The Department of Justice sued this week to stop the proposed AT&T-T-Mobile merger. Associate Director of Technology Studies Ryan Radia thinks this is a mistake. The evidence that the merger would make the wireless market less competitive is unconvincing. Nobody knows if the merger will succeed or not. Either way, consumer harm is unlikely.
DoJ
Today, the Department of Justice sued to stop the proposed AT&T-T-Mobile merger. They claim to know in advance how the merger will affect the mobile market for years to come. It’s an example of F.A. Hayek’s fatal conceit. Of course, most people haven’t read Hayek. So over in the Daily Caller, I use a better known thinker to make the same point:
The philosopher Yogi Berra once said that “It’s tough to make predictions, especially about the future.” Let’s apply his lesson to the proposed $39 billion AT&T-T-Mobile merger…
Competitors are also surprisingly confident in their ability to predict the future. A Sprint spokeswoman said that “Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision … Today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.”
This translates roughly to “We think the merger would make the market more competitive. We were scared that we’d have to work harder to innovate and cut costs to keep our customers happy. Whew.”
Most mergers fail. Nobody knows if a merged AT&T and T-Mobile would offer a better, cheaper product line. The only way to find out is trial and, often, error. The Justice Department’s astounding claim that it knows the merger’s effects in advance is either proof of its superior enlightenment, or else the height of hubris. I’m guessing the latter.
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.
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 host Richard Morrison welcomes back returning guest co-host Jeremy Lott and distinguished special guest David Mark of the Politico for Episode 55 of the LibertyWeek podcast. We start with reports of unrest over health care in the provinces, the U.S. Postal Service’s death spiral and the globe trotting ways of members of Congress. We continue with some sadly familiar antitrust murmurs regarding Apple and Google, a classic union corruption scandal out of New York City and some inspiring and heroic Paralympic News.
The long-awaited collaboration of Microsoft and Yahoo on search has the tech business community abuzz. CEI analysts Wayne Crews and Ryan Young made their original statements here. Media outlets immediately took note, as seen in this Investor’s Business Daily story (posted, fitting enough, at Yahoo Finance) from yesterday:
Ryan Young, a fellow of regulatory studies at the Competitive Enterprise Institute, says the deal should be approved.
“It will make Google stay on its toes,” he said. “Bing and Yahoo should improve from the proposed partnership. This is how a competitive, contestable market works.”
We also got some love from Erika Morphy at E-commerce Times in her story today:
The Obama Administration is taking a harder line on antitrust issues than in the past, which could prove to be a wild card, noted Ryan Radia, information policy analyst with the Competitive Enterprise Institute, although he’s also convinced that the deal will go through.
“Antitrust administrators are looking to make headlines now,” Radia told the E-Commerce Times, pointing to investigations he dubbed “dubious,” such as the probe into the Google book deal or the inquiry into Silicon Valley employment practices.
“The latest line of attack is that lack of regulation and enforcement is behind the recession,” he said.
[...]
Microsoft has been battling EU antitrust charges for years, CEI’s Radia noted, with the most recent involving accusations that it violated EU antitrust law by bundling Internet Explorer with its Windows operating system.
“It is going to be more of a problem over there than with U.S. regulatory authorities,” he predicted.
National Journal’s Tech Daily Dose also noted our advice to regulators to keep their snouts out of the deal:
“Our subcommittee is concerned about competition issues in these markets because of the potentially far-reaching consequences for consumers and advertisers, and our concern about dampening the innovation we have come to expect from a competitive high-tech industry,” [Senate Judiciary Antitrust Subcommittee Chairman Herb] Kohl said in a statement. Senate Judiciary Antitrust Subcommittee ranking member Orrin Hatch, R-Utah, said he did not see “any immediate yellow flags” from an antitrust front. Competitive Enterprise Institute argued regulators “can best serve consumer interests by leaving well enough alone.”
Who knows where we’ll pop up next!
Statements of Ryan Young and Wayne Crews
Washington, D.C., July 29, 2009 – Today, Microsoft and Yahoo announced a ten-year partnership of their search businesses in order to better compete against Google. The Department of Justice, citing antitrust concerns, is likely to investigate the deal before allowing it to go through. Competitive Enterprise Institute technology policy experts Wayne Crews and Ryan Young argue that regulators can best serve consumer interests by leaving well enough alone.
