[todd-davies]

I think it's a false dichotomy to say that businesses either succeed by IPO/acquisition or fail. Can't a startup "just" be profitable within its niche, serve its customers well and make money while being privately held? It's not clear to me that we should live in a world where every middling startup is eventually acquired or has an IPO. Sure, some startups are destined for exponential growth and huge success, but not all. Likewise, if a business isn't profitable (and can't get funding to tide it over until it is profitable) then maybe it's not a good business. That's catastrophic for the firm, but on a social level, it essentially survival of the fittest.

With regards to personal freedom, we need to think more broadly than just founders. There's also the personal freedom of citizens to consider too; when powerful firms control large parts of the economy they essentially operate as private governments which can also impinge on people's personal freedom (see the below quote). Should a startup founder be allowed to sell a startup to monopolist/oligopolist if that contributes to more economic concentration? Maybe each individual merger isn't that harmful, but taken together their cumulative effect is. Besides, Khan isn't trying to block all mergers. She is focusing on mergers with already dominant firms; perhaps it's possible for the founder to sell a firm which isn't in a dominant position.

> ...power that controls the economy should be in the hands of elected representatives of the people, not in the hands of an industrial oligarchy. Industrial power should be decentralised. It should be scattered into many hands so that the fortunates of the people will not be dependent on the whim or caprice, the political prejudices, the emotional stability of a few self-appointed men. The fact that they are not vicious men but respectable and social minded is irrelevant. That is the philosophy and the command of the Sherman Act. It is founded on a theory of hostility to the concentration in private hands of power so great that only a government of the people should have it. [1]

[1] https://supreme.justia.com/cases/federal/us/334/495/

[gms]

How do you define ‘power’? Absent government regulation that can result in pathologies, a corporation only exists if customers are happy with its services. If Amazon makes me unhappy I’ll just take my money to alternatives.

No corporation forces me to do anything. They offer services and I’m free to buy or not from whomever.

[todd-davies]

Power is notoriously hard to define. In antitrust "market power" is usually defined as either the ability to set prices above marginal cost, or an ability to act free from competitive constraint (i.e. if the firm takes some action, it doesn't worry about other firms responding and taking away some of its business).

On the point of consumers switching away from bad firms, you say that

> a corporation only exists if customers are happy with its services

I'm not so sure. There are many firms that exist despite consumers being unhappy with the products/services provided. The notion that consumers can take their business elsewhere is shouldn't be taken for granted. There are many times where that's not possible; maybe alternative firms don't exist, or they're not convenient, or they have products you like (even) less. Maybe you're "locked in" to the existing firm even though it's starting to provide a worse service, through a contract or because of some path dependency. Thus, we can't take it for granted that firms and consumers have equal bargaining power and that consumers can simply stop purchasing at any time.

[gms]

I’ve never seen alternative firms not exist unless, like I said earlier, government regulations exist to make it harder for new market entrants to pop up (see eg investment banking firms or local cable companies in some regions). In a free society there are always a set of people eager to take advantage of existing vendor weakness.

I commend your exceeding politeness but it seems like this position is based on feelings of consumer harm and missionary zeal rather than rigour (including a lack of true acknowledgement of second order effects of this regulation - all regulation has costs). Yet here I am as a consumer speaking for myself otherwise.

Maybe this why Lina keeps losing her cases.

WhatsApp can’t figure how to make money -> Facebook buys them and can afford to keep them free -> consumers continue using them instead of losing access to a wealth-generating service (the third world is full of small businesses that run on WhatsApp and Instagram).

Still not clear to me why preventing this from happening is good.

[todd-davies]

Likewise, thanks for being polite.

I agree with you that regulation has costs. I never intended to communicate that it didn't. Yet, at risk of stating the obvious, the fact that something has costs doesn't make it not worth doing if its benefits are greater than its costs. The question then returns to the crystal ball; will society be better off if we allow or deny the merger? I get a sense that you are of the opinion that free markets generally lead to good outcomes. Me too! Central planning of economies is generally to be avoided. Yet at the same time, I view large concentrations of corporate power as an endogenous source of unfreedom in otherwise free markets. Big companies, if we're not careful, become mini central planners in their own right.

Are you suggesting that the only reason competition might not exist is because of government regulation? If so, that's not correct. Being free to enter a market doesn't mean that it's viable to do so. Barriers to entry are common in all kinds of markets so it's not as though people can always start competing against a weak vendor. Exclusive contracts, the threat of predatory pricing, increasing returns to scale, high switching costs, network effects, IP monopoly, geographic isolation, etc can mean that it's simply infeasible to enter a market and start competing against an underperforming incumbent. Local cable companies are a good example. If you want to start a cable company, you either have to lease cable from an existing owner or lay your own cable. The former is infeasible if your competitor owns the cable, and the latter may be prohibitively expensive. All that to say... merger control is an important tool which can help prevent markets from becoming more concentrated when barriers to entry are high [1].

Regarding WhatsApp & Instagram, we don't know what the counterfactuals are if Facebook didn't acquire them. It's not a dichotomy where either WhatsApp was either acquired or would cease to exist. Indeed, there could be another world where Instagram (a startup monetised via ads) merged with WhatsApp (another startup without a monetisation plan) to challenge Facebook. Perhaps that additional competition would have led to all sorts of innovations that we haven't thought of yet. Of course I can't prove that, but again, we're back to the crystal ball again ;)

Finally, it's important to acknowledge that antitrust is political. That's because public power (the state) is used to discipline/reshape private power (privately held firms). Furthermore, it's asking a very political question: who gets to coordinate economic activity? [2] Many other areas of law are similarly political (e.g. taxation law, electoral law), so antitrust isn't special. Yet it does explain to some extent why there are strong disagreements. That's okay :)

[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1999829 [2] https://heinonline.org/HOL/Page?handle=hein.journals/uclalr6...

[gms]

I would like to see a list of costs of these regulations. Lina Khan never mentions it. Again there may be a fundamental lack of rigour that causes her to lose her cases so absolutely.

Yes, you point to another fundamental problem: central planning has a consistent record at making most of the populace poorer. It’s precisely because you don’t know the counterfactual that you should leave decisions to those with knowledge and skin in the game (ie market participants).

If Silicon Valley’s best VCs have a 30% success rate at picking winners, I don’t see how bureaucrats in Washington (whose salaries, modulo election season, aren’t even subject to consumer preferences given that they’re extracted by force from our taxes) feel so confident.

Finally, of course there is a fundamental axiom that is the root of the disagreement. I view government bureaucrats as our servants given we pay their salaries. I would rather consume services with private service providers as I please and involve the government to arbitrate disputes that come up.

PS The UK government did a nice job opening their cable market.