Anti-Trust Law and the Corporate State

Kevin Drum is uncomfortable that Google got off the hook on anti-trust charges merely because it was not harming consumers

Google made a number of arguments in its own defense, and consumer welfare was only one of them. Still, it was almost certainly the main reason they won, and it's still not clear to me that this is really what's best for consumers in the long run. Did Google users click on the products they highlighted? Sure. Did they buy some of the stuff? Sure. Were they happy with their purchases? Sure. Is that, ipso facto, evidence that there's no long-run harm from a single company dominating the entire search space? I doubt it. After all, John D. Rockefeller could have argued that consumers bought his oil and were pretty happy with it, so what was the harm in his controlling the entire market?

The tech industry moves fast enough that antitrust might genuinely not be a big issue there. In the end, it wasn't antitrust that hurt IBM and Microsoft. It was the fact that the industry moved rapidly toward smaller computers and then the internet, and neither company was really able to react fast enough to dominate these new spaces. Nonetheless, I'm skeptical of the tautology at the heart of the consumer welfare argument. If a company is successful, then by definition people must be buying its stuff. On this basis, bigness is simply unassailable anymore. That has broad societal implications that I suspect we're not taking seriously enough.

He seems to be arguing that we consider returning to a pure bigness standard without reference to consumer harm.  I am not sure that we ever followed such a standard, but certainly today the alternative to a consumer harm standard is not a bigness standard but a competitor harm standard.  Whether he knows it or now, this is essentially what Drum is advocating.  We see this in the article he quotes:

But while the F.T.C. said that Google’s actions might have hurt individual competitors, over all it found that the search engine helped consumers, as evidenced by Google users’ clicking on the products that Google highlighted and competing search engines’ adopting similar approaches.

I am not sure what Drum really wants, but the result of eliminating the consumer-harm standard would be an environment where every failed company can haul its more successful competitors in front of the government and then duke it out based on relative political pull rather than product quality.  It is pretty well understood out there that this anti-Google FTC claim was initiated and championed by Microsoft, certainly not among the powerless typically championed by progressives, and a company well known to have missed the boat on Internet search and which is apparently trying to do now through government fiat what it has not been able to do in the marketplace.  Microsoft learned this technique from Sun and Oracle, which took Microsoft to the FTC in the famous browser case where Microsoft faced years of anti-trust scrutiny for the crime of giving the public a free product.

Already, anti-trust law is an important tool of the corporate state, to allow politically powerful companies to squash competition from those who invested less money in their Washington office.  I am not a legal expert at all, but this consumer standard in anti-trust strikes me as a critical shield stopping a hell of a lot more abuse of anti-trust law.

By the way, there is a modern bigness problem with corporations that is very troubling -- we have made government tremendously powerful, giving it many tools to arbitrarily choose winners and losers without any reference to justice or rights.  As private entities get larger and richer, they are better able to access and wield this power in their own favor.  The libertarian solution is to reduce the government's power to pick winners and losers.  The progressive answer is to regulate business more with tools like anti-trust.

But the progressive solution has a built-in contradiction, which why Drum probably does not suggest a solution.  Because the very tools progressives suggest to regulate business typically become the tools with which politically connected corporations further tilt the game in their own favor.  Anti-trust is a great example.  We want to reduce the number of large companies with an eye to reducing corporatism and cronyism, but the very tool to do so -- anti-trust law -- has become one the corporate crony's best tools for stepping on competitors and insulating their own market positions.

And by the way, Rockefeller's Standard Oil did a HELL of a job for consumers.  It was nominally punished for what it might some day hypothetically do to consumers.

Here are the facts, via Reason

Standard Oil began in 1870, when kerosene cost 30 cents a gallon. By 1897, Rockefeller's scientists and managers had driven the price to under 6 cents per gallon, and many of his less-efficient competitors were out of business--including companies whose inferior grades of kerosene were prone to explosion and whose dangerous wares had depressed the demand for the product. Standard Oil did the same for petroleum: In a single decade, from 1880 to 1890, Rockefeller's consolidations helped drive petroleum prices down 61 percent while increasing output 393 percent.

