Category Archives: Antitrust

In the News: DC’s Amazon Antitrust Case

Canada’s Les Affaires quotes me, in French, on the DC attorney general’s Amazon antitrust case that he filed yesterday Note that I am not sophisticated enough to speak French, and can barely read it well enough to get the gist of it. This is translated from an earlier statement:

Cela nuirait aussi aux PME, qui sont déjà suffisamment en difficulté en ce moment», a abondé Ryan Young, un analyste du centre de réflexion Competitive Enterprise Institute. 

Il estime en outre qu’Amazon fait déjà face à de la compétition de la part de Walmart, qui a sa propre plateforme de e-commerce ouverte aux tiers, ainsi que d’autres sites comme Ebay, Etsy ou Shopify.

Microsoft to Retire Internet Explorer: Lessons for Today’s Antitrust Cases

Microsoft just announced it will retire its Internet Explorer browser next year. This is the same program that was at the heart of an antitrust lawsuit against Microsoft in the late 1990s. There are two lessons here for today’s calls for expanding antitrust enforcement. One is that making something the default option does not guarantee that people will use it. The second is that the difference between a 90 percent market share and a laughing stock can be as small as a few years.

Internet Explorer was bundled into Microsoft’s Windows operating system, and Microsoft would not allow computer manufacturers to unbundle it. It was also set as Windows’ default browser in every new machine. It had a 90 percent market share in 2001, when the case was still active. The antitrust case argued that Microsoft’s inclusion of Internet Explorer with Windows was illegal tying—requiring consumers to buy two products together, even if they only want one of them.

The case more or less ended in a draw. The initial decision to break the company up was overturned on appeal. In the final settlement, Microsoft made some minor concessions to the government and paid about $3 billion to competitors who had sued it in separate private antitrust lawsuits.

Just a few years later, Internet Explorer’s 90 percent market share cratered. It turns out that making something the default option is not enough to make people actually use it. A succession of superior browsers, including Mozilla’s Firefox and Google Chrome, have taken turns as the leading browsers. Chrome is the current market leader with about a 65 percent market share.

As a response to the competition, Microsoft launched Edge, a new browser, and made it the default Windows browser. Its market share is currently about 3 percent. Internet Explorer is around 1 percent.

Microsoft’s real-world experience puts a damper on today’s antitrust claims that Google, Apple, and Amazon giving preferential treatment to their in-house offerings is an effective anti-competitive strategy. This is because of what I call the dozen keystrokes argument—that’s about how difficult it is to download a different browser, type in a different search engine’s URL, join a new social network, or find a different product in a search.

Internet Explorer’s journey to the pasture is not the only news story poking holes in populist antitrust arguments. AT&T is selling its WarnerMedia division for about half of what it paid for it just three years ago. The deal was nearly blocked, with critics arguing that combining network infrastructure and media content in the same company would devastate competition. Now AT&T is refocusing on networks, while WarnerMedia is attempting to compete with a raft of streaming services, many of which did not exist just a few years ago. Antitrust regulators’ cries of foul will never change, but markets always do. Just ask Microsof and AT&T.

One of Google’s Antitrust Cases Dismissed, for Now

A District judge on Thursday dismissed a private antitrust case against Google brought by a group of advertisers. It does not affect separate cases brought by state attorneys general and the federal Department of Justice.

The dismissal is rooted in the relevant market fallacy. Essentially, the advertisers’ lawyers defined Google’s relevant market too narrowly, which leaves out important details. As the judge writes, “The Court is particularly concerned that Plaintiffs’ market excludes social media display advertising and direct negotiations.”

Essentially, the attorneys argued that Google has a monopoly over Google ads. This is true, in the same way that Ford has a monopoly over Ford-branded cars. But just as car buyers can easily buy a Toyota or a Chevy despite this monopoly, advertisers can easily turn to other options, both online and in print.

The plaintiff’s lawyers until June 14 to revise and resubmit their lawsuit with a more realistic definition of Google’s relevant market.

