When you think about it, the story is even more fantastic than Lewis Carroll’s Alice in Wonderland.
A government—politicians and bureaucrats—which, among other problems, is mired in deficit and debt is suing two companies, Google and Amazon, with which nobody is forced to do business, while the same government is, just to take an example, forcing future taxpayers to finance its vote purchases with trillions of dollars of expenditures, not to mention its continuous misleading advertising.
Each of these companies has to supply free and voluntary consumers with services, often free of charge, lest it be dethroned by competitors. Add that each (and perhaps especially Amazon) deserves a Medal of Freedom for arguably contributing to culture and knowledge more than any government has done.
There is another irony difficult to reproduce in any rabbit hole one can imagine. It is probably true that both companies are owned and managed if not manned by fans of state power who probably thought all along that “progressive” politicos were on their side. Any serious economist or student of Leviathan, I think, could have told them. Whether the lesson is learned or not is an interesting question.
Google has been sued by the Department of Justice’s Antitrust Division, supervised by Assistant Attorney General Jonathan Kanter, while Amazon is sued by the Federal Trade Commission, chaired by Lina Khan.
In my Regulation article on “Bidenomics,” I note:
Biden’s nomination of Lina Kahn, a 32‐year‐old Harvard Law School professor, as head of the Federal Trade Commission marked an attempt at expanding government antitrust action. Confirmed with the help of 21 Republican votes in the Senate, Khan has embarked on a crusade to extend the reach of existing law by developing new legal theories and filing more lawsuits. Mere “bigness” and high technology seem to be her chief concerns, rather than the longstanding consumer‐welfare standard. The antitrust division of the Department of Justice has moved in the same direction. Large corporations are seen as the problem simply because of their size, though there appears to be no parallel concerns about big trade unions and big government. …
The international news magazine The Economist, despite being generally favorable to antitrust laws, has argued that the new crusade against bigness and high tech is unproductive. It threatens American research and development, of which one‐fourth is done by the five largest high‐tech firms. With nearly Schumpeterian accents, the venerable magazine defended the idea that “dealmaking, even involving big firms, is a vital part of healthy capitalism,” which the new antitrust warriors in D.C. do not seem to understand.
Let’s hope that the courts will stop the comedy.
READER COMMENTS
nobody.really
Sep 27 2023 at 12:07pm
HOW longstanding?
Yes, courts have tended to interpret US antitrust law–the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914–in accordance with a consumer welfare standard advanced by the Chicago School of economics in the 1960s and 70s.
But today SCOTUS promotes a theory of legal interpretation called Originalism—the idea that judges should interpret statues as they would have been understood when adopted (either understood by the legislators, or by the public).
In 1890 and 1914, the US was a much more rural country, with many more people living in small towns. This was the Gilded Age of robber-barons. The big cities were dens of iniquity–replete with jazz music, race-mixing, and all manner of breaches of small-town norms. (Think The Music Man, wherein Iowa townfolk in 1912 nearly riot over the opening of a pool hall.) Moreover, the first commercial radio broadcast wouldn’t occur until 1920, so most rural Americans would not yet have developed a parasocial sense of intimacy with urban celebrities.
And, regardless of any of that, it was a time that predated the Chicago School of Economics.
In short, I suspect antitrust laws were in fact motivated by anti-urban, anti-BIGNESS sentiments. Judges that embrace Originalism would want to interpret antitrust laws in light of these sentiments.
Pierre Lemieux
Sep 27 2023 at 12:52pm
Nobody: Indeed, there has been an agrarian-populist streak in American history. To it we owe notably banking regulation and the unstable banking system. The Sherman Act and the “Napoleon craze” date from the heydays of American agrarian populism; more openly socialist populism was an offshoot. (See my post “The Populist and Napoléon,” where I quote Charles Postel.) Whether, on antitrust, the Supreme Court would attach more weight to these statist adventures as opposed to the first century (in the case of antitrust) after the founding, I don’t know–and am interested in any citation you might have.
Jon Murphy
Sep 27 2023 at 1:24pm
As a formal legal doctrine, since the 80s. However, it’s been informally applied for much longer. I was reading somewhere (I do not recall where) that even the Sherman AntiTrust Act was originally interpreted though a rudimentary consumer welfare standard.
