[karzeem]

Genuine question: is it safe to assume that dumping is bad for consumers? It's clearly bad for competitors, but it's basically like handing out free money to consumers. The concern is that once all the competitors die, the dumper will have a monopoly and jack prices up. But empirically, what are some examples of that happening? With few exceptions, it's only possible for monopolies to sustain above-market prices when laws block new competitors from starting up.

[sdenton4]

Look towards video rental back in the nineties. Blockbuster would move into a town, give very cheap rentals until the moon and pop stores went under, and then raise prices.

[p4wnc6]

The interesting thing in the case of Uber/Lyft/etc. is that the end goal would almost have to be a situation in which on-demand ride sharing applications became nearly the sole mode of transit in the regions of interest. Otherwise, literally as soon as you drive out all the other transit competitors (taxi companies, other ride-sharing services, whatever) and begin to apply monopolistic prices, there will be a huge flood of lower-priced alternate options, like taxi companies popping up again.

For me, this is what's so scary about Uber. It's not "disruption" as many people seem to claim. It's engineered regulatory capture.

The goal isn't to disrupt a market, but rather to wipe it out and have the financial and political backing to secure some sort of regulatory environment in which lower-priced options cannot emerge after the VC-subsidy phase ends and the monopolistic price increases begin.

It's double sad that as the sort of flagship start-up of the era, Uber leads the way in deplorable executive behavior, shady business practices, and questionable labor policies ... and despite it, they've managed to win the PR war that has every naive tech youngster singing about how they are "disruptive" and singing how all criticisms against them are invalid because of precious, precious "disruption."

[serge2k]

It seems to be coming around a bit, but people still talk about "taxi monopolies" and whine about how awful cities like Austin and Vancouver are to block Uber.

[Merem]

In a town here, we had basically the same with a doner kebab shop. The chain moved in, priced the doner at 1.20€ (local was 2.20€ which was already cheap), killed the competition after a few months and then raised prices to 3.50€.

[exclusiv]

Yeah video games were especially bad. I think they got up towards $8 a rental before they went under.

[cousin_it]

If a monopoly keeps prices high, but has deep enough pockets to temporarily lower prices and put any competitor out of business, then no competitors will arise.

[karzeem]

This is an interesting angle. Are there examples of it actually happening?

[dragontamer]

http://legal-dictionary.thefreedictionary.com/price+fixing

Unlike what the other commenter said... there are plenty of historical examples.

> The most notorious of the trusts were the Sugar Trust, the Whisky Trust, the Cordage Trust, the Beef Trust, the Tobacco Trust, John D. Rockefeller's Oil Trust (Standard Oil of New Jersey), and J. P. Morgan's Steel Trust (U.S. Steel Corporation).

[karzeem]

Those monopolies were generally protected by tariffs, expensive licenses or regulatory costs, or other laws that blocked competition.

Some dominant companies of course emerged in that era, but I'd be interested to see evidence that companies that weren't insulated from competition by government policies actually used their dominance to harm consumers.

[rayiner]

Those trusts arose at a time where there was very little regulation. There were tariffs protecting the industry as a whole from foreign competition, but that wouldn't have affected the rise of domestic competitors.

[karzeem]

Foreign competition is important, because some things (like oil drilling or sugar farming) are only doable in a few places, so if one company captures those places it'll be tough to compete.

Also, the fact that some companies became very dominant doesn't mean ipso facto that they harmed consumers. If a company becomes huge fair and square (as opposed to via regulatory capture or other coercive means), it may just mean that people like their product the best.

[dragontamer]

> expensive licenses or regulatory costs, or other laws that blocked competition.

Those didn't exist in the 1800s. The rise of the corporation occurred after the 1830s, when Congress no longer had to approve of every single company's existence.

After that, it was Laissez-faire economics for over 50 years. https://en.wikipedia.org/wiki/Laissez-faire ... basically ending with the Sherman Anti-Trust Act when Americans realized that was a bad idea.

http://ncpedia.org/united-states-v-american-tobacco-co

> protected by tariffs

Globalization wasn't a big thing in the 1800s. US Companies basically only had to worry about other US Companies. There was some foreign trade, but not much.