The other antitrust complaints against Google commit their own versions of the relevant market fallacy, as I’ve noted before:

Google’s relevant market is larger than a traditional search engine page. Every Uber ride involves an Internet search to pair riders and drivers. These searches do not use a Google algorithm, and would not work if their customers’ information was “being concentrated in one company.” Netflix, Hulu, and Spotify searches do not use Google. Nor do dating sites, which compete with each other based on proprietary search algorithms, as do many other popular search-based Internet services.

The relevant market fallacy also applies to allegations of anti-conservative bias against Google. If Google acquires even the reputation of serving unreliable search results, consumers can turn to competing options by simply typing a web address into their browser. And the relevant competitive market, as noted above, is not limited to search engines. News aggregators, consumer review sites, and other relevant content sites are legion, and easy to find, even for relatively uninformed users.

I call this the dozen keystrokes argument, because that’s roughly how difficult it is to type in another website’s address.

It will be months before court dates are set in any of the Google antitrust suits. They are still in the process of deciding relevant market definitions for the purposes of the cases. As we’ve seen, plaintiffs often try to bias antitrust cases in their favor by suggesting unrealistically narrow market definitions. It is good that at least one judge is wise to this semantic trick.

On the Radio: Apple’s EU Antitrust Case

On Friday, I discussed the EU’s new antitrust case against Apple on the Lars Larson show. Audio is here.

EU Antitrust Action Against Apple – Bad for Trade, Bad for Consumers

This press release was originally posted at cei.org.

The EU Commission declared today that “Apple has a monopoly” in the distribution of music streaming apps to owners of Apple devices, the upshot of an antitrust investigation launched last year against the App Store and triggered by a complaint filed by streaming music company Spotify. CEI experts criticized the EU for what will be a poor outcome for consumers, entrepreneurs, and trade.

Ryan Young, CEI trade policy expert

“Antitrust policy can be a form of trade protectionism, similar to tariffs. Europe’s tech industry has long lagged behind America’s, largely due to the EU’s stifling regulatory climate. The EU could boost its tech industry by reforming its own bad policies, such as its corporate subsidies and overly risk-averse regulatory approach. Instead, it is trying to boost Europe-based Spotify by taking U.S.-based Apple to court.

“It is better to build up than to tear down. Europe has plenty of talented innovators and plenty of capital to fund them. The EU would better help consumers and businesses by letting its entrepreneurs innovate, rather than suing foreign competitors.”

Jessica Melugin, CEI technology policy expert

“Apple’s fees are in line with or less than the global industry standard, and Spotify has benefited greatly from the App Store’s distribution network. Spotify chose to offer its product through the App Store and now is crying to regulators in the EU and US for them to intervene and change the rules. Apparently, corporate cronyism is at home on both continents.”

Related analysis: Terrible Tech 2.0: The Most Burdensome, Anti-Consumer Technology Policy Proposals in Washington

In the News: Hawley’s Antitrust Bill

A Fox News writeup of Sen. Josh Hawley’s newest antitrust bill quotes my colleague Jessica Melugin and me:

“[H]is claims that the industry, ‘hasn’t been a success … for the American economy,’ don’t ring true for so many Americans that are employed by or invested in these economic powerhouses, not to mention the millions of consumers who enjoy tech products,” Jessica Melugin, the director of the Competitive Enterprise Institute’s (CEI) Center for Technology and Innovation, said of Hawley’s merger-banning legislation. 

CEI Senior Fellow Ryan Young called Hawley’s broader anti-tech efforts “feel-good populism” that is “just another culture war issue.”

Read the whole thing here.

Hawley Antitrust Plan Would Limit Innovation and Harm Consumers

This news release was originally posted at cei.org.

Senator Josh Hawley (R-MO) today touted a new proposal he calls a “trust busting plan” that calls for a new standard for antitrust intervention to replace the legal principle of consumer harm. While the plan is not accompanied by specific legislation, Competitive Enterprise Institute experts weighed in on the Senator’s proposal.

