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Antitrust Pollyannaism: Google Facebook Amazon = New Entrants Not Incumbents

Are Google, Facebook, and Amazon, pro-competitive Internet “new entrants” or anti-competitive enduring monopoly Internet platform incumbents?

Apparently, that critical distinction depends less on evidence, and more on one’s antitrust predilections and prosecutorial presumptions – i.e. does one view the Internet competition glass half-empty (pessimistic) or half-full (optimistic).  

Recent evidence from the Trump DOJ Antitrust Division suggests it’s in the Internet competition optimist camp almost to the point of Internet competition Pollyannaism, despite the evident Internet platform antitrust enforcement drumbeat around the world, in Congress, and the White House, to the contrary over the last 18 months.

The first big tell of this DOJ antitrust division’s potential Pollyannaish prosecutorial presumptions and predilections towards Internet platforms was DOJ Antitrust Division Chief Makan Delrahim’s philosophical answer to a Recode question in September about whether there is a need for antitrust enforcement of Google, Facebook and others.

We do not want to punish that competitor when we’ve encouraged them to compete and succeed. Once they succeed, we do not want to get them out of the business. It’s really important that our policies don’t discourage that. It’s not go out, compete, be successful, but only to a limit. That’s not our economy and I don’t think that’s good for our economy. We want every one of them to become monopolists as long as they’re behaving properly. We don’t want them to, once they are there, now try to block and create a moat around themselves in an inappropriate way. That’s the way I look at it.”  [Bold added for emphasis.]

Many could reasonably consider that DOJ antitrust way of looking at today’s dominant Internet platforms to be Pollyannaish, given human nature and given that the history of humankind is replete with evidence of the truism that power corrupts, and that those in power naturally act in inappropriate ways to maintain and extend that power IF they believe they can get away with it.

Given that reasonable, evidence-based, and time-tested premise that many naturally abuse their power, if they believe they can, many also could reasonably consider it Pollyannaish, and even anti-antitrust-deterrent, for America’s lead competition enforcer, to be unabashedly pro-monopolization rather than pro-competition for the Internet winner-take-all market segment that is by far generating the most monopoly-abuse concerns in the last several decades.

The second big tell of this DOJ antitrust division’s potential Pollyannaish prosecutorial presumptions and predilections towards Internet platforms was DOJ Antitrust Division Chief Makan Delrahim’s little-covered, November 7th speech at a Mexico City telecommunications conference.

He tellingly characterized Amazon and Google-YouTube competitively as “new entrants.”  

“Facts matter a great deal in antitrust enforcement.  While the law and underlying principles haven’t changed, the digital economy frequently changes the facts, and we always take those facts into consideration. One fact that has changed in the world of media is the development of new technologies and new entrants—like Netflix, Amazon, Hulu, and YouTube.”  [Bold added for emphasis.]

Key “facts” here are: streaming is not a “new” technology, Google-YouTube and Amazon began video streaming in 2006, and Netflix and Hulu in 2007; and Amazon and Google-YouTube are not “new entrants,” but streaming incumbents, by any reasonable antitrust measure.

It is particularly telling that this DOJ Antitrust Division still evidently perceives, or wants to characterize, Amazon and Google-YouTube to be “new entrants,” not two of the three most dominant Internet platform incumbents in the world today, and which generate outsized antitrust complaints.

If we think of Internet years like dog years, streaming is middle-aged technology.

Streaming has been around since 2006 or half of the public Internet’s 1994-2018 lifespan. Given the Internet’s unprecedented exceptional rates of development, rollout, and adoption, most call internet technologies “new” if they are less than one maybe two years old, not twelve-year-old, every day, mainstream, technologies everyone uses.   

Please note that the 1990’s DOJ antitrust division never perceived or characterized Microsoft to be a “new entrant” to the Internet browser market when it extended its dominance by tying its operating system to its browser – to snuff out Netscape.

Why would the current DOJ characterize Google-YouTube as just a “new entrant” and not a dominant search incumbent that video cloudcasts when it contractually ties YouTube to its dominant search engine, browser, operating system, location services, and advertising services?

And why would it characterize Amazon Video as just a “new entrant” and not a dominant ecommerce incumbent and dominant cloud-computing incumbent that video cloudcasts, when it contractually ties its video streaming service to its ubiquitous, dominant contractual Amazon Prime delivery services?    

Consider the Internet platform incumbent facts about “new entrants” Google-YouTube, Amazon, Netflix and Hulu.    

Google and YouTube are the #1 and #2 most visited sites in the U.S. per Alexa.

When Google bought no-revenue-YouTube in 2006 for $1.6b, and DOJ did no second request investigation, Google alone knew YouTube’s value to Google was its acquisition of its extraordinary origination of search traffic flow.

In the four years after Google acquired YouTube 75% of its search gains were YouTube per ComScore and 25% of all Google searches originated from YouTube. Simply, acquiring YouTube catapulted Google’s search share from 40+% to 60+% of searches, quietly tipping it to search dominance and lessening search and search advertising competition in hindsight.

