat’ is used in conjunction with Saints marks that it’s a problem.”
Wayne Crews and I have an article in today’s American Spectator about the antitrust crusade against Intel. Our key points:
-An FTC picking winners and losers is not capitalism. It is crony capitalism.
-Chips in “Wintel” desktop computers increasingly constitute just one subset of a vast semiconductor market. Only a small fraction of the chips in non-PC devices are Intel’s — and these devices are where the future lies.
-Regulators’ charges against Intel have changed over the years, but their verdict always remains the same: guilty. Suspicious.
-We’d be better off prosecuting the DOJ and the FTC for colluding against free enterprise.
Your hosts Richard Morrison and Jeremy Lott welcome guests Gregory Conko and Garrett Peck to Episode 71 of the LibertyWeek podcast. We start with an update on the latest in the Climate-Gate scandal and the impact of nanny state policies in New York City, then move on to Monsanto’s antitrust worries and finish with an interview with Garrett Peck, the author of The Prohibition Hangover: Alcohol in America from Demon Rum to Cult Cabernet (buy your copy here).
Over at the Washington Examiner‘s Opinion Zone, Wayne Crews and I explain why New York Attorney General Andrew Cuomo’s antitrust lawsuit against Intel is a mistake.
Calling Intel’s business practices “bribery” and “coercion” is little more than argument by assertion. Rebates and exclusivity deals are normal competitive behavior. Not only is Intel facing increasing competition in its home turf, that small segment is hardly the extent of the relevant competitive market. Intel faces an uncertain future as consumer tastes shift to smaller products powered by non-Intel chips. Cuomo’s antitrust lawsuit does not stand up to scrutiny. It deserves to be dropped.
Antitrust policies thwart the competitive process whenever and wherever they are applied.
Intel and AMD have announced a settlement in their 4-year legal antitrust battle. As per the agreement, Intel will pay AMD $1.25 billion, an amount that’s likely far less than what they would have owed had Intel lost it’s case in court. Intel claims that it will not change its business practices because they were never illegal in the first place.
Hopefully, this agreement between private companies will send a signal to the Federal Trade Commission, New York Attorney General Andrew Cuomo, and European Union regulators. Each has targeted Intel in the past, with the EU’s case against the company resulting in a fine of $1.5 billion. If two companies can agree that no unfair business practices are going on, it’s difficult to see where that leaves a federal case against them, especially considering that consumers don’t appear to have been negatively affected by the increasingly fast (and ever-cheaper) processors that have been coming to market in the past decade.
While it remains unclear what impact this agreement will have on Intel’s other legal troubles with both the federal government and European Union regulators, consumers can take heart knowing that this truce has the effect of freeing up vast resources for both companies that would have otherwise been wrapped up in legal costs. Intel and AMD can quit taking jabs at each other and get back to building newer, faster, cheaper processors.
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