DOJ antitrust chief Makan Delrahim looking to the past to combat tech giant monopolies
The head of the U.S. Justice Department's antitrust efforts, Makan Delrahim, drew comparisons on Tuesday between past monopolies like AT&T and the state of the modern tech industry, including companies like Apple and Google.
At one point before its breakup Standard Oil likewise offered cutting-edge technology and low prices, Delrahim told an Israeli conference via video link, according to Reuters. Another infamous monopoly, AT&T, similarly defended itself by claiming that its market status offered better prices and innovation -- in reality it was an early example of the "network effect," Delrahim said, by way of its opposition to independent companies using its long-distance lines. That made it difficult or impossible for smaller rivals to compete.
The problem extended into Microsoft's anti-competitive efforts against Netscape in the 1990s, and antitrust action was a solution, Delrahim argued.
"The government's successful monopolization case against Microsoft may very well have paved the way for companies like Google, Yahoo and Apple to enter with their own desktop and mobile products," he remarked.
When considering antitrust actions the DOJ is said to watch for collusion, higher prices, and falling quality standards. Delrahim used diminished privacy as an example of poor quality, likely referring to scandals at Amazon, Facebook, and Google.
The DOJ isn't inherently opposed to companies buying up each other, Delrahim noted.
"Acquisitions of nascent competitors can be pro-competitive in certain instances and anti-competitive in others," he explained. "I will note the potential for mischief if the purpose and effect of an acquisition is to block potential competitors, protect a monopoly, or otherwise harm competition."
The DOJ recently received jurisdiction to launch an antitrust probe of Apple as part of a much wider examination of the tech industry. While Apple has escaped privacy complaints, critics have still pointed out that the company maintains absolute control of iOS app distribution, blocking developers from selling anywhere but the App Store -- where it normally claims 30% from each transaction, and enforces tough rules that for instance block "duplicates" of its own apps and services.
Democratic Senator and U.S. Presidential candidate Elizabeth Warren recently called on Delrahim to recuse himself from probing Apple and Google. He lobbied for both companies between 2006 and 2007, something Warren suggests is a conflict of interest.
At one point before its breakup Standard Oil likewise offered cutting-edge technology and low prices, Delrahim told an Israeli conference via video link, according to Reuters. Another infamous monopoly, AT&T, similarly defended itself by claiming that its market status offered better prices and innovation -- in reality it was an early example of the "network effect," Delrahim said, by way of its opposition to independent companies using its long-distance lines. That made it difficult or impossible for smaller rivals to compete.
The problem extended into Microsoft's anti-competitive efforts against Netscape in the 1990s, and antitrust action was a solution, Delrahim argued.
"The government's successful monopolization case against Microsoft may very well have paved the way for companies like Google, Yahoo and Apple to enter with their own desktop and mobile products," he remarked.
When considering antitrust actions the DOJ is said to watch for collusion, higher prices, and falling quality standards. Delrahim used diminished privacy as an example of poor quality, likely referring to scandals at Amazon, Facebook, and Google.
The DOJ isn't inherently opposed to companies buying up each other, Delrahim noted.
"Acquisitions of nascent competitors can be pro-competitive in certain instances and anti-competitive in others," he explained. "I will note the potential for mischief if the purpose and effect of an acquisition is to block potential competitors, protect a monopoly, or otherwise harm competition."
The DOJ recently received jurisdiction to launch an antitrust probe of Apple as part of a much wider examination of the tech industry. While Apple has escaped privacy complaints, critics have still pointed out that the company maintains absolute control of iOS app distribution, blocking developers from selling anywhere but the App Store -- where it normally claims 30% from each transaction, and enforces tough rules that for instance block "duplicates" of its own apps and services.
Democratic Senator and U.S. Presidential candidate Elizabeth Warren recently called on Delrahim to recuse himself from probing Apple and Google. He lobbied for both companies between 2006 and 2007, something Warren suggests is a conflict of interest.
