Antitrust – Page 4 – artdiamondblog.com

Not Clear If Net Neutrality Is Good for Consumers

(p. B2) Of course, government antitrust and communications policy is supposed to benefit consumers, not any individual company or group of companies. “It’s fair to say Netflix has gotten something of a free pass,” said Scott Hemphill, visiting professor of antitrust and intellectual property at New York University School of Law. “This open Internet principle that’s in ascendance is certainly good for Netflix. It’s harder to say it’s good for consumers.”
. . .
Despite Netflix’s arguments that it shouldn’t have to pay fees to a broadband provider, that proposition is hardly self-evident. The fees Netflix so fiercely opposes are analogous to those found in many industries, such as credit cards, where both consumers and merchants pay the credit card companies. “It’s hard to say if these fees are good or bad for consumers,” Professor Hemphill said.

For the full story, see:
JAMES B. STEWART. “Common Sense; Netflix’s Invisible Hand In Policy and Mergers.” The New York Times (Fri., MAY 29, 2015): B2-B3.
(Note: ellipsis added.)
(Note: the date of the online version of the story is MAY 28, 2015, and has the title “Her Majesty’s Jihadists” which was also the title used on the cover, but not at the start of the actual article on p. 42, which has the title “Common Sense; How Netflix Keeps Finding Itself on the Same Side as Regulators.”)

Occupational Licensing Creates Cartels

(p. 251) Aaron Edlin and Rebecca Haw discuss “Cartels by Another Name: Should Licensed Occupations Face Antitrust Scrutiny?” “Once limited to a few learned professions, licensing is now required for over 800 occupations. And once limited to minimum educational requirements and entry exams, licensing board restrictions are now a vast, complex web of anticompetitive rules and regulations. . . . State-level occupational licensing is on the rise. In fact, it has eclipsed unionization as the dominant organizing force of the U.S. labor market. While unions once claimed 30% of the country’s working population, that figure has since shrunk to below 15%. Over the same period of time, the number of workers subject to state-level licensing requirements has doubled; today, 29% of the U.S. workforce is licensed and 6% is certified by the government. The trend has important ramifications. Conservative estimates suggest that licensing raises consumer prices by 15%. There is also evidence that professional licensing increases the wealth gap; it tends to raise the wages of those already in high-income occupations while harming low-income consumers who cannot afford the inflated prices.” “We contend that the state action doctrine should not prevent antitrust suits against state licensing boards that are comprised of private competitors deputized to regulate and to outright exclude their own competition, often with the threat of criminal sanction.” University of Pennsylvania Law Review, April 2014, pp. 1093-1164. http://www.pennlawreview.com/print/162-U-Pa-L-Rev-1093.pdf.

Source:
Taylor, Timothy. “Recommendations for Further Reading.” Journal of Economic Perspectives 28, no. 3 (Summer 2014): 249-56.
(Note: ellipsis in original.)

Delta and Atlanta Protect Their Huge Hartsfield-Jackson Airport from Little Silver Comet Field

(p. B6) DALLAS, Ga. — Airports do not get much smaller than Silver Comet Field at Paulding Northwest Atlanta Airport, where an undeveloped two-lane road weaves to a church-quiet setting framed by small hills.
On a recent weekday morning, four small business jets were planted on the tarmac, if it can be called that. Nine automobiles dotted the parking lot, most of them driven there for a meeting. Outside the two-story building that serves as the terminal, which was reminiscent of a lodge in off-peak season, there was no sign of human life.
Only 50 miles away sits the world’s most bustling airport, Hartsfield-Jackson. It maintains a monopoly on commercial flights in Atlanta, the largest metropolitan region without a secondary airport.
Paulding Northwest would like to change that grip on the market. The airport has applied for a commercial license so it can introduce two flights a week, and has since encountered stiff opposition.
Leading the charge against the bid is the Atlanta-based Delta Air Lines, which averages about 1,000 daily departures from its sprawling hub.
But the airport’s supporters are crying foul, saying that Delta, along with the city of Atlanta, which owns Hartsfield-Jackson, has managed to throw up a series of barriers, legal and political, against the bid.