Within the US, a major entity like the Tobacco Trust had the power to set prices. When you're the only company in the entire US, you have the ability to stomp out competition like that.

[Wagthesam]

The cement industry is a cartel. They will rally to crush new entrants

[magic_beans]

Do you have any links of reporting on this? To be honest, it's a bit of a funny idea, given how banal the cement industry seems.

I could see something like this being an interesting This American Life story.

[kamaal]

All capital intensive businesses are this way.

Hotels, Transportation etc.

Why do you think it costs Uber $1.2 billion in losses just to survive?

[mkaziz]

Comcast and the ISP industry.

[dragontamer]

ISPs are a natural monopoly, but I don't believe they're actively working on price fixing like the Robber Barrons of the late 1800s / early 1900s.

[jsymolon]

The physical plant is a natural monopoly as you don't want everyone to put their own poles and/or wires in.

Nothing special about ISPs.

See Phone Service and Electricity.

[dragontamer]

I can agree to that.

[rhino369]

Comcast and the companies that became Comcast never had competition. It doesn't make sense to be the second cable company.

[dragontamer]

Time-Warner Cable, Verizon, Comcat, Google Fiber... plenty of competition.

The issue with natural-monopolies is that when one company starts serving a neighborhood, it makes no sense for a 2nd company to start serving the same neighborhood. That's just wasteful.

So there are huge amounts of Verizon-only neighborhoods or Comcast-only neighborhoods out there.

--------

Other countries solve this by highly regulating the "natural monopoly" part. IE: If you are going to lay wires to a neighborhood, you become subject to strict regulations. (Ex: utility).

Then, they force you to provide multiple choices. The deregulation of power companies for example allows me to pick a blend-of-energy, or I can pay a little bit more for clean energy providers.

Similarly, if we turn Comcast into a government-regulated utility (aka: accept the fact that it will always monopolize a neighborhood), and then force it to supply multiple ISPs in its pipes, things would probably get better.

My county actually has this deregulation, but it doesn't seem to work in practice because Comcast is both cheaper and got better customer service than the other ISPs that run on Comcast's networks.

[karzeem]

Huge portions of the cost of building a utility are due to local regulations, not the inherent cost of doing it. http://www.wired.com/2013/07/we-need-to-stop-focusing-on-jus...

[mulmen]

The argument for "treat ISP infrastructure like a utility" has always been that quality of service will improve and prices will drop if competition is introduced. It sounds to me like the regulations did exactly what would be expected when an actual market is allowed to form. How does this arrangement not work if you have good customer service and low prices from Comcast? Are you suggesting that the alternatives are somehow even worse than standard Comcast?

[karzeem]

There are huge regulatory hurdles to starting new ISPs.

[ee8aq3g5c6]

The broken taxi cartel wants you to think that high fares were a good thing.

[dragontamer]

Taxis once provided a good service. Just 20 years ago, you needed a specialist to take you to random places in a new city.

Then a little thing called the "GPS" was invented. Uber takes advantage of the GPS and anybody can now plot a course to anywhere without specialist knowledge of a city.

The strange thing is, people seem to have forgotten what life was like before GPS.

[the_duke]

Good point.

In Vienna (Austria), taxi drivers had to pass a pretty tough exam which required intimate knowledge of the cities streets.

A good driver still makes a difference in the age of GPS, because you can often safe quite some time by avoiding certain points of congestion and factoring in traffic.

But with GPS that incorporates (live) traffic data, the additional value is a lot smaller.

[kamaal]

Fares are still the same, you just don't notice it because a VC is subsidizing it for you.

The day that ends, it will be back to business.

Think of Uber as a taxi company subsidizing your travel for a few years. Things will be back to normal once the VC realizes they can't make profits until they charge customers like other taxi companies.

[ee8aq3g5c6]

Why would fares be the same when they don't have to fund the capital cost of a medallion?

