Texas Antitrust Case Against Google would Harm Consumers and Small Businesses

This is a press statement originally posted at cei.org.

The State of Texas announced today it is filing an antitrust lawsuit against Google, alleging the company’s online advertising platform harms competition and allows Google to fix prices for advertising.

CEI senior fellow Ryan Young said:

“A company has monopoly power if it can raise prices, restrict supply, and still keep its dominance. Despite Google’s growth, digital ad prices have fallen by half over the last decade. At the same time, print ad prices have been increasing. Some newspapers have doubled their rates. Google and Facebook, which hold similar market shares, have made the ad market more competitive. Their innovation and price-cutting has made advertising more affordable than ever for small businesses who are struggling to find customers at a difficult time. Attorney General Paxton’s lawsuit would harm consumers and small businesses—precisely the opposite of what antitrust regulation is intended to do.”

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

“It’s hard to take seriously Attorney General Paxton’s claim that Google has, ‘harmed every person in America.’ Consumers have benefited from Google’s products, services and innovations, often for free. This suit is costly solution in search of a problem.”

Read more:

New EU Tech Rules will Chill Innovation and Harm Consumers

This is a press statement originally posted at cei.org.

The European Union today announced new rules it claims will change the way technology companies operate. The EU says the Digital Services Act and the Digital Markets Act “will create a safer digital space for users” and “level the playing field so that digital businesses can grow.”

Vice President for Strategy Iain Murray said:

“The European Union’s proposed new powers allow it to treat American tech firms as cash cows, to be fined whenever it finds them guilty of providing too much discretion to consumers or allowing too much speech. Its proposed veto on acquisitions will also chill innovation in the European tech sector as it will make the prospect of significant rewards for an acquisition-based business strategy less likely. Europe will act as an anchor on tech innovation, slowing progress and reducing consumer welfare worldwide. The incoming Biden administration should avoid making the same mistakes.”

Senior Fellow Ryan Young said:

“The European Union’s two proposed tech regulation bills have two fatal flaws. One is that, on purpose or not, they are trade protectionism under another name. Many of their provisions are aimed at the large U.S. tech companies. Taking them down a notch would give an opening to EU-based tech companies, the thinking goes. As with President Trump’s trade wars, this will harm consumers without actually helping the industry. The two bills also leave in place the EU’s stifling regulatory culture that is the root cause of Europe’s lack of tech sector innovation.

“The second fatal flaw is that the EU’s proposals would actually lock in the existing American firms’ dominance. They are the only companies that can afford the massive content moderation costs the EU is demanding, or the large fines. Startups that might one day dethrone today’s giants cannot afford these costs, and may not even bother trying to compete.”

Read more:

This Week in Ridiculous Regulations

The big news is that the Food and Drug Administration is poised to follow several other countries’ lead in approving one or more coronavirus vaccines. [Ed.: this post was drafted last Friday morning. Vaccine approval happened over the weekend. The larger point stands.] If a mutual recognition policy was in place with any of those countries, approval would already have happened, and people would already be receiving treatment. The Fall 2020 Unified Agenda came out last week. It lists each rulemaking agency’s planned rules for the short and long-term. It was also due in October. CEI’s Wayne Crews breaks it down over at Forbes.Regulatory agencies issued new regulations ranging from standards for professional journalism to accountant qualifications.

On to the data:

  • Last week, 67 new final regulations were published in the Federal Register, after 65 the previous week.
  • That’s the equivalent of a new regulation every two hours and 30 minutes.
  • Federal agencies have issued 3,157 final regulations in 2020. At that pace, there will be 3,316 new final regulations. Last year’s total was 2,964 regulations.
  • There were 34 proposed regulations in the Federal Register last week, for a total of 2,055 on the year. At that pace, there will be 2,168 new proposed regulations in 2020. Last year’s total was 2,158 proposed regulations.
  • Last week, agencies published 456 notices, for a total of 21,260 in 2020. At that pace, there will be 22,327 new notices this year. Last year’s total was 21,804.
  • Last week, 1,881 new pages were added to the Federal Register, after 2,278 pages the previous week.
  • The 2020 Federal Register totals 80,580 pages. It is on pace for 84,626 pages. The 2019 total was 70,938 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Five such rules have been published this year. Four such rules were published in 2019.
  • The running cost tally for 2020’s economically significant regulations ranges from net savings of between $2.04 billion and $5.69 billion. 2019’s total ranges from net savings of $350 million to $650 million, mostly from estimated savings on federal spending. The exact number depends on discount rates and other assumptions.
  • Agencies have published 74 final rules meeting the broader definition of “significant” so far this year. 2019’s total was 66 significant final rules.
  • So far in 2020, 622 new rules affect small businesses; 24 of them are classified as significant. 2019’s totals were 501 rules affecting small businesses, with 22 of them significant.

