In Case You Missed It: Antitrust Law Should Protect Competition, Not Competitors
Last week, a Wall Street Journal report revealed yet another example of antitrust attacks being levelled by competitors concerned with protecting their own market positions, not competition or the welfare of consumers.
This most recent case of “swampetition” (defined as “the strategy of persuading regulators to hamstring competitive rivals, competing not in the market but in the political swamp” by CCIA’s Matt Schruers) makes clear that protecting competitors, not competition, is the impetus for many such antitrust attacks against leading tech services. And protecting competitors’ interests can come at the expense of consumers.
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Corporate interests have consistently launched anti-tech campaigns in response to competition.
The firms urging action against Amazon are some of its “chief corporate rivals,” notes the Wall Street Journal. “They include shopping mall owner Simon Property Group Inc., retailer Walmart Inc. and software giant Oracle Corp., according to people involved with and briefed on the project. Simon Property is fighting to keep shoppers who now prefer to buy what they need on Amazon; Walmart is competing with Amazon over retail sales; and Oracle is battling Amazon over a $10 billion Pentagon cloud-computing contract.”
The strategy is unfortunately common: News Corp called for a break-up of Google as the company “has seen billions of dollars of advertising spend move from its newspapers to online,” reports The Independent.
Similarly, in the midst of its litigation against Google, Oracle joined News Corp and others in a letter supporting EU antitrust action against it, reports Recode.
In May testimony before the Senate Judiciary Committee, founder and former CEO of AT&T-owned AppNexus Brian O’Kelley urged Congress to break up leading tech services competing with it in the ad tech space, notes AdExchanger.
“[A]iming to manipulate regulators into undermining an agile and disruptive competitor” isn’t a unique tactic, writes CCIA’s Matt Schruers for DisCo.
“At times, established firms that face serious competitive challenges in the market will turn to political economy, aiming to manipulate regulators into undermining an agile and disruptive competitor.”
“For example, industries threatened by sharing economy developments have recently used this strategy with some success,” Schruers notes. “A hospitality sector-backed anti-Airbnb group attacked short-term rental services with deceptive ads in New York and Washington, DC. (Hotels celebrated their ability to raise prices after successfully hamstringing Airbnb in New York City.) Ridesharing services have encountered similar tactics, as taxicab providers sought to persuade municipal regulators into hobbling their online competitors.”
Antitrust law exists to protect competition, not competitors.
CEI’s Ryan Young: The WSJ story “brings up an important concept for the current antitrust battle: the difference between pro-business and pro-market…. Competition and fairness would be better served by pro-market policies. These do not aim to help or harm individual businesses. Pro-market policies set up an ongoing, churning competitive process, in which companies compete, adapt, succeed, and often fail on the merits. Pro-business interests, by contrast, often seek a comfy set result, which incumbents would like to maintain for as long as they can.”
University of Pennsylvania Professor Herbert Hovenkamp: “Any time a merger or other practice reduces a firm’s costs or improves its products or services, it boosts competition by putting pressure on obsolete or less efficient rivals. But protecting these rivals should not be the purpose of the antitrust laws. Rather, the focus of antitrust laws should be on maximizing output, which benefits both consumers and workers.”
University of California, Berkeley Professor Carl Shapiro: “So I say: let these inquiries proceed when suspicious conduct can be identified. But in doing so, let us avoid a ‘big is bad’ mentality and let us truly have the interests of consumers in mind. We learned long ago that proper antitrust enforcement is about protecting consumers, and protecting the competitive process, not about protecting competitors. We must not forget that guiding principle.”