By the way, according to the article, Uber is roughly breaking even in the US (lost some money last quarter, made money the quarter before).

[patrickaljord]

There are no examples. Social/price dumping is the big boogie man here in Europe used to regulate, tax, sue or just plain forbid foreign companies from competing aggressively against local companies. Branding the permanent menace of social/price dumping is just cronyism and protectionism in disguise, it hurts customers, innovation and employment. I hate it when populists and even regular politicians uses it and I hate it even more when people buy it, really makes me cringe but there's nothing I can do I guess.

[dragontamer]

I dunno about European History, but here in the US, every child is taught the lesson of the monopoly era.

Rockefeller Oil, J.P. Morgan Steel / US Steel, Tobacco Trust, etc. etc. These companies monopolized the industry in the late 1800s and fixed-prices to kill competitors.

[hibikir]

In the Spain of my youth, the regulation was way past avoiding a monopoly in commodities, and full on to protecting any incumbents on anything, like mom and pop retail.

One example was (and maybe still is), to ban discounts on textbooks, as the big margins were a big reason small bookstores stayed afloat.

Another was is to limit hours of operations in stores, including making stores be closed on sunday being mandatory, as many family retailers just couldn't man the store without hiring someone, and labor laws made hiring someone for little time expensive.

There was also a semi-recent outcry when the government stopped regulating rent hikes. for commercial property. There were plenty of stores in highly desirable locations that were on the same lease for a century! Their monthly rent could be two orders of magnitude away from the space next door.

Such level of protectionism of old business models just means that instead of going through pain and optimization for decades, they all get wiped off the map in one fell swoop the minute competition that can skirt the protectionist regulations comes in: Imagine what happens to tiny stores when, instead of first having to compete with US levels of efficiency in big box stores, they get to compete with Amazon. What happens to record stores that can get away with selling music for 25+ euros an album when spotify shows up?

So, while there is reason in fearing monopolies, the levels of regulation I describe just have little to do with what the US calls anti monopoly regulation.

[aaroninsf]

> With few exceptions, it's only possible for monopolies to sustain above-market prices when laws block new competitors from starting up.

This is false. The 'exceptions' are the norm.

It's all but tautological that monopolies can only be established in markets in which there are meaningful barriers to entry.

Those barriers are seldom legal, and legal barriers are of arguably limited value.

The only way for a 'start up' to 'disrupt' is if they are extremely well funded relative to the monopoly holder's investment in the market.

As noted elsewhere today, that is precisely the business model of Uber/Lyft/AirBnB: use vast amounts of capital to attempt to break into locked markets, while unprofitable for years and years.

Absent funding at that level, monopolies that level are largely unassailable once established.

The pace of breaking them and evolving the market in the interest of consumers is thus measured on a very very long timescale, during which consumers take it in the shorts.

(Witness taxi service in SF pre-Uber/Lyft)

[karzeem]

What are some good examples of sustained monopolies in markets that aren't heavily regulated?

[forgetsusername]

>The concern is that once all the competitors die, the dumper will have a monopoly and jack prices up

I'm not sure how relevant it is to ride-sharing, because the industry is not particularly vital to the economy, and the barrier to entry is low.

Where it becomes a concern is in crucial industrial infrastructure. Over the long term, China, for example, can dump cheap, government subsidized steel in the US, obliterating the domestic steel industry. 40 years down the road there's nowhere else to buy steel, which is bad both economically and militarily.

[andyidsinga]

in addition, uber may be getting rid of one kind of competitor that has a hard time competing with it while laying the ground work for other low-end entrants to compete with it. I really love seeing cars around town with both uber and lyft signs in the windows. ..I can imagine a sign with 8 of these.

[melvinmt]

While Uber competes with Lyft directly in the on demand rides space it by no means will gain a monopoly on all transportation, there are multiple levels of competition after all. So I don't believe we'll end up in a monopoly situation soon where we have to pay whatever Uber demands. If Uber gets too expensive (similar to how they started with pricey black car service), consumers will simply resort to alternative ways of transportation.