By the way, Greenpeace should have a picture of John D. Rockefeller on the wall of every office.  Rockefeller, by driving down the cost of kerosene as an illuminant, did more than any other person in the history to save the whales.  By making kerosene cheap, people were willing to give up whale oil, dealing a mortal blow to the whaling industry (perhaps just in time for the Sperm Whale).

So Rockefeller grew because he had the lowest cost position in the industry, and was able to offer the lowest prices, and the country was hurt, how?  Sure, he drove competitors out of business at times through harsh tactics, but most of these folks were big boys who knew the rules and engaged in most of the same practices.  In fact, Rockefeller seldom ran competitors entirely out of business but rather put pressure on them until they sold out, usually on very fair terms.

From "Money, Greed, and Risk," author Charles Morris

An extraordinary combination of piratical entrepreneur and steady-handed corporate administrator, he achieved dominance primarily by being more farsighted, more technologically advanced, more ruthlessly focused on costs and efficiency than anyone else. When Rockefeller was consolidating the refining industry in the 1870s, for example, he simply invited competitors to his office and showed them his books. One refiner - who quickly sold out on favorable terms - was 'astounded' that Rockefeller could profitably sell kerosene at a price far below his own cost of production.

  • Addie

    Bigness used to be the standard for antitrust until the recently deceased Robert Bork and his book, the Antitrust Paradox, changed this in the 1970s. http://www.forbes.com/sites/danielfisher/2012/12/19/robert-bork-the-man-who-redefined-antitrust-is-dead-at-85/

  • MingoV

    "... Microsoft to the FTC in the famous browser case where Microsoft faced
    years of anti-trust scrutiny for the crime of giving the public a free
    product...."

    That was not the reason for the anti-trust suit. Microsoft required computer vendors who installed Windows (that included Internet Explorer) on new PCs to remove all competing browsers from the hard drive. Any vendor who failed to do that would not be allowed to sell Microsoft products. That heavy-handed approach was the reason for the suit.

  • Sean

    The conspiracy theorist in me thinks letting Google off the hook as a matter of convenience for the government. Google is in the business of collecting lots of information on the people who use its services. I suspect they know a lot more about people's internet and spending habits than folks realize. The government is also one of the greatest aggregators of information but must operate within constitutional limits. I suspects the government finds it quite useful to have all this information stored on servers by a private entitity that it can access when its want to do investigations.

  • Noumenon72

    Does that Reason link go to Search.com/search for anybody else, or do I have a browser redirect virus?

  • slocum

    If you want to play conspiracy theorist, you'd do better to look at the close relationship between Obama and Google CEO Eric Schmidt (to the point that there were reports last month of Schmidt being considered for a cabinet post). As Warren says, Google should have been 'left off the hook' on the merits of the case, but the deciding factor was probably more along the lines of Google having much more 'juice' with Obama and his justice department than Microsoft. That's the way the game is played these days (the Chicago way), and Google has obviously figured it out (and they'd be morons not to). It's pretty revealing that Drum didn't bother to point out the close Obama-Google connections is his piece (since he certainly must be aware of it).

  • obloodyhell

    }}} Microsoft learned this technique from Sun and Oracle, which took Microsoft to the FTC in the famous browser case where Microsoft faced years of anti-trust scrutiny for the crime of giving the public a free product.

    Dude, I am SO sick of you bringing this BULLSHIT up. You're like a Gun Control advocate that has had their claims disproved openly time and time again, but STILL you keep parroting the SAME IMBECILIC CRAP.

    I will re-print my previous DEBUNKING of this ridiculous claim. I respectfully request you either RESPOND to it with why it is wrong or STOP REPEATING IT.

    It was NOT Microsoft's "giving something away for free" which was a violation of consumer interests -- it was Microsft PAYING MANUFACTURERs to NOT INSTALL their competition despite the competition being EIGHTY PERCENT of the existing market.

    That's not just wrong, it's flat out inexcusably reprehensible.

    And YOU defend this BULLSHIT by glossing over that crap.