For the full story, see:
MIKE TIERNEY. “Fighting for 2 Fights a Week.” The New York Times (Tues., DEC. 23, 2014): B6.
(Note: the online version of the story has the date DEC. 22, 2014, and has the title “Tiny Airport Fights for Sliver of Atlanta Market.”)

Rollin King Found Legal Way to Avoid Fed’s Regulations

(p. 25) Rollin W. King, a co-founder of Southwest Airlines, the low-cost carrier that helped to change the way Americans travel, died Thursday [June 26, 2014] in Dallas. He was 83.
. . .
The concept for Southwest came to Mr. King when he noticed that businessmen in Texas were willing to charter planes instead of paying the high fares of the domestic airlines.
At the time that Mr. King first proposed the idea to Mr. Kelleher over drinks, the federal government regulated the fares, schedules and routes of interstate airlines, and the mandated prices were high.
Competitors like Texas International Airlines, Braniff International Airways and Continental Airlines waged a protracted legal battle before Southwest could make its first flight. By not flying across state borders, Southwest was able to get around prices set by the Civil Aeronautics Board.

For the full obituary, see:
MICHAEL CORKERY. “Rollin King, 83, Pilot Who Helped Start Southwest Airlines.” The New York Times, First Section (Sun., June 29, 2014): 25.
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the obituary has the date June 28, 2014, and has the title “Rollin King, Texas Pilot Who Helped Start Southwest, Dies at 83.”)

How Sega Came Out of Nowhere to Leapfrog Near-Monopolist Nintendo

Source of book image: http://images.eurogamer.net/2014/usgamer/original.jpg/EG11/resize/958x-1/format/jpg

(p. C10) “Console Wars” tells how Sega, an unremarkable Japanese manufacturer of games played in arcades, came out of nowhere to challenge Nintendo for dominance of the videogame world in the first half of the 1990s. Nintendo, which had revived the stagnant home videogame category a few years earlier, had something close to a monopoly in 1990 and behaved accordingly, dictating terms to game developers and treating retailers as peons. Sega, in Mr. Harris’s telling, was a disruptive force in a highly concentrated market, introducing more advanced gaming technology, toppling Nintendo from its perch and becoming the largest seller of home videogame hardware in the U.S. by late 1993.

Mr. Harris’s hero is a former Mattel executive named Tom Kalinske, who became president of Sega of America, then a small subsidiary, in 1990. Mr. Kalinske assembled a team of crack marketers who would not have gone near Sega but for his reputation and persuasiveness. Within a year and a half, according to Mr. Harris, Mr. Kalinske’s leadership, along with a new gaming system called Genesis and a marketing assist from a mascot named Sonic the Hedgehog, made Sega the U.S. market leader in videogames.
And then, after only three years at the top, Sega fell from its pedestal. Sega’s management in Japan, suffering mightily from not-invented-here syndrome, rejected Mr. Kalinske’s proposals to collaborate with Sony and Silicon Graphics on new gaming systems. Instead, over his objections, Sega pushed out its ill-conceived Saturn game console in 1995. While Saturn flopped, Sony struck gold with its PlayStation; Silicon Graphics sold its chip with amazing graphics capabilities to Nintendo; and the game, so to speak, was over.
. . .
The author admits he has taken liberties: “I have re-created the scenes in this book using the information uncovered from my interviews, facts gathered from supporting documents, and my best judgment as to what version most closely fits the historical record,” he writes. The result is more a 558-page screenplay than a credible work of nonfiction.

For the full review, see:
MARC LEVINSON. “Sonic Boom; How a no-name company took on Nintendo, tied its fate to a hyperactive hedgehog, and–briefly–won.” The Wall Street Journal (Sat., May 24, 2014): C10.
(Note: ellipsis added.)
(Note: the online version of the review has the date May 23, 2014, an has the title “Book Review: ‘Console Wars’ by Blake J. Harris; How a no-name company took on Nintendo, tied its fate to a hyperactive hedgehog, and–briefly–won.”)