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"A popular idea is to splinter the companies of their properties, which could prove a financial windfall for investors. Facebook could create billions of dollars in additional value through the spinoff of WhatsApp and Instagram, and Google could do the same with YouTube, according to Scott Galloway, a marketing professor at New York University and author of “The Four: The Hidden DNA of Amazon, Apple, Facebook and Google.”
Needham analyst Laura Martin wrote in a note Tuesday that cleaving parts of Alphabet would likely result in more valuable pure-play properties for investors. Separately, Cowen analyst John Blackledge estimated Amazon Web Services would be worth $500 billion as a separate company, making it one of the world’s 10 most valuable companies.
The problem with that approach is that the individual businesses could actually better compete against pure-play startups that can benefit from being singularly focused when facing off with a large company. Instead of four large companies ruling the tech world, there could be many that still have ties to a former corporate parent but are actually better equipped to harm competition.
“The threat of a Microsoft-like judgment could drive some of these (four) companies to spin off certain business lines in an effort to be seen as promoting competition,” Day said. “Whether such actions will, in fact, promote meaningful competition or just further reinforce the position of existing players or platforms remains to be seen.”
By the way, another good article delving in the possible cures is here:
https://www.marketwatch.com/story/breaking-up-big-tech-is-a-big-task-2019-06-10
Economics have to serve society not society economics.
Look no further that Ajit Pai for an example of how this relationship can be viewed.
It hinges on proving that a past association still represents a conflict of interest. So Spam is correct.
I'm well aware that the current political situation seems to have made lobbying a prerequisite experience for any administrative job, and I'm not in the Agit Pai fan club.
For government employees, who make or who take part in the decision making for the distribution of billions of dollars and pass regulations that control the flow of billions of dollars (or less), there are some rather serious rules. Broken every day, but there are rules. There are rules because of rampant abuse in past history. There minimally needs to be a suitable time period where the influence of a company’s money (employment, stock options, power, etc) stops have an influence on a government employee’s decisions.
It goes both ways for government employees. A government employee can’t quit and work for a company whom they had some kind of monetary or regulatory influence on while a government employee. They have wait 1 to 2 years. It really should be 5 to 10 years. This supposedly prevents the government employee from making a favorable decision for a company and being rewarded through employment, money from the same company later. Same thing in reverse, a new government employee shouldn’t be in the position to reward prior interests as that can enrich themselves as well.
Who knows, maybe this guy has been out of the lobbying business for tech giants for several years, in which case, he’ll pass muster. But, bah, I don’t see any favorable consequence from these actions whatsoever. It’ll surely enrich some people (you can already see the fund managers salivating), but for the public at large? My bet is they will get nothing, if not, will have a worse outcome, with higher costs and less convenience.
We're trusting everyone involved in the decision-making process to be non-biased but there's no assurances they are since we wouldn't have any way to know. Personally I think Delrahim might be the least of anyone's concerns. Everyone is watching him for signs of bias. What do we know about anyone else, who they've worked for in the past, who their friends are now, what their personal opinions are of Google and Apple, etc.? Nothing.
Under another administration, I’d be in support of this attempt at regulation. This administration is explicitly against regulation. This situation therefore has the odor of ulterior motivation.
You can suspect whatever you want, but there is no evidence it's true. Now, on the other hand, the Obama administration provably targeted political opponents with the IRS. They targeted journalists. They spied on Sheryl Atkinson, and tried to criminally pursue James Rosen. They also used intelligence agencies and the State department to spy on, frame, and attempt to remove the duly-elected President. This stuff actually and provably happened. Right now, your position seems to be that you don't trust Orange Man, so his entire administration must be corrupt and can't be trusted to even look at these matters fairly.
That position doesn't make sense, no matter what you think of the Orange Man. Under whose administration did these probes really get moving? Hint: It wasn't Obama. It was under Trump and his new AG. Moreover, Trump has worked with Cook, far more than has been publicized. True, he goes after Bezos, but that's presumably more about WaPo.