    ===========================================================

    }}}} (remember, Microsoft was convicted of anti-trust violations for giving away free stuff to consumers)

    No, Microsoft's antitrust violations were, regardless of what may have been stated, its using its control over the price of one software to get producers to NOT stock the opposition's software.

    This isn't about IE being bundled "for free". It was a piece of crap, lacking features in IE v3 that were present in Netscape 2.0, released two years earlier.

    What Microsoft did that was risibly anticompetitive was to offer LOWER PRICES on its system bundles (I.E., the OS, Office, etc.) to computer makers IF THEY DID **NOT INSTALL** THE INDUSTRY STANDARD, NETSCAPE on their machines.

    I say "industry standard" because at the time of IE's launch, NS was fully EIGHTY PERCENT of the market share, and, being FREE, was pretty much a standard install on ALL machines.

    Got that?

    *BOTH products were FREE*. And, if Microsoft had "played fair", and let the consumers DECIDE, then NS would have won hands down.

    Microsoft, however, understood full well that people are lazy, and, when they lacked knowledge of how much better NS was (many purchasers at the time were first time buyers), then they would use what was easily available, IE, rather than going out and getting a free copy of NS and installing it.

    I'm sorry, I don't see how PAYING others to NOT STOCK your opposition is anything but a violation of consumer interests. That's not about winning on merits -- it's about winning on deep pockets.

    Then there was the corporate side of it.

    How did Microsoft make inroads into corporate sites, which had people who KNEW what a POS IE was in the way?

    Simple. They subverted a higher level of the organizations.

    They specifically inserted tools into Microsoft's CODING TOOLS to make certain programming operations easier for programmers who wrote code -- tools that would ONLY work on IE, despite the fact that they violated HTML, Javascript, and later JAVA standards (Sun tried to fight Microsoft on that one, and lost on money, again).

    We are talking standards SET BY OFFICIAL STANDARDS ORGANIZATIONS.

    Right -- Microsoft was such a corporate "nonentity" that they could IGNORE INDUSTRY STANDARDS and write their own special schemes into programming languages and templates, and not be ignored -- seriously injured by such behavior -- by the marketplace. Naww.... that's not a monopoly at all.

    Ouch. It HURTS when my eyes roll that far back in my head!

    I worked for such an organization. We got a new CTO. She brought in her own programming "fair haired boy", who had his head up Bill's nether regions. So this SOLE INDIVIDUAL caused an entire company with 500 users to switch from NS to IE --with all that lost re-training time -- by claiming (often lying) that "NS can't do that".

    I even called them on it, one time, when they tried to pawn off a specific thing as something only IE could do when NS could easily do it... by sending around the instructions on how to do it in NS. But that place got switched to IE sure as shooting, because M$ made it easier for one shitty coder to do his job, regardless of how it inconvenienced 500 other people.

    Furthermore, it was a truism for a long time that, if you didn't use IE and you didn't use OUTLOOK, you could, if knowledgeable, get away without an AV for the most part. Because those two represented something in excess of 80% to 90% of ALL security holes, and the rest you could avoid just by simple common sense and basic caution.

    I know I've gone over this before but somehow, Warren just can't figure it out.... he just keeps spitting out the Microsoft corporate line.

    Microsoft was a MONOPOLY. They had FAR too much control over the industry, which enabled them to ignore standards bodies and to defacto pay off bundlers to SUPPRESS their competition.

    There's a reason there's only ONE significant OS in the computer industry, until Android (No, Apple and Linux did not represent a significant enough market share, for different reasons, until Google picked up Linux and turned it into Android).

    There's a reason there's only ONE real significant Office Suite.

    Because Microsoft was, until Google, with its equally deep pockets, got into competition with them about 3-4 years ago, a defacto monopoly. As such, they've been stunting the growth of personal computing for more than a decade, not with quality products, but with risibly shoddy ones which existed only because Microsoft CHEATED.

    Thanks, Google, for putting us out of "Microsoft Misery".
    >:-P

  • obloodyhell

    See my commentary above. I do not believe Microsoft went QUITE that far -- what they did do was lower the price substantially for the purchased license if the vendor did not install NS on their machines. And that meant that the vendor could lower the price to buyers compared to anyone who did not accept the offer.