Andrew_FL
Sep 27 2023 at 2:29pm
There are many mistakes you are making here, nobody.really
The first is that you confuse the issue of how the judiciary ought to interpret what the law means, and how the executive branch ought to implement the law in practice. Originalism has nothing to do with the latter.
Your second mistake is to believe that Originalism is about following the prejudices of the people of the time when a law was enacted, which you confuse with the meaning which the language of the legislation had at the time it was enacted. Originalism is not about motives or prejudices, it is about meaning only.
Your third mistake is that you assume that you know what the prejudices and motivations of the people must’ve been (or as you say, you “suspect” what they must’ve been) based on your own stereotype of the historical period. Rather than assume, you would be better served to actually study the period and what concerns over trusts were really about at the time. I think you will find that proponents of the legislation had more sophisticated concerns than mere prejudice against bigness.
vince
Sep 27 2023 at 7:47pm
Here you go: https://en.wikipedia.org/wiki/New_Brandeis_movement
Somewhat related is that Adam Smith didn’t like corporations.
Craig
Sep 27 2023 at 8:25pm
The old adage applies I think, Vince, ‘Pigs get greedy, hogs get slaughtered’
Jon Murphy
Sep 28 2023 at 7:43am
Well that’s outright false. Smith didn’t like corporations that wielded sovereign power (eg the East India Company). Bit he had nothing against corporations per se.
vince
Sep 28 2023 at 1:30pm
Hogwash. https://en.wikipedia.org/wiki/Criticisms_of_corporations
Jon Murphy
Sep 28 2023 at 5:22pm
Your link unwittingly supports me. Note that the citicism is levied at East India Company, a specific form of corporation, not corporations in general. Smith did not oppose corporations, or indeed any gathering of people for commercial purposes.
Jon Murphy
Sep 28 2023 at 6:31pm
You can read more about Adam Smith and corporations in my short piece here.
Craig
Sep 27 2023 at 12:17pm
“Google and Amazon, with which nobody is forced to do business”
Weird world of course, but I will say this. The internet was a tool which really should’ve lead to hypercompetitive results. Instead what we got is Big Tech. Just remember that you might buy something from Amazon and you might say, “Well, they make offers I voluntarily accept” That which is seen, that which is unseen is the better offer I’m not allowed to make you.
Just remember that Amazon’s net margin (quick google its coming up at 2.43%) and they charge third party sellers on their platform a 15% commission. The point isn’t that the 15% commission isn’t fair, it is, its to illuminate just how ridiculously inefficient they are actually. Amazon’s retail competition which are also third party sellers on their platform can give Amazon 15% of the gross sale AND STILL MAKE MONEY. If Amazon gave 15% of the gross sale to its competitors, Amazon would LOSE money.
Many might say that because of Google and Amazon prices are lower. Half true, they’re lower than they would’ve been prior to the internet age for sure, but right now TODAY, prices are at least 15% higher than they should be.
One of the marks of my economics undergraduate education was the neoclassical assumption of perfect competition. It was some kind of unattainable holy grail, an assumption based on an ideal that could never be.
Then the internet came a tool which should’ve lead to something much more competitive, literally hypercompetitive. Let’s try that!
Instead I get missives like this: “Please remove all of our items from your website until you can bring them up to compliance. You have incorrect pricing and old product we no longer have to sell.” The old product I had in stock and the incorrect pricing was pricing below Amazon. So I hacked that by using Google to place ads in markets I know Amazon isn’t monitoring which go to places on my website that don’t have a web path from the home page of the website. So far I haven’t gotten caught being a fat pimple on JB’s butt but they will figure it out and when they do that spigot will be turned off. [I can see them banging on the website trying to find where I am selling at a lower price, abandoned carts where they are trying various coupon codes.] They’ll catch me either when a customer sends my link to somebody looking for a price match to Amazon or maybe somebody else (I don’t think Amazon does price matches) OR when Amazon does a geographic distribution of where they ARE selling versus where they AREN’T selling and they’ll realize I am posting the ad in some places but not others. Until then I own flyover country!