What streaming “new entrant” commands 1.9b monthly logged-in viewers who watch a billion hours of streamed video daily and generate billions of views, in 91 countries, in 80 different languages, covering 95% of the Internet population?

Amazon is the #3 most visited site in the U.S. per Alexa. Amazon’s AWS also hosts Netflix which is the #12 most visited site in the U.S. per Alexa.

What “new entrant” commands 95m U.S. Amazon Prime streaming subscribers of which greater than 60m use Amazon Video in the U.S.?

What “new entrant” commands 137m Netflix streaming subscribers worldwide and almost 60m U.S. Netflix subscribers?

The third big tell of this DOJ antitrust division’s potential Pollyannaish prosecutorial presumptions and predilections towards Internet platforms was in DOJ Antitrust Division Chief Makan Delrahim’s same November 7th speech, in effectively arguing Facebook’s dominance is not durable and market forces can overcome Facebook’s dominance by 2025.  

In today’s digital economy, it may be entirely possible for popular companies with large market shares to be replaced quickly by new, innovative competitors.  Firms that fail to innovate are often left behind in the dust. …

For instance, a study looked at the top 20 most popular websites in Mexico between 2006 and 2013.  Facebook jumped from #14 in popularity in 2006 to #1 by 2013, while competitors MySpace and Hi5 dropped from #7 and #13, respectively, to off the chart entirely.  Twitter was not on the list at all in 2006, but was #7 by 2013.  Who knows what a comparable list will look like in 2025? … The question for antitrust enforcers is whether a firm has durable market power.”

This appears Pollyannaish because it heroically assumes that the nascent 2006-2013 social market dynamics and changes are comparable to mature social market dynamics of 2013-2018 with the fully-developed network effects of Metcalfe’s law.

Any DOJ economist knows network effects are exponential, so they grow much more powerful over time and as a market reaches maturation/saturation it is very difficult for a “new entrant” or a competitor to overcome the competitive barrier to entry of ingrained network effects (and habits/history/data) of 2.4b active monthly users.  

And Facebook is much more durable because it is a government-enabled social advertising platform given that the FTC allowed Facebook to buy its two leading competitors, Instagram and WhatsApp, in violation of the Clayton Act, and the DOJ allowed Google and Facebook to allocate markets in 2014 when Google exited social advertising by shutting down its Google+ and Orkut social networks and Facebook exited competing with Google in search advertising in shutting down its search partnership with Microsoft-Bing/Yahoo, in violation of the Sherman Antitrust Act.

Conclusions:

1.      Market forces can’t overcome six years of U.S. Government Internet Platform Pollyannaish antitrust non-enforcement 2012-2018.   

2.      Just like Microsoft was not a pro-competitive “new entrant” into the Internet browser market in the 1990s, but a monopolistic software incumbent platform maintaining and extending its market power, Google, Facebook, and Amazon today are not pro-competitive “new entrants” into many different markets, but monopolistic Internet platform incumbents maintaining and extending their online market power anticompetitively into multiple offline markets.

3.      Has the U.S. Judiciary’s activist shrinking of the antitrust enforcement “strike zone” in the 2000s turned U.S. antitrust enforcement into the protection of the online monopolization process over the protection of the free market competitive process and level playing field?

4.      If you are interested, carefully read Mr. Delrahim’s September 7th speech, to make your own assessment of whether the current DOJ Antitrust Division has a predilection to seriously enforce U.S. antitrust law against Internet platforms like Google, Facebook, and Amazon.

Forewarned is forearmed.

***

Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an Internet competition and policy consultancy for Fortune 500 companies, some of which are Internet platform competitors, and he is Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. Cleland has testified before the Senate and House antitrust subcommittees on Google. Eight different Congressional subcommittees have sought Cleland's expert testimony and when he worked as an investment analyst, Institutional Investor twice ranked him the #1 independent analyst in his field.

***

Precursor LLC Research on Asymmetric Accountability Harms:

Part 1:   The Internet Association Proves Extreme U.S. Internet Market Concentration [6-15-17]

Part 2:   Why US Antitrust Non-Enforcement Produces Online Winner-Take-All Platforms [6-22-17]

Part 3:   Why Aren’t Google Amazon & Facebook’s Winner-Take-All Networks Neutral? [7-11-17]

Part 4:   How the Google-Facebook Ad Cartel Harms Advertisers, Publishers & Consumers [7-20-17]

Part 5:   Why Amazon and Google Are Two Peas from the Same Monopolist Pod [7-25-17]

Part 6:   Google-Facebook Ad Cartel’s Collusion Crushing Competition Comprehensively [8-1-17]

Part 7:   How the Internet Cartel Won the Internet and The Internet Competition Myth [8-9-17]

Part 8:   Debunking Edge Competition Myth Predicate in FCC Title II Broadband Order [8-21-17]

Part 9:   The Power of Facebook, Google & Amazon Is an Issue for Left & Right; BuzzFeed Op-Ed[9-7-17]

Part 10: Google Amazon & Facebook’s Section 230 Immunity Destructive Double Standard [9-18-17]

