[Perseids]

> At the end of the day it should only matter if Microsoft's practices are hurting consumers rather than their competitors.

Focusing on short term repercussions for consumers has significantly hurt long term consumer interests and there is evidence that it hurt the economy in general. In the decades preceding the 1980s it was generally understood that competition itself is a necessity for effective free markets and that extreme power concentration (as we e.g. see today in the IT sector) is hard to reconcile with efficient markets and political freedom.

See [1] for details, here is an excerpt:

> An emerging group of young scholars are inquiring whether we truly benefitted from competition with little antitrust enforcement. The mounting evidence suggests no. New business formation has steadily declined as a share of the economy since the late 1970s. “In 1982, young firms [those five-years old or younger] accounted for about half of all firms, and one-fifth of total employment,” observed Jason Furman, Chairman of the Council of Economic Advisers. But by 2013, these figures fell “to about one-third of firms and one-tenth of total employment.” Competition is decreasing in many significant markets, as they become concentrated. Greater profits are falling in the hands of fewer firms. “More than 75% of US industries have experienced an increase in concentration levels over the last two decades,” one recent study found. “Firms in industries with the largest increases in product market concentration have enjoyed higher profit margins, positive abnormal stock returns, and more profitable M&A deals, which suggests that market power is becoming an important source of value.” Since the late 1970s, wealth inequality has grown, and worker mobility has declined. Labor’s share of income in the nonfarm business sector was in the mid-60 percentage points for several decades after WWII, but that too has declined since 2000 to the mid-50s. Despite the higher returns to capital, businesses in markets with rising concentration and less competition are investing relatively less. This investment gap, one study found, is driven by industry leaders who have higher profit margins.

[1] https://archive.is/HEik3#selection-1737.0-1737.346 (original: https://hbr.org/2017/12/the-rise-fall-and-rebirth-of-the-u-s... )

[fauigerzigerk]

What makes this so difficult is that it would be hard to fix even if there was agreement on the problem.

If governments were to parcel up markets and stop companies from crossing rather arbitrary dividing lines, it would effectively stop all investment in disruptive technologies because any real disruption most likely infringes on some of these laws.

If you stop large companies from expanding into neighbouring industries, e.g by bundling new stuff with their existing offering, you stop them from becoming bigger but at the same time you are reducing competition. The risk is that you might end up with smaller companies but even less competition.

I'm not ideologically opposed to government intervention. I just don't know how to do it. All discussions on how to break up some tech giant quickly reveal how devilishly complex the problem is. And it's different for each of them and for each industry.

What would be a general rule to prevent growing concentration without damaging innovation, ossifying existing market structures and make impossible demands on the political system in terms of keeping all those detailed rules up-to-date and fit for purpose?

[pydry]

>If governments were to parcel up markets and stop companies from crossing rather arbitrary dividing lines

There is absolutely no need to do this until you become Microsoft's size and no government has or likely ever will.

There was a lot more innovation enabled by the antitrust action against Microsoft in the early 2000s.

[fauigerzigerk]

>> If governments were to parcel up markets and stop companies from crossing rather arbitrary dividing lines

>There is absolutely no need to do this until you become Microsoft's size and no government has or will.

I'm not so sure. Debates about how to break up the tech giants often revolve around which particular activities shouldn't be under the same roof because there is an intrinsic conflict of interest.

For instance, some of the accusations against Amazon appear to be pointing to a potential solution where Amazon would no longer be allowed to compete with Amazon Marketplace traders or with publishers. Not sure if Lina Khan has anything like this in mind or not.

We also had many debates about whether media companies should be allowed to be internet access providers or operate internet backbones. Net neutrality is supposed to stop any misuse of power, but net neutrality itself is under constant fire from deregulators.

The thing is, it doesn't make much sense to break up a specific company because doing both A and B causes a conflict of interest but then let other companies do A and B. That's why in my view any such breakup implies a need for defining boundaries between markets that cannot be crossed.

[ClumsyPilot]

> boundaries between markets that cannot be crossed.

This only applies to dominant companies/ monopolies.

But there is merit to the idea - like should investment banks be allowed to profit from taking a position against the position of their customer, even if that was done on their advise?

[Wytwwww]

> defining boundaries between markets that cannot be crossed

So basically entrenched companies in specific markets would be extremely hard to challenge unless you have very large amounts of capital just laying around doing nothing? Even start-ups would struggle a lot more to get funding because no established company outside of that specific market would be allowed to purchase them. I'm not sure overall that would benefit consumers that much (IMHO the complete opposite but it's debatable).