Highlights from last week’s new regulations:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

The Relevant Market Fallacy and Facebook’s Antitrust Cases

Facebook was hit by two separate antitrust complaints this week. One is from the Federal Trade Commission (FTC) and the other is from a group of attorneys general (AGs) from 46 states. As most antitrust complaints do, they both commit the relevant market fallacy. This is defining a company’s market unrealistically narrowly, so it looks more dominant than it is. The Justice Department also made this error in its recent Google complaint.

The FTC complaint slips up in its second paragraph, stating that “Facebook holds monopoly power in the market for ‘personal social networking services.’” The states’ complaint uses the same term, which they define starting on page 11.

If you’ve never heard the term “personal social networking services” before, you’re not alone. The FTC and attorneys general made it up just for their Facebook cases. And they both define it in such a way that excludes TikTok—a curious oversight. TikTok is a competing social network that is popular among the younger people Facebook is actively courting to freshen up its aging user base. Facebook is not only competing against other networks, it is also competing against demographics.

Facebook’s popularity with the over-40 crowd is a major reason for its unpopularity with teenagers. They generally prefer to be where their parents and teachers are not. Because younger people’s friend groups are malleable and still forming, and because typing a website’s name into a browser is so easy, the network effects argument the complaints rely on is not very strong. Network effects basically means that there is strength in numbers. People will tend to join networks where their friends already are, rather than try to cajole them into moving to a brand new network. But this theory does quite explain why many people are members of multiple networks. It is common for people on Facebook to also be active on Twitter, Discord, LinkedIn, and other networks.

While the network effects argument has some sway with older people, whose networks are long-established and for whom inertia is stronger, it is weaker with younger people. In the case of Facebook, its network effects among the gray-haired set may in fact be pushing younger people away.

This may be why a text search for “TikTok” turns up zero results in both the FTC’s and the states’ complaints—out of sight, out of mind. So even if Facebook holds a monopoly in “personal social networking services” as defined by the complaints, Facebook clearly does not hold a monopoly in its real-world relevant market. Because of that, consumer harm is almost impossible to prove—and proof of consumer harm is the threshold for antitrust enforcement.

But this concedes too much. Facebook almost certainly does not hold a monopoly even in the narrow “personal social networking services” market definition. One common test whether a company has a monopoly is to see if it is able to jack up prices, restrict supply, and still remain dominant. Extra-high monopoly profit margins naturally attract competitors; successfully keeping them out is a sign a company may have monopoly power.

Facebook does not charge its users, but it does charge advertisers. Has Facebook been able to raise ad prices and squeeze supply? It has not. Online advertising prices have gone down by about half over the last decade—precisely the period when Facebook became a major player. Over the same period, print advertising prices have been going up. Some newspapers have doubled their ad prices.

If Facebook has a monopoly and is acting to illegally maintain it, cutting its ad prices while competing ad sellers raise theirs is an unlikely way to go about it.

There are a lot of other arguments in play in the Facebook antitrust cases. But the relevant market fallacy is a major one, and it doesn’t look good for the FTC’s or the state AGs’ cases.

For more, see Iain Murray, Jessica Melugin, and Mario Loyola’s statement, Wayne Crews’s and my paper, “The Case against Antitrust Law,” and visit antitrust.cei.org.

This Week in Ridiculous Regulations

The midnight regulatory rush is on, with one of the year’s highest weekly page counts last week. The 2020 Federal Register is on pace for 84,415 pages. This would exceed seven of the Obama administration’s eight Federal Registers, and would be the second-highest count in its 85-year history. The number of proposed regulations also passed 2,000 for the year. Despite all this activity, the Fall 2020 Unified Agenda, in which rulemaking agencies disclose their planned upcoming rules, has still not been published. It was due in October. Regulatory agencies issued new regulations ranging from AM radio to overflight fines.

On to the data:

  • Last week, 65 new final regulations were published in the Federal Register, after 73 the previous week.
  • That’s the equivalent of a new regulation every two hours and 35 minutes.
  • Federal agencies have issued 3,090 final regulations in 2020. At that pace, there will be 3,314 new final regulations. Last year’s total was 2,964 regulations.
  • There were 37 proposed regulations in the Federal Register last week, for a total of 2,021 on the year. At that pace, there will be 2,168 new proposed regulations in 2020. Last year’s total was 2,170 proposed regulations.
  • Last week, agencies published 412 notices, for a total of 20,804 in 2020. At that pace, there will be 22,315 new notices this year. Last year’s total was 21,804.
  • Last week, 2,278 new pages were added to the Federal Register, after 1,821 pages the previous week.
  • The 2020 Federal Register totals 78,697 pages. It is on pace for 84,415 pages. The 2019 total was 70,938 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Five such rules have been published this year. Four such rules were published in 2019.
  • The running cost tally for 2020’s economically significant regulations ranges from net savings of between $2.04 billion and $5.69 billion. 2019’s total ranges from net savings of $350 million to $650 million, mostly from estimated savings on federal spending. The exact number depends on discount rates and other assumptions.
  • Agencies have published 73 final rules meeting the broader definition of “significant” so far this year. 2019’s total was 66 significant final rules.
  • So far in 2020, 605 new rules affect small businesses; 24 of them are classified as significant. 2019’s totals were 501 rules affecting small businesses, with 22 of them classified as significant.