Part 11: Online-Offline Asymmetric Regulation Is Winner-Take-All Government Policy [9-22-17] 

Part 12: CDA Section 230’s Asymmetric Accountability Produces Predictable Problems [10-3-17]

Part 13: Asymmetric Absurdity in Communications Law & Regulation [10-12-17]  

Part 14: Google’s Government Influence Nixed Competition for Winner-Take All Results[10-25-17]

Part 15: Google Amazon & Facebook are Standard Monopoly Distribution Networks [11-10-17]

Part 16: Net Neutrality’s Masters of Misdirection[11-28-17]

Part 17: America’s Antitrust Enforcement Credibility Crisis – White Paper [12-12-17]

Part 18: The U.S. Internet Isn’t a Free Market or Competitive It’s Industrial Policy [1-4-18]

Part 19: Remedy for the Government-Sanctioned Monopolies: Google Facebook & Amazon [1-17-18]

Part 20: America Needs a Consumer-First Internet Policy, Not Tech-First[1-24-18]

Part 21: How U.S. Internet Policy Sabotages America’s National Security [2-9-18]

Part 22: Google’s Chrome Ad Blocker Shows Why the Ungoverned Shouldn’t Govern Others [2-21-18]

Part 23: The Beginning of the End of America’s Bad “No Rules” Internet Policy [3-2-18]

Part 24: Unregulated Google Facebook Amazon Want Their Competitors Utility Regulated [3-7-18]

Part 25: US Internet Policy’s Anticompetitive Asymmetric Accountability - DOJ Filing [3-13-18]

Part 26: Congress Learns Sect 230 Is Linchpin of Internet Platform Unaccountability [3-22-18]

Part 27: Facebook Fiasco Is Exactly What US Internet Law Incents Protects & Produces [3-26-18]

Part 28: How Did Americans Lose Their Right to Privacy? [4-14-18]

Part 29: The Huge Hidden Public Costs (>$1.5T) of U.S. Internet Industrial Policy [4-15-18]

Part 30: Rejecting the Google School of No-Antitrust Fake Consumer WelfareStandard [4-20-18]

Part 31: Why New FTC Will Be a Responsibility Reckoning for Google Facebook Amazon [4-27-18]

Part 32: “How Did Google Get So Big?” Lax Bush & Obama FTC Antitrust Enforcement [5-23-18]

Part 33: Evident Internet Market Failure to Protect Consumer Welfare -- White Paper [5-31-18]

Part 34: What Happened Since FTC Secretly Shut 2012 Google-Android Antitrust Probe? [6-8-18]

Part 35: Buying WhatsApp Tipped Facebook to Monopoly; Why Didn’t FTC Probe Purchase? [6-19-18]

Part 36: The Sea Change Significance of Simons-FTC Privacy and Antitrust Hearings [6-27-18]

Part 37: New U.S. Privacy & Data Protection Law Is Inevitable Like a Pendulum Swing [7-9-18]

Part 38: Why a US v. Google-Android Antitrust Case Is Stronger than US v. Microsoft [7-16-18]

Part 39: Google-Android’s Deceptive Antitrust Defenses Presage a US v. Alphabet Suit [7-20-18]

Part 40: Case Study of Google Serial Over-collection of Private Data for FTC Hearings [7-30-18]

Part 41: The Unfair and Deceptive Online-Offline Playing Field – FTC Hearing Filing [8-7-18]

Part 42: What Most Stunts FTC Antitrust and Consumer Protection Law and Enforcement? [8-21-18]

Part 43: Why New U.S. Privacy Data Protection Law Will Preempt State Privacy Laws [8-27-18]

Part 44: What’s the FTC Hearing before their Hearings on the Unlevel Playing Field? [9-6-18]

Part 45: Google Facebook & Amazon’s Anticompetitive Nontransparent Exchange of Ideas [9-12-18]

Part 46: The Unlevel Playing Field of Asymmetric Competition Expectations [9-17-18]

Part 47: How EU Amazon Antitrust Probe Spotlights Amazon as an Unlevel Playing Field [9-26-18]

Part 48: Google Facebook Amazon’s Non-Neutral, Neutrality Nonsense Harms Competition [10-2-18]

Part 49: FTC-DOJ Signal Privacy Is a New Antitrust Risk for Google Facebook [10-9-18]

Part 50: Google+’s Market Exit Spotlights Google + Facebook Cartel Market Allocation [10-16-18]

Part 51: Google Facebook Amazon’s Civil Liability Immunity = A Culture of Un-Ethics? [10-23-18]

Part 52: Google Facebook & Amazon’s Efficient Vortex Traps [10-31-18]

Part 53: The Bipartisan Politics Case for More Google Facebook Amazon Accountability [11-8-18]

Part 54: The Bipartisan Case for Modernizing Net Neutrality & Online Privacy Policy [11-15-18]

Part 55: Google Facebook Amazon’s Non-Neutral No-Privacy Paid-Prioritization Models [11-30-18]

Q&A One Pager Debunking Net Neutrality Myths