If I’m forced to charge the same price as Amazon, I’d be out of business because between paying $100 to Amazon and have it tomorrow versus buying it from me an having it in 7 days or less (some areas actually ARE within the 1 day UPS Ground zone from me), its obvious better to get something sooner rather than later. But if the choice is pay $100 and get it tomorrow or pay $75 and wait, AT MOST, 7 days (and in TN actually the UPS Ground in transit times aren’t that bad ANYWHERE actually) But yeah, if you’re the only idiot accepting a 33% GM for an item you’ll sell alot of widgets. And sure its not a 50% GM, but if I charge that I sell next to zero, and even at a 33% GM I’m still making a 20% net margin because I have little opex
The people who are good at getting you an item TOMORROW don’t do it by magic, it costs alot of money to do that. But to do that they have to stop others from saying, I’ll charge you 25% less but you’ll get it next week because if that were tolerated, they wouldn’t be out of business, but instead of being a $500bn business, they’d be a $50bn business.
But feel free to give it up to Droopy Eye Jeff. Fantastic entrepreneur, should be a billionaire.
Jon Murphy
Sep 27 2023 at 1:00pm
I’d argue that we have gotten hypercompetitive results. Google, Amazon, etc all behave as if they are perfectly competitive firms.
Craig
Sep 27 2023 at 1:55pm
Remember when you use G! you’re not the customer, you’re the product. I note this because you are compensated for that by getting to use google’s suite of free services which are obviously very useful, right? (I use them, they’re great). But if it were actually a competitive market, you’d be able to select a walled garden and that is a segue into much larger discussion on net neutrality. Yes, that phone should be free. And I don’t mean magic socialist utopia, AOC free, I mean free as a form of compensation for being the product. That home internet connection likely should even be free as well, indeed I’d even suggest you should get paid outright.
Pierre Lemieux
Sep 27 2023 at 3:02pm
Well, Craig, every not-totally-nirvana socialist wants the same thing as you do: free stuff for him or his group and paying stuff for others. The market never (or only occasionally, for marketing purposes) offers this: everybody gets what he wants if he pays for it himself. And there is no central planner who decides what is free and what is not, what costs less and what costs more.
Jon Murphy
Sep 27 2023 at 3:15pm
I don’t understand what this sentence means
Craig
Sep 27 2023 at 3:33pm
I have to make the example much simpler to illustrate the point, the topic could go on and on and on for day, ok?
Right now let’s assume as facts GIVEN: 1. you like google more than yahoo, 2. you pay your at home ISP some money per month for internet and 3. you pay Verizon for your cell phone plan.
I note Verizon because at one point Verizon actually owned Yahoo. I note a general preference for google over yahoo because that seems to be where the market went. So if you buy a phone from Verizon with a plan, you expect you should be able to go to Google, Gmail, Maps, etc. And you use those services because they are actually world class But you’re the product, you use these services for free and you pay by consuming their advertising from advertisers on google and other 3rd party sites (I’ve sold advertising ‘inventory’ to google from my websites).
And by and large you’re going to be ok with this arrangement because you do actually voluntarily do it. And google is absolutely valuable, no question.
Now let’s say you pay $100/month for unlimited access on an S21 (married with 2 kids, I’m paying more than that) to Verizon. Now let’s say that Verizon had the thought, “Gee, whiz, all our users love google so much they pay us $100/month and they spend 55% of their time searching for stuff on google, maps and youtube and as a result Google has a market cap of a gazillion”
Verizon thinks further and thinks, “Hmmm, we own Yahoo and its not as good as google, but we’d really like to see Yahoo increase its value, what can we do and so the accountants count up some numbers and voila, Verizon can offer you a free phone and $10/month as long as you use Yahoo, Yahoo Maps and yahoo mail and are blocked from using Google services on the phone”
But you don’t have that option because of Google’s political activities thwarting net neutrality for many years (Trump administration notwithstanding). Meanwhile Google actually OFFERS walled gardens in certain international markets.
Jon Murphy
Sep 27 2023 at 5:29pm
I would have just settled for you explaining what that one sentence meant. No need to go for a more simple explanation.
That particular problem goes back to before Google. Don;t forget the DOJ sued Microsoft for that move Verizon might hypothetically want to do back in the 2000s.
Regardless, I still do not see your point. Google et al are still behaving like perfectly competitive firms: the price they charge is at MC: $0.