The book under review is:
J., Harris Blake. Console Wars: Sega, Nintendo, and the Battle That Defined a Generation. New York: HarperCollins Publishers, 2014.

A&P Case Shows that Size Can Bring Economies of Scope and Scale

(p. A9) The claim that large, profit-driven firms are harmful to society has a venerable history in the United States. Perhaps no company was ever more vilified for its bigness than the Great Atlantic and Pacific Tea Co., which from 1920 to the 1960s was the largest retailer in the world. From the 1910s to the 1950s, as it cut out wholesalers and demanded volume discounts from food manufacturers, A&P was criticized for destroying the local merchants that formed the backbone of small-town America and the satisfying jobs they provided. Federal and state governments tried to cripple its business by prohibiting discounting; the Justice Department even won an antitrust case claiming that the company was selling food too cheaply. The fact that A&P’s economies of scope and scale saved shoppers 15% or 20% on groceries didn’t get much respect, just as Ms. Heffernan doesn’t much value the role that big businesses play in lowering costs today.
Yes, competition drives many companies to act in socially harmful ways, and competition within firms can get in the way of collaboration. But the fact that competition can be dysfunctional does not mean that scope and scale are economists’ fictions. Size does matter, and competition, while no panacea, does force people to find better ways of doing business.

For the full commentary, see:
MARC LEVINSON. “BOOKSHELF; When Size Does Matter; We glorify the local, but smallness didn’t stop the country’s savings and loans from needing a federal bailout in the 1980s.” The Wall Street Journal (Fri., April 18, 2014): A9.
(Note: the online version of the commentary has the date April 17, 2014, and has the title “BOOKSHELF; Book Review: ‘A Bigger Prize’ by Margaret Heffernan; We glorify the local, but smallness didn’t stop the country’s savings and loans from needing a federal bailout in the 1980s.”)

Levinson’s own book (not the one he is reviewing in the passages quoted above), is:
Levinson, Marc. The Great A&P and the Struggle for Small Business in America. New York: Hill and Wang, 2011.

In the Gilded Age Moguls Cleaned Up Their Own Mess and the Economy Was Not Hurt

Source of book image: online version of the WSJ review quoted and cited below.

(p. A13) Takeover wars seem to have lost their sizzle. What happened to the battles of corporate goliaths? Where have they gone, those swaggering deal makers? “Harriman vs. Hill” is a corporate dust-up that takes us back to the beginning of the 20th century, when tycoons who traveled by private rail merrily raided each other’s empires while the world around them cringed.
. . .
Mr. Haeg conveys a vivid picture of the Gilded Age in splendor and in turmoil. Champagne still flowed in Peacock Alley in the Waldorf-Astoria, but fistfights erupted on the floor of the exchange, and a young trader named Bernard Baruch skirted disaster with the help of an inside tip, then perfectly legal. There were scant rules governing stock trading, the author reminds us–no taxes, either. “If you won in the market, you kept it all.”
In that era, moguls were left to clean up their own mess. . . .
. . .
Though hardly a cheerleader, Mr. Haeg is admiring of his cast, nostalgic for the laissez-faire world they inhabited. Observing that the economy wasn’t upset by the stock market’s mayhem, he concludes that, “in a perverse way, the market had worked.”

For the full review, see:
ROGER LOWENSTEIN. “BOOKSHELF; When Titans Tie the Knot; Businessmen of a century ago didn’t place ‘competition’ on a revered pedestal. Merger and monopoly were considered preferable.” The Wall Street Journal (Fri., Feb. 14, 2014): A13.
(Note: ellipses added.)
(Note: the online version of the review has the date Feb. 13, 2014, and has the title “BOOKSHELF; Book Review: ‘Harriman vs. Hill,’ by Larry Haeg; Businessmen of a century ago didn’t place ‘competition’ on a revered pedestal. Merger and monopoly were considered preferable.”)

The book under review is:
Haeg, Larry. Harriman Vs. Hill: Wall Street’s Great Railroad War. Minneapolis, MN: University of Minnesota Press, 2013.

