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November 29, 2012

Antitrust Troubling in an Innovation Economy

 

Just as competitors lobbied to have the government restrict Microsoft in the 1990s others are now lobbying to harm Google by trying to convince the iron hand of government to squeeze the company and limit its competitive abilities. As the Federal Trade Commission (FTC) is poised to bring a legal complaint against Google it seems that Google’s rent-seeking competitors are succeeding. 

At issue is whether the company is influencing Internet users to use preferred-company services, and whether such efforts hurt its competitors. The fact that the FTC is even considering the issue demonstrates that the FTC is stuck in an antitrust past rather than an innovation future—all to the detriment of the public.

Rent-seekers focus some of their resources on appealing to the power of the government, via lobbying, to bring a lawsuit, regulations or legislation to hobble their competitor(s). They do not use those resources to create innovative new products, provide better services or advance innovation. Rather, they are attacking their competitor to gain a greater market share. In the end, it is a thinly veiled government redistribution of wealth from successful companies to those less so, ignoring the harm to consumers such as higher prices and fewer new and better technologies.

In essence,  government seizes control of the direction of technology, or whether it advances at all. Take, for example, the “agreement” that the FTC reached with Facebook last year, which allows extra government regulation and review of Facebook alone for 20 years—yes, 20 years, longer than the World Wide Web has existed in the first place. How many innovation cycles are lost because of fear of running afoul of some sprawling government “mandate?”

Innovation is seriously harmed if companies are afraid of gaining a temporary market dominance (which should happen routinely as new product categories spring to life), and if government is too quick to pronounce judgment.

Yet, even the market experts, the companies themselves, have a hard time determining what the public wants next as competition changes too rapidly, technology continues to evolve, collapse, and create whole new product categories. A clear understanding of who competes with whom is beyond anyone’s, particularly a government bureaucrat’s, ability to predict.

So who, or what, is being protected by antitrust actions? Not consumers. If they don’t like something, they won’t use it. Innovation still holds the promise for our greater economic future if government doesn’t get in the way.


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