Craig
Sep 27 2023 at 7:37pm
“Regardless, I still do not see your point. Google et al are still behaving like perfectly competitive firms: the price they charge is at MC: $0.”
You are NOT their customer, you are their product.
From the point of view of BUYING advertising, I’ve been in ecommerce since 2000 so I was involved when the market was a much more competitive oligarchy. Its never been remotely close to perfect competition, ever. Back then you could ignore google and if you did well in the other ones like Yahoo, Altavista, MSN, AOL was pretty big for a while, you could make decent business off that. Yahoo had a tool called Overture which was a CPC bidding tool and slowly and surely Google took it all and the prices went up. You could GIVE me all the others now and it wouldn’t be worth much at all. I even think Yahoo just delivers google results at this point as well! (I think). So of course a greater percentage of the sale has to go to google. I’d say right now its actually in between an oligarchy and a monopoly. In no way shape or form does it resemble a ‘perfect competition’ paradigm.
Now note from the point of view of SELLING advertising, ie I at one point had a website that actually received 9 million unique visitors per year. In that circumstance I am selling the inventory to Google or Yahoo or frankly any number of companies capable of delivering ads on third party websites. And in THAT circumstance it doesn’t matter who is delivering the ad because you wouldn’t be visiting my site because it delivered google ads, you’d be visiting my website because you were interested in my website and the company delivering the ad would be incidental. In THAT circumstance, much more competitive and the advertiser split with google stayed absolutely the same. Shocker. I always got 68% of the ad revenue. But SEARCH is different from this. This is much more like monopolistic (not monopoly) competition which I recall resembles the market restaurants face.
Craig
Sep 27 2023 at 7:43pm
And just for a humorous anecdote, but there’s at least some core of truth to it, but when you try to grapple with adsense/adwords (Its just google ads now), there is extremely little customer service. Have a problem? Well, they’re not going to address it. Underbilled, overbilled, anything like that? Nope, not going to deal with it.
The DMV has better customer service and that’s not an exaggeration. Amazon of course is the reverse, they are known for decent customer service. But google is the absolute worst.
Pierre Lemieux
Sep 27 2023 at 8:41pm
Craig: As far as I can see, “You are their product” is as meaningless and as analytically useless as when Marxists talk about the commodification of labor. If I am the product of someone, it is of my parents, who provided the physical inputs. This is as useful for the study of society as saying that I am a product of my experiences: perhaps I am, but they are my experiences. When I sell my services to someone, I am selling the information encoded in my genes and the ideas and information in my mind. So what? If I don’t want that person or organization to use my genes or my information, I just don’t do business with him or her. When I buy a newspaper subscription (and it was much truer 20 or 30 years ago), I am paying partly in money and partly (sometimes mostly) in being a potential subject of the advertising sold by the newspaper to third parties interested in my patronage. Same when I use Chrome or Google search or Amazon or when I walk in a department store. It is just free exchange. I am their product in no meaningful way. Nobody owns me and can sell me in any meaningful sense; if some organization can pretend that I am in such a relation with it, it would only be the state.
Craig
Sep 27 2023 at 9:22pm
“I am their product in no meaningful way.”
You are their product in that trillion dollar kind of way!
1973, I’m in diapers being sold to my mom by commercials on TV at the time. I retrospectively hope she pampered me with Pampers, I suppose. Or should I even care?
This video is actually in MoMA by the way in NYC.
https://www.moma.org/collection/works/118185?artist_id=34941&page=1&sov_referrer=artist
“The product of Television, Commercial Television, is the Audience.”
And so you write similarly: ” I am paying partly…..in being a potential subject of the advertising” <–not wrong, does the characterization bother you as a natural person because there is something innate within us as people that resents ‘being sold’?
“You are the end product. You are the end product delivered En Masse to the advertiser. You are the product of t.v.”
Richard Serra, Carlota Schoolman. Television Delivers People. 1973
Found it on youtube: https://youtu.be/nbvzbj4Nhtk
The critique is a bit much of course in the sense that it seems want to make people want to object to being the product.
I take it a bit differently, I’d suggest recognize when you’re the product and don’t sell yourself cheap. Perhaps I should disseminate this idea on social media so that I can get some LIKES! 😉
Jon Murphy
Sep 28 2023 at 7:45am
Irrelevant. They are not acting like a monopoly. They are acting like a perfectly competitive firm.