Edison, Not Antitrust, Reduced Power of Hated Gas Monopolies

Counterbalancing the angst of those hurt by the death of an old technology is sometimes the triumph creative destruction provides to those who were less well-served by the old technology. Some look to governments to restrain a dominant technology; but sometimes a more effective way is to replace the old technology through creative destruction’s leapfrog competition.

(p. 84) Gaslight monopolies had few friends outside of the ranks of shareholders. At the beginning of the nineteenth century, gaslight had been viewed as pure and clean; seventy years later, its shortcomings had become all too familiar: it was dirty, soiled interior furnishings, and emit-(p. 85)ted unhygienic fumes. It was also expensive, affordable for indoor lighting only in the homes of the wealthy, department stores, or government buildings. The New York Times almost spat out the following description of how gas companies conducted business: “They practically made the bills what they pleased, for although they read off the quantity by the meter, that instrument was their own, and they could be made to tell a lie of any magnitude…. Everybody has always hated them with a righteous hatred.”

Edison credited the gas monopoly for providing his original motivation to experiment with electric light years before in his Newark laboratory. Recalling in October 1878 his unpleasant dealings years earlier with the local gas utility, which had threatened to tear out their meter and cut off the gas, Edison said, “When I remember how the gas companies used to treat me, I must say that it gives me great pleasure to get square with them.” The Brooklyn Daily Eagle printed an editorial titled “Revenge Is Sweet” in which it observed that the general public greatly enjoyed the discomfort of the gas companies, too: “To see them squirm and writhe is a public satisfaction that lifts Edison to a higher plane than that of the wonderful inventor and causes him to be regarded as a benefactor of the human race, the leading deity of popular idolatry.”

Source:
Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.
(Note: ellipsis in original.)

Incentives Limit Collusion

(p. 476) Carnegie’s business strategy was the one he had followed twenty years earlier: keep production steady by accepting orders at any price. In early (p. 477) October, he notified Frick that the time had come to leave the rail pool. “I confess I can see nothing so good for us as a ‘free hand'” in setting prices. He was willing to lower his prices and profit margin on rails if that was the only way to get the orders he needed to keep his works running. “By this policy we shall keep our men at work.” Carnegie had never been entirely happy as a member of the rail pool, especially after Illinois Steel was allocated a greater share than Carnegie Steel. “For my part,” he now declared, “I do not wish to play second fiddle in the rail business any longer. I get no sweet dividend out of second fiddle business, and I do know that the way to make more money dividends is to lead…. I am sure that The Carnegie Steel Co. can make more dollars, even next year, and certainly in future years, by managing its own business in its own way, free from all understandings with competitors, than by continuing in any combination that possibly can be formed. Now having made my speech, which I trust you will read to all my partners, I take my seat and imagine the loud applause with which my sentiments are greeted.”

Source:
Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.
(Note: underlines and ellipsis in original.)
(Note: the pagination of the hardback and paperback editions of Nasaw’s book are the same.)

If Feds Stalled Skype Deal, Google Would Have Been “Stuck with a Piece of Shit”

Even just the plausible possibility of a government veto of an acquisition, can stop the acquisition from happening. The feds thereby kill efficiency and innovation enhancing reconfigurations of assets and business units.

(p. 234) . . . , an opportunity arose that Google’s leaders felt compelled to consider: Skype was available. It was a onetime chance to grab hundreds of millions of Internet voice customers, merging them with Google Voice to create an instant powerhouse. Wesley Chan believed that this was a bad move. Skype relied on a technology called peer to peer, which moved information cheaply and quickly through a decentralized network that emerged through the connections of users. But Google didn’t need that system because it had its own efficient infrastruc-(p. 235)ture. In addition, there was a question whether eBay, the owner of Skype, had claim to all the patents to the underlying technology, so it was unclear what rights Google would have as it tried to embellish and improve the peer-to-peer protocols. Finally, before Google could take possession, the U.S. government might stall the deal for months, maybe even two years, before approving it. “We would have paid all this money, but the value would go away and then we’d be stuck with a piece of shit,” says Chan.

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.
(Note: ellipsis added.)