Competition

This quarter EU antitrust authorities are expected to rule that Google is illegally dominant in the markets for licensable smart mobile operating systems and app stores for the Android mobile operating system, because Google evidently abused its dominance by contractually requiring Android device manufacturers and mobile network operators to install only Google search and make it the default search engine.

Importantly, this expected EU Android ruling occurs in the context of the EU’s seminal antitrust decision last June that: 1) ruled Google’s search services were dominant; 2) ruled Google abused that dominance by giving illegal advantage to its own comparison shopping service; 3) fined Google a record $2.7b; 4) imposed a cease and desist order on Google to stop this illegal behavior in 90 days (or face additional fines of up to 5% of Alphabet’s revenues); and 5) imposed a remedy that requires that rival comparison shopping services get treatment equal to what Google provides itself, a requirement that Google apparently has not been respecting.

What this all suggests is that the next ruling, fines, and remedies that the EU will consider in the Android case, are likely to be more adverse to Alphabet-Google’s business and model than the previous one.

In 16 minutes I overview for you why there is a woefully incomplete understanding of the U.S. Internet’s three “Standard Oil-like” monopolizations (Google, Amazon, and Facebook) and the four cartelization dynamics these three monopolies have collectively spawned. I also spotlight why there is virtually no understanding of the root cause of these artificial and anticompetitive outcomes. Please see this link to a video (2:30-19:05) courtesy of The Capitol Forum and CQ’s Fourth Annual Tech, Media, and Telecom Competition Conference on December 13, 2017.

My remarks at this conference summarize and expand on my White paper entitled: “America’s Antitrust Enforcement Credibility Crisis: America’s three enduring intermedia monopolies and four market cartelizations are a result of lax, asymmetric antitrust law enforcement & America’s anticompetitive Internet-first industrial policy.”

Below is the abstract of my new antitrust white paper, which can be accessed in full here.

I will present it at the Capitol Forum CQ 4^th annual tech competition conference in New York City Wednesday on “Obstacles to Antitrust Enforcement.”

It is also a timely and relevant addition to the Senate Judiciary Antitrust Subcommittee hearing Wednesday in Washington D.C. on “The Consumer Welfare Standard in Antitrust: Outdated or a Harbor in a Sea of Doubt?” because it discusses how the Chicago School antitrust consumer welfare standard remains sound as is, but warns that its application to Internet intermediary platforms is being badly distorted by America’s Internet-first industrial policy and its longstanding Internet competition double standard.

Many will find the 27-page white paper with >150 cites, a very helpful, up-to-date, overview and fact set on the current badly troubled state of competition and antitrust in the marketplace today.

A White Paper

Sometimes it is easy to miss the forest for the trees.

That may be the case with the outlook for the DOJ v. AT&T-Time Warner case.

In this analysis, rather than recount the legal antitrust “trees” that have been well-argued in the DOJ’s complaint brief and AT&T-Time Warner’s defense brief, and the rule of law “tree” I analyzed initially, it is important to focus on how this case is highly-unusual in one characteristic, and that characteristic begs us to try and examine the forest not the trees.

What is highly-unusual about this precedent-driven case is the Judge, U.S. District Court Senior Judge Richard J. Leon.

On net neutrality, we have all been tricked by the masters of misdirection.

For many years Google, Facebook, Amazon, and the Internet Association have deftly misdirected the media’s and government’s attention away from their unaccountable market power, discriminatory models and practices, and real consumer protection problems, towards the potential for discrimination by legacy-regulated, competitive, broadband providers.

The masterful misdirection becomes painfully obvious when one looks at the facts.

First, it’s the supposedly “competitive” Internet “edge” that is hyper-dominant and hyper-concentrated, and it is America’s broadband industry that is the most competitive in the world.

While I agree with the economic liberty, principled approach of limited government and a reduction in regulation that DOJ Assistant Attorney General Makan Delrahim, explained in his remarks before the ABA’s Antitrust forum today, I also believe in the equally important economic liberty principles of equal protection under the law and due process. Both are important to fair and equal antitrust administration of Justice in a free market.