Dylan
Sep 28 2023 at 12:30pm
Easier said than done I’m afraid. For example, on this site there are I count two trackers from Microsoft, 2 from Google, and 1 from Facebook. Every time I come to this site those companies have a record of that which is attached to my IP address and likely a browser fingerprint. Same with pretty much every other site I go to on the internet.
I’ve never had an account with Facebook, yet they have tons of information on me that I have given them just be existing as a modern human. I used to use Google more regularly, but after Snowden I made a big effort to stop using Google services and other big tech, so I gave up all my personal Google accounts and no longer use them for personal use, but these days for almost any job that uses a computer you will have either a Google account or a Microsoft account that is mandatory and that can be used to tie into all of that personal data from sites like this one.
I should be clear that I don’t think that breaking up the tech companies is the right answer, I’m not sure if there is any right answer that wouldn’t be more destructive than the problem it is trying to solve, but I don’t think people realize just how difficult opting out is. Given the nearly global reach of these companies, it might be harder than opting out of a national government.
Pierre Lemieux
Sep 27 2023 at 3:39pm
Craig: The late Samuel Brittan, in his Capitalism and the Permissive Society, noted that businessmen are paid to run the system, not to understand it. (It is not the exact formulation, but I would find my book right now only for a time-fee. At any rate, the formulation is strange because a business owner is not paid for anything, he is a residual claimant. But we get the general idea.) I do know that, contrary to the run-of-the-mill businessman, you understand much in economics. But, with due respect, you tend to forget it when your own interests are at stake!
Paying a fee to have access to a market is a normal and, I would think, near-universal phenomenon. A typical author pays to a publisher something (I guess) like half of what would be his gross margin in order to have access to the former’s market. Google pays Apple, if I remember correctly what I read, a few tens of billions of dollars a year to have Chrome as the default browser on iPhones. And so forth.
Craig
Sep 27 2023 at 3:56pm
” But, with due respect, you tend to forget it when your own interests are at stake!”
FYI I am better off with the ‘cartel’ (retail price maintenance agreement for those who don’t like using the term ‘price fixing’) and cheating it than getting rid of it actually. If the retail price is $100 and you’re the only one out there selling at $75, you’ll sell many widgets for sure, right? That’s with respect to A! of course not so much G! in fact I am using G! to cheat A!, right?
“Paying a fee to have access to a market is a normal ”
You would still be paying. Think broader about how you’re paying. Option A is pay $100/mo and go to whatever website you want.
Option B is get paid $5/month but you have to use Yahoo. You’re paying by foregoing use of google. Remember, when you use Google, YOU ARE THE PRODUCT worth over $1tn in market cap to Alphabet!
nobody.really
Sep 29 2023 at 7:47pm
Tangentially related to the world of natural monopolies: Pre-internet, some of us will recall the existence of phone books and yellow pages. Phone books listed the names, addresses, and phone numbers of people subscribing to (monopoly) telephone service in an area, in alphabetical order of subscribers’ last names. The yellow pages listed, for an incremental fee, the business that subscribed to telephone service in the area, by category of business. In my memory, these books were published by the monopoly phone company; I had one phone book and one yellow pages.
I understand that yellow page listings could be expensive, that larger ads could be very expensive, and that the publishers were not especially responsive. All the stuff you’d expect from a monopoly.
Then the monopoly broke up. Now I had MULTIPLE yellow pages and phone books. I guess the advertising rates got better. But from the perspective of a telephone user, the results were MUCH less convenient because we had to consult multiple volumes to find the stuff we wanted.
Does econ literature have a way to describe and analyze this loss of a central-clearing-house-of-information function? Does it qualify as a “market failure”?
Or do I simply misremember the facts?
Craig
Sep 30 2023 at 1:22am
I actually just received one in the mail in very rural TN. I was astonished.
“I understand that yellow page listings could be expensive, that larger ads could be very expensive, and that the publishers were not especially responsive. All the stuff you’d expect from a monopoly.”
There was also the trick where business put many AAAAAA’s before their name in an attempt to be first in the phone book since it was listed alphabetically.
Jon Murphy
Sep 30 2023 at 10:47am
Search costs. No, it’s not a market failure in any meaningful sense of the term.
Comments are closed.