Ryan Young, Fellow in Regulatory Studies:
“What is there to investigate? Microsoft and Yahoo are trying to outcompete Google. To succeed, they will need to put together the best search engine they can. The firms believe their announced partnership will help them achieve that goal. They should be allowed to try – their own money is at stake if they fail. Either way, Internet users stand to benefit. Bing and Yahoo Search should improve from the proposed partnership, which will also force Google to make its own search engine better, lest it be left behind. This is how a competitive, contestable market works. The goal of antitrust policy is to benefit consumer welfare, but there is nothing regulators can do to make an already fiercely competitive market even more so.”
Wayne Crews, Vice President for Policy and Director of Technology Studies:
“This administration is already suspicious of allegedly ‘dominant’ firms in the high tech sector – but consumers are better off when regulators let markets evolve naturally, rather than guiding them from above. The Microsoft-Yahoo alliance has the potential to offer great value to consumers. The dangers of arbitrarily blocking such voluntary business arrangements, or needlessly delaying them, are severe. Regulatory intervention in the high-tech sector thwarts the natural evolution of the market. Worse, it distorts the response of competitors. Antitrust investigations steer the market in unnatural directions, creating instabilities in entire industry sectors.
“Consumers have more to fear from government bureaucracies that have the power to stop progress cold than they do from free enterprise looking to create the next big thing. Should the Microsoft-Yahoo partnership not pan out, rivals, partners, consumers, investors, advertisers, and even global competitors are perfectly capable of dealing with any challenges to competition. Consumers stand to lose if Washington gets involved.”
Below see CEI President Fred Smith’s comments on Jonathan Hillel’s piece in the San Jose Mercury News:
Hillel’s piece raises the very interesting question of whether the use of copyrighted materials must forever remain out of reach of most people. The vast majority of creative works disappear from public view within a very short time of their release. Few books or records are best sellers, many magazines (especially specialized magazines and journals) go out of existence in a decade or so. Yet, the information and enjoyment value of these works might enrich millions of people in our new e-world. Currently, the length of copyright and the reluctance of any one to devote the resources to bring them back into view mean they’ve been taken from the world’s “library” and “record/CD/DVD” shelves.
One way to think through this topic is to consider how real (as opposed to intellectual) property that has been “abandoned” is treated. Land, for example, remains in the hands of the original owners unless (as is very often the case) no one has paid the property taxes for a number of years (in political jurisdictions without property taxes – there must be some – I have no idea what is done) and then these lands are sold to compensate the jurisdictions for the unpaid taxes. In another case, individuals may open a financial account in some institutions and then for some reason (death, forgetfulness, small balance) simply abandon it. Since some costs are incurred in maintaining such accounts, some private institutions will simply close the account and absorb whatever assets are in that account (airline loyalty programs, for example) although generally an effort is made to warn the user that such action is imminent. Banks, being regulated and subsidized, take various approaches to what, in that context, are called “dormant accounts.” After a period of inactivity, the banks post notices and, if no response is received, any funds (less management fees) are generally transferred to the state in which that account exists. (Depending on state law, one may be able to recover the funds even after this transfer if adequate documentation can be provided.) In some jurisdictions, however, the financial institution simply retains the funds and uses them as part of their reserves, while still honoring the obligation to repatriate the funds (perhaps with interest) if a qualified owner eventually turns up.
Whether the shift of “orphan” copyrights to the state or a creative party and, in either case, what obligations should exist if the owner does appear after some period of time, is an interesting question. The Google “answer” seems both equitable and fair.
In yesterday’s San Jose Mercury News, CEI Policy Fellow Jonathan Hillel talks about the Justice Department’s antitrust investigation into the Google Search Settlement. Read it here.
Afraid of Google taking over the world? The Justice Department seems to be. It recently confirmed its antitrust investigation into the Google Book Search Settlement, citing “public comments expressing concern” as impetus for the inquiry. European Union officials have also started sniffing around.
These concerns are misguided, and outmoded antitrust regulation will stunt the growth of the emerging book search market.
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