Highlights from last week’s new regulations:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

A Big-Picture View of the Antitrust Debate

In this month’s issue of Reason magazine, I have a feature-length article on the bipartisan push to revive antitrust enforcement. If you don’t have the print edition, it is now online. Here is the introduction:

Mark Zuckerberg was having one of 2020’s worst Zoom meetings. It was July 29, and one of the most influential men in the world was sitting, pale and perspiring, in a sparse white room getting attacked by members of Congress from both parties. Rep. Matt Gaetz, a Florida Republican and close ally of President Donald Trump, was scolding the Facebook CEO about the “content moderators that you employ [who] are out there disadvantaging conservative content.”

But before Zuckerberg could offer much in the way of a response, he was attacked from the left, as Rhode Island Democrat Rep. David Cicilline castigated Zuckerberg for not taking down the same content. For Cicilline, “the problem is Facebook is profiting off and amplifying disinformation that harms others because it’s profitable.”

For good measure, Rep. Jim Sensenbrenner, a Wisconsin Republican, asked Zuckerberg why Facebook temporarily took down Donald Trump Jr.’s account over a post promoting hydroxychloroquine as a COVID-19 treatment. Zuckerberg pointed out that the incident happened on Twitter.

After discussing how conservatives’ and progressives’ ideological priors are warping the antitrust debate, I point to a better way: abolish antitrust regulation outright. Or at the very least, require proof of consumer harm before unleashing it.

Read the whole thing here. See also CEI’s dedicated antitrust site, antitrust.cei.org.

Book Review: Al Schmitt with Maureen Droney – Al Schmitt on the Record: The Magic Behind the Music

Al Schmitt with Maureen Droney – Al Schmitt on the Record: The Magic Behind the Music (New York: Rowman and Littlefield, 2018).

Schmitt is a legendary recording engineer and producer. He has worked with Frank Sinatra, Bob Dylan, Diana Krall, and more, and is still active today. He even got Paul McCartney to write the foreword to this book. He is a longtime house producer at Capitol Studios in Los Angeles, which is one of the world’s finest. This book is more about his professional life than his personal life. Fortunately, Schmitt is the type of person whose work life is more eventful, anyway.

Music nerds and equipment nerds will enjoy his discussions of what it was like working with different artists, his equipment choices and recording techniques, and how he works with artists to get their best performances. He also gives career advice on the importance of being easy to work with and respectful of colleagues–which also applies to pretty much any line of work. Schmitt comes across as someone who sets high standards, but is also an amiable type who takes joy in what he does and appreciates his good fortune.

Book Review: Philip Freeman – Celtic Mythology: Tales of Gods, Goddesses, and Heroes

Philip Freeman – Celtic Mythology: Tales of Gods, Goddesses, and Heroes (Oxford: Oxford University Press, 2017).

An entertaining collection of retold Celtic myths. I listened to the Audible version. Freeman offers some historical and cultural analysis to go along with the stories. The added context makes it easier to appreciate stories with cultural norms very different from ours. It also puts them in proper historical context, mostly stretching across a period stretching from Ireland and Britain’s time at the periphery of the Roman Empire up until Northern Europe’s economic revival around the time of Charlemagne.

The cultural and textual similarities to Nordic myths and Icelandic sagas was surprising. They are both very violent. Women are relegated to the sidelines, but occasionally flash independence and deviousness. And they are clearly honor and kin-based cultures. This was more for fun than for research for me, but there is plenty there at both levels.

Then again, during this period and after, as Michael Pye argues in The Edge of the World, the areas ringing the North Sea were almost their own distinct civilization, just as was the Mediterranean region to the south. The sea connected the British Isles to what is now northern France and Germany and the Lower Countries, whose traders would later form the Hanseatic League. Norway and Sweden were on the eastern edge of this ring. And Iceland was settled by their more adventurous sailors, and brought their language, customs, and stories with them. The Celtic tradition Freeman shares is distinct, but also part of this larger whole.