Of course it depends on how the boundaries are defined, but just in tech:

Apple (being a computer company) would have never been allowed to develop the iPod/Phone/Pad without spinning them off into independent companies?

Google (being an OS provider) wouldn't have been able to sell Pixel phones themselves, but that wouldn't be an issue since Android probably wouldn't have been a thing in the first place.

So we'd be permanently stuck with Symbian and Nokia/Sony Ericsson/Blackberry/etc.

Same applies to MS, which is a great counterexample, despite all their resources and power they completely failed to leverage that in the mobile market. Then you have Intel vs ARM, Google and social media, even Kodak to an extent.

Having a lot of money, resources and great engineering is not necessarily such a huge competitive advantage when trying to enter an adjacent market. You must also be capable of developing competitive/innovative products while not being afraid to cannibalize your current revenue streams. Especially if we're talking about major public companies. Pouring billions into some (potential) boondoggle without any immediate return is hard to pull off without generating a severe backlash from your investors.

Having a seemingly "perfectly" competitive market (i.e. margins are close to the "risk-free" rate of return) doesn't necessarily lead to a lot of innovation because companies in such markets can't afford to make risky investments and tend to just focus on maximizing efficiency of current technologies. e.g. yes Google being able to fund Waymo with their Search/Ad revenue/etc. is not exactly fair to their potential competitors but IMHO preventing that would have significantly slowed down any real progress in the field.

[fauigerzigerk]

That's exactly what worries me. So if something is done to prevent growing market concentration it better be something that doesn't rely on this sort of fine grained market segmentaion.

One alternative that could work is to mandate open APIs and a requirement for large platforms to carry all legal traffic and content. I know this is incredibly tricky as well. Who pays for the infrastructure? What about security and privacy issues? It raises many questions but it seems more promising as a direction of travel.

[joshjje]

Yeah I don't know how you would break up Microsoft Office or regulate that. There are competitors but it's so pervasive, most companies use it. You'd have to create a public API that other competitors could use, and the HR lady is going to be pissed!

[Wytwwww]

> preceding the 1980s it was generally understood that competition itself is a necessity for effective free markets and that extreme power concentration (as we e.g. see today in the IT sector)

Yet Bell wasn't broken up until 1982 so I'm not sure if it was a such a turning point. IMHO allowing AT&T's monopoly to exist for that long was much more detrimental to consumers than whatever MS, Apple and other tech companies are doing these days.

But yeah I certainly overall agree that competition has generally been the driving force behind most of human progress and economic growth at least over the last few hundred years. It's just not entirely clear what measures should governments use to maximize the competitiveness of markets without introducing inefficiencies and costs that slow down economic growth and technological progress (while not providing that many benefits to consumers either).

[Aloha]

I fully believe we lost more than we gained from the breakup of AT&T - local access prices went up significantly, and while long distance rates declined, it did so roughly linearly with the decreasing cost of bandwidth.

In the end we pay about as much as we ever have in aggregate - but at a loss of all of the benefits the AT&T monopoly - subsidized general science research from the labs, a plethora of union jobs, and an overall loss of US manufacturing capacity.

My belief having working in the sector, anything that looks like a utility is better off as a tightly regulated monopoly than being open to the winds of competition.

[CamperBob2]

I fully believe we lost more than we gained from the breakup of AT&T - local access prices went up significantly

Interesting. Out of curiosity, may I ask how old you are?

[Aloha]

Early 40's - about the same age as the divestiture.

[CamperBob2]

I was a teenager at the time, and what I remember, above and beyond pricing alone, was just how firm a grip Ma Bell had on our entire civil communications infrastructure. The Carterfone decision was still a relatively-recent thing with radical implications -- you mean I can plug stuff besides phones into the wall socket?! -- and it was definitely time for things to open up further.

Intra-LATA calling between neighboring towns got a bit more expensive for a while, yes, but long distance almost immediately became much cheaper. It was like the move from film photography to digital -- suddenly everybody was taking photos freely, because the marginal cost was almost gone.

Post-breakup long distance calling became something people weren't inherently reluctant to use, and that was a big deal. Especially with the concurrent rise of BBSes. There's no way I'd ever agree that we were better off with the status quo.