Director of CEI’s Center for Technology and Innovation Jessica Melugin said:

“Senator Hawley claims that allowing the tech industry to operate in a relatively free market ‘hasn’t been a success for the American consumer,’ but if there’s consumer harm to point to, why does he advocate for abandoning the consumer harm standard in U.S. antitrust law? Perhaps it’s because consumers have enjoyed consistent innovations in products and services from ‘big tech,’ especially while quarantining during the pandemic and often at no monetary cost to them.  Similarly, his claims that the industry, ‘hasn’t been a success…for the American economy,’ don’t ring true for so many Americans that are employed by or invested in these economic powerhouses, not to mention the millions of consumers who enjoy tech products.”

Senior Fellow Ryan Young said:

“One of the most problematic parts of Sen. Hawley’s antitrust plan is its proposed ban of mergers and acquisitions for companies larger than $100 billion in annual revenues. Startups need capital to compete in the big leagues. But financial regulations, especially in the post-Dodd-Frank era, make it difficult for smaller companies to hold IPOs or attract other forms of investment. So, they instead get their capital by being bought out by one of the big tech companies.

“The regulatory situation is so bad that many promising startups are founded with the explicit goal of selling out to a bigger company. If Sen. Hawley wants fewer acquisitions by big companies, he should focus on the root cause of bad financial regulations, rather than the feel-good populism of banning mergers and acquisitions.

“Then again, the feel-good populism is likely the point. Hawley’s proposal is unlikely to become law. For him, antitrust policy is just another culture war issue. He wants to fire up his base and provoke his opponents. In this sense, his antitrust proposal is no different than his similarly unserious proposals to ban infinite scrolling in social media apps and to have the federal government regulate political speech.”

For more information on CEI’s position on antitrust, please visit cei.org/antitrust.

Monopoly Is Not the Same as Big

Ball State University economist Steve Horwitz posted to YouTube an excellent clarification/gentle rant about the difference between having a monopoly and being big. Though aimed at one his undergraduate classes in which many students were making repeated slips, it is a good reminder for just about everyone. This is what good teaching looks like.

The seven-minute video is here. It is even shorter than that if, as I often do, you play the video at 1.5x speed or so.

Why Facebook’s Antitrust Cases Should Be Dropped

Facebook filed today to dismiss antitrust lawsuits against it today by the Federal Trade Commission (FTC) and several state attorneys general. One of the reasons they should be dismissed is that both cases rely on a textbook example of defining a company’s relevant market artificially narrowly in order to make the company look more dominant than it is.

In its Facebook complaint, the FTC argues that Facebook dominates the market for “personal social networking services.” The states’ case uses the same term. They made it up just for this case. Its specialized definition omits competitors such as TikTok and Twitter. It also omits emerging competitors such as Discord and Clubhouse, and more like them that are sprouting up all over the Internet, a point that will only grow more important as the Facebook case proceeds.

Of course Facebook dominates a market definition that intentionally leaves out most of the competition! Arguments this weak have no place in a courtroom. Any of these competitors could take away Facebook’s market share the same way Facebook supplanted MySpace.

Even this is not the full extent of Facebook’s relevant market. Facebook competes for consumers’ attention against other uses of people’s leisure time, such as Netflix, podcasts, and even in-person socializing. As more people get vaccinated, restaurants, sporting events, movie theaters, and other activities will resume competing against Facebook for peoples’ attention.

Facebook also competes in the advertising market. A common test for market power is whether a company can jack up prices while restricting supply. Facebook does not have market power in the advertising market. Digital ad prices went down by half between 2009 and 2019. Over that same period, print ad prices doubled. In fact, the antitrust complaints argue that Facebook executives worried in internal correspondence that Instagram and WhatsApp would drive down ad prices even farther or faster. Due to the evidence they provide in their own complaints, the FTC and the states will have a difficult time arguing that Facebook had the market power to raise ad prices. In soccer, this is called an own-goal.

Apple and Google, for example, are Facebook’s largest competitors in the ad market. They are both in the process of changing their privacy policies to differentiate themselves from Facebook’s approach, in the hope of luring consumers and ad buyers away from Facebook. Meanwhile, other websites and apps, as well as real-life entertainment options, will never stop competing with Facebook for consumer attention.