Since the DOJ apparently is telegraphing its intention to file suit to block the AT&T-Time-Warner merger, because it reportedly prefers structural remedies over behavioral remedies, I appreciate that for the DOJ to prevail in court, it must operate a fair merger review process, and prove its case on the merits in a court of law.  

In the specific case of the AT&T-Time-Warner merger, which was considered in 2016 and announced October 22, 2016, the companies evaluated the merger based on the known, long-standing, consistent, vertical-integration, legal precedents at that time and that today remain the operative legal antitrust precedents in court.

Washington increasingly is asking what are Google, Amazon, and Facebook?

That’s because they seem to be in the middle of many vexing problems spanning culture, politics, civility, economics, competition, jobs, investment, national security, public safety, consumer welfare, etc.

At core, Google, Amazon, and Facebook are unregulated, economy-wide, distribution networks, that de facto are taking control over core economic processes.

They are modern-day Standard Oils. Google is Standard Data. Amazon is Standard Commerce. Facebook is Standard Social.

Doubt it? Consider reality.

Standard Data: Alphabet-Google is the distribution network for over 4 billion search users, 2 billion Android devices, 15 million publisher partners, 5 million advertiser clients, and 400,000 Android developers. Google’s network has over 200 data-capturing products and services, 15 of the world’s fastest, highest-capacity data centers, and 2000 server points of presence in over 150 countries.

Google commands 19 of the top 25 Android apps downloaded over a billion times including: Search, Play, Gmail, Maps, YouTube, Google+, Text-to-Speech, Chrome, Play Books, Play Games, Play Music, Play Newsstand, Play Movies & TV, Drive, Photos, and StreetView.

Facts are stubborn things.

Know what one finds when one puts the evidence of Google’s many antitrust, IP, and privacy offenses into one telling timeline of what Google did from 2008-2017?

One sees a tale of two terms. Commendably, the evidence shows the first Obama Administration term featured very tough antitrust, IP, and privacy law enforcement against Google. Sadly, the second term was the direct opposite – featuring virtually no antitrust, IP, or privacy law enforcement against Google.

Know what one finds when one overlays the telling timeline of improper influence of Google’s Government Guardians, i.e. senior Google executives and outside counsels placed in all the right places to protect and advance Google’s business -- with the timeline of Google’s antitrust, IP, and privacy law enforcement problems?

One can see predictable patterns. Shortly after Google Guardians show up, those Google’s government problems go away. Same administration, different personnel, near completely opposite outcomes. It’s a quintessential example of the old Washington adage that “personnel is policy.”

You can’t make this stuff up.

Asymmetric Realities: The five most valuable companies – Apple $802b, Alphabet-Google $688b, Microsoft $585b, Facebook $500b, and Amazon $475b – are together worth an unprecedented $3 trillion and widely-appreciated to be dominant in the communications-driven businesses of smartphones, search advertising, subscription business productivity software, social advertising, and ecommerce platform services respectively.

In Washington’s theater of the absurd, these well-known, winner-take-all platforms, are playing the role of victims of potential harms, that supposedly can’t afford to shoulder the potential risks for the potential net neutrality problems that they allege are potentially serious, when they produce $131b annually in free cash flow and have $357b in cash (mostly overseas).

SUMMARY:

In 2015, the FCC’s Title II Open Internet broadband order was predicated on a demonstrably false central competitive premise: that the Internet’s edge was competitive while the broadband Internet core was not competitive. The facts prove the opposite.

The 2015 FCC’s competition premise is myth.

While there is plenty of information in the record, and in the July 17 comments, that broadband is  competitive, until now there has been little data and research on the overall competitiveness of the Internet edge providers, save for NetCompetition’s July 17^th comments that showed how concentrated the Internet edge is using the Internet Association as a proxy.

To further rebut comments that were predicated on the demonstrably false central premise that the Internet’s edge is competitive, NetCompetition submits additional Internet competition research below.