Book Review: Frederick Lewis Allen – Only Yesterday: An Informal History of the 1920s

Frederick Lewis Allen – Only Yesterday: An Informal History of the 1920s (New York: HarperPerennial Modern Classics, 2015 [1931]).

A history of the 1920s, but written in 1931, when the memories were still fresh. The title is almost literal. I read part of it in undergrad and revisited it recently. Many historians would write this type of near-real time history by simply discussing the major news stories of the day in order. Allen goes for a more thematic approach. A typical chapter covers the entire decade from beginning to end, but covering a different theme. Topics include sex and morality, fashion, Prohibition, business and the economy, technology, leisure, sports, politics, and more. But Allen also sees larger overarching themes that tie all these mini-themes together—and this is what makes his book so compelling.

The 1920s saw shared mass culture arise in a way that hadn’t been seen before. It would be a while before there was a television in every room. But every town had a movie theater, and the radio was mass-adopted more quickly than perhaps any other technology. Radio, along with maturing telephone and telegraph networks, enabled instant mass communication. Mass-produced automobiles meant that people lived their lives in a much broader area than before. For the first time, people could live in one city and work in another. Daytrips or weekend trips to other states became commonplace.

This led to an explosion of shared culture. The 1920s were filled with fads, sensations, and cultural icons—flappers, Babe Ruth and his home runs, title fights like Dempsey-Tunney, Mahjong, crossword puzzles, Charlie Chaplin, Charles Lindbergh and other aviators, and more. Nothing like this had ever happened before, at least on such a scale.

Allen also notes the very different starting and ending points of the 1920s. It began just after the end of World War I, and ended with the onset of the Great Depression. These natural bookends are grist for occasional meditations for an almost life-cycle view of the decade. A young nation began the decade eager and optimistic to rebuild and make something new after the war was won. This exuberance gave way to an industrious middle age filled with work and reward. Finally, a jaded old age kicks in as youthful excesses brought economic ruin. I share the historian William McNeill’s skepticism of these types of stories. Nations and cultures are never young or old, individuals are.

A lot of Only Yesterday is surprisingly contemporary. Maybe not so much the bits about the annual rises and falls of women’s hemlines, where an inch’s change towards or a way from the knee was a major national event. But Allen’s description of how people reacted to the rise of mass media sounds an awful like how people are reacting today to the Internet, smartphones, and social media. People had all kinds of overblown reactions to it, both in favor and against it. And the technologies drove all kinds of fads. Back then, it was Mahjong. Today, it’s Candy Crush. People were able to pay much closer attention to national events than before.

There was a lot of handwringing about the changes in the news and media industries, and the effect this saturation would have on people’s health and happiness, and on America’s political system. Despite all the melodrama, people got through it—just as our generation will. Today’s generation is hardly the first one that needs to calm down about the media industry.

This is one of those books that is surprisingly hard to put down. Allen’s biggest shortcoming is a common cultural failure—an unthinking condescension towards business and commerce. Like a lot of people, he took Sinclair Lewis’ novel Babbitt a little too seriously. And he frequently—almost reflexively, without really thinking about it—makes cutting remarks at businessmen, peoples’ work lives, or almost anything having to do with finance. The unspoken implication is that the author is above such earthly concerns, and his readers should be as well. This tendency is off-putting, and distracts from an otherwise superb volume of history.

Book Review: C.S. Lewis – The Screwtape Letters

C.S. Lewis – The Screwtape Letters (London: Geoffrey Bles, 1942).

I have almost no interest in theology, and actively dislike proselytizing. Yet, I enjoyed The Screwtape Letters. The book consists of 31 letters written by Screwtape, a senior demon, to his bumbling nephew Wormwood, who is having trouble tempting his “Patient” to sin and damnation. Lewis has a sly, avuncular humor throughout that makes his unsubtle didactic aims go down easier. And Screwtape is endlessly quotable. Lewis was a talented writer, and there is a reason people still read him.

That said, Lewis’ post-Victorian-Christian hangups about sex are as amusing as they are unhealthy. Most societies today, and throughout history, have less repressed norms that better fit human biology, and normal human behavior.

Less amusing is Lewis’ apparent belief that people cannot be morally good without religious belief. His frequent criticisms of materalism as immoral make no logical sense. Here, Lewis means “materialism” not in the sense of greed, but rather in the metaphysical sense of rejecting the existence of non-physical spirits.

The trouble with this argument is, well, almost everywhere. High-character people who are not religious are easy to find. In Lewis’ argument, X has no link to Y. And Lewis does not attempt to find one, arguing only by assertion. His broad-brush dismissal of millions of good people is arguably its own moral failing.

Much of Lewis’ other advice is on firmer ground. One need not share his theism to agree that the world would be a kinder place if people were a bit better at resisting temptation.