ICYMI: Competition Drives Tech Innovation, Improving Consumer Experience
The consumer welfare standard, the bedrock of antitrust law, acknowledges the power of competition to drive innovation, superior quality, choice, and price for the benefit of consumers. When consumers are empowered, competition becomes very dynamic, as demonstrated by tech services that are constantly driven to enhance their offerings to attract and retain customers.
— Competition can make products better, enhancing consumer welfare.
— Entrance into new markets is an example of “competition working to the benefit of consumers,” including by making incumbents improve their products.
— Overreaching regulation could diminish the benefits of competition for consumers.
Competition Can Make Products Better, Enhancing Consumer Welfare.
Tech analyst Ben Thompson, author of the Stratechery newsletter, argues that Google’s success derives from its ability to create a superior consumer experience: “Google started to transform mobile results in particular to be much more useful: instead of forcing users to click a link for an answer — something mobile users dislike about as much as downloading new apps — Google would give it to them; they didn’t even need to ‘feel lucky’. Most importantly, though, when it came to vertical search categories, Google would offer an entirely new kind of results page.”
ScOp Venture Capital Managing Partner Kevin O’Connor writes that competition in tech is fierce, and leading tech services are successful because they create products that consumers value: “Though many of their products are provided free of charge, tech titans now face political attack for their success. Yet if you don’t like their products, the competition is only a click away. There’s no reason internet companies can’t be out-competed in the marketplace (remember Alta Vista, MySpace and Pets.com?). Critics say Google and Facebook’s dominance of digital advertising is evidence of illegal market manipulation. A simpler explanation is that their products work very well.”
Wall Street Journal reporter Dan Gallagher points out that leading tech services are investing ever-increasing amounts in research and development in order to stay competitive: “Combined spending on research and development is expected to rise 24% in 2018, while capital expenditures for the five are expected to surge by 48% compared with last year. For Big Tech, these expenses reflect the rising costs of running their current businesses while also developing new ones to stay more competitive—in a world where their most significant source of competition is mostly each other.”
Entrance Into New Markets Is An Example Of “Competition Working To The Benefit Of Consumers,” Including By Making Incumbents Improve Their Products.
In Stratechery, Tech analyst Ben Thompson wrote that existing “competition [is] working to the benefit of customers” and is “unequivocally a good thing.” “[Booking Holdings CEO Glenn] Fogel added ‘In the end, what’s most important for us to get customers to come to us directly. We’ve talked about this a lot in the past. It’s one of the things that I think is very important. For us to have our own future is to create a service that is so wonderful, so good that people just naturally will come back to us directly. And we will not be as dependent on other sources of traffic.’ This seems like unequivocally a good thing, no? Booking knows it can’t depend on the Google channel, that its future is best secured by innovating and building a customer experience that convinces users to go to Booking directly. That is competition working to the benefit of customers!”
Inc. columnist Jason Aten writes that competition from Google spurred Apple to improve its Maps product: “So, Apple started rebuilding its app the hard way. Instead of purchasing maps from third-party vendors, which caused problems with updates and data, the company started its own mapping initiative. Like Google, it sent out vehicles to take photographs for street level views of buildings and locations.”
Competition from ride-hailing apps is pushing taxi companies to innovate too, writes Smart Cities Dive contributor Katie Pyzyk: “A number of taxi businesses and industry organizations worked over the past few years to improve their apps and the user experience. More than three years ago, Red Top Cab in Arlington, VA upgraded the features on its app to allow passengers to pay with their phone via a credit card-linked account, track the vehicle’s progress and schedule trips in advance.”
Overreaching Regulation Could Diminish The Benefits Of Competition For Consumers.
University of Pennsylvania professor Herbert Hovenkamp asserts that the purpose of antitrust laws should be to protect consumers, not obsolete or less efficient rivals: “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.”
Economist Timothy Taylor argues that excessive regulation against leading tech services could “close off new competitors”: “It’s not enough to rave against the size of Big Tech. It’s necessary to get specific: for example, about how public policy should view network effects or online buyer-and-seller platforms, and about the collection, use, sharing, and privacy protections for data. We certainly don’t want the current big tech companies to stifle new competition or abuse consumers. But in pushing back against the existing firms, we don’t want regulators to set rules that could close off new competitors, either.”
FTC Commissioner Christine Wilson warns that calls to ban top tech firms from participating in the market will reduce competition and increase prices: “Perhaps worst of all, we are told that banning some firms from the market and imposing strict pricing rules will surely increase competition and reduce prices. These mistaken ideas have all been tried before. I fear that, unless we learn from those mistakes, we are doomed to repeat them.”