In a competitive market like this, Facebook does not have the power to control its fate—consumers do. Facebook and its competitors are engaged in an ongoing discovery process to see what appeals to their customers.

The market process resembles a moving picture that is constantly changing and evolving. Antitrust cases are more like still images of a single frame. A decade ago, critics complained that MySpace was a natural monopoly that could drive out all competition. Now people are making similar arguments against one of those competitors, Facebook. A decade from now, Facebook might still be the largest social network company. Or it might not. Either way, it will not be the same product it is today. It must either continue to adapt its privacy, content moderation, and newsfeed algorithms in ways that people like, or it will lose its dominance. If it stays on top, it is because people like its product. Either way, consumers are in charge. To claim otherwise is unrealistic.

Whether it’s in “personal social networking services,” or an arbitrarily narrow definition of the advertising market, Facebook does not have monopoly power. Nor is there proof of consumer harm. One reason Facebook’s user services are free is because users would flee to other free sites if Facebook were to begin charging them.

Facebook is also unable to stop ad prices from declining. With the ad market essentially on a permanent 50 percent off sale compared to when Facebook became big, the company clearly does not have the ability to set a floor on ad prices. Even if it were to try, prices would continue to fall through their floor because of the competitiveness of the market.

The FTC and the states are unlikely to win on the merits, so they are instead turning to semantic arguments. The FTC and the states should drop their cases. If they don’t, courts should dismiss them.

For more, see a statement from CEI experts, my earlier blog post, Iain Murray’s Fortune article, Wayne Crews’s and my paper “The Case against Antitrust Law,” and CEI’s dedicated antitrust website, antitrust.cei.org.

CEI Experts: Courts Should Dismiss Antitrust Lawsuits against Facebook

This press release was originally posted at cei.org.

Facebook today asked courts to dismiss antitrust lawsuits brought by the Federal Trade Commission and state attorneys general, an outcome supported by the Competitive Enterprise Institute for legal and consumer freedom reasons.

Statement by Kent Lassman, CEI President:

“When neither the facts nor the law are on your side, the only thing left is political muscle. The lawsuits by the FTC and state attorneys general are dangerous political posturing, unrooted in economics or law. They fail on economics because there is no demonstrated consumer harm. They fail on the law because the acquisitions were previously approved and remedies are only available for ongoing, not previous, conduct. Crucially, they fail the test of common sense. Consumers continue to benefit from investment, innovation, and new entrants into the marketplace. Americans have had enough of power poses and posturing. Dismissal of these cases would help renew confidence in free enterprise and the rule of law.”

Statement by Jessica Melugin, Director of CEI’s Center for Technology & Innovation:

“The only question worth asking about Facebook’s acquisitions of Instagram and WhatsApp is: how did consumers fare? U.S antitrust law is based on consumer harm, and there’s none of that to be found in the lawsuits brought by Federal Trade Commission or state attorneys general against the social media giant. Facebook made WhatsApp free and improved the Instagram app to the tune of a billion satisfied users. No prices have been raised, no output has been restricted, and no consumer has been harmed by these acquisitions. Both lawsuits should be dismissed.”

Statement by Ryan Young, CEI Senior Fellow:

“The Facebook case is a classic example of the relevant market fallacy. The FTC made up its own boutique term for Facebook’s market, ‘personal social networking services,’ which excludes Twitter, TikTok, and other competitors, as well as emerging competitors like Discord and Clubhouse. Of course Facebook dominates a market definition that intentionally leaves out most of the competition! But any of them could take away Facebook’s market share, like Facebook did with MySpace.”

Related analysis:

Commentary: Antitrust Litigation Usually Causes More Harm Than Good. Big Tech Is No Different

Statements: State AG and FTC Antitrust Actions against Facebook Fail to Prove Consumer Harm or Anticompetitive Behavior

Report: U.S. Antitrust’s Greatest Misses

The Case For Repealing Antitrust Law by Fred L. Smith, Jr. (1999)