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SWINDLE: Technological innovation is its own antitrust policy
Government can’t avoid harm when it tries to regulate dynamic markets
Question of the Day
The pace of innovation in the information-technology sector of our economy is so fast that defining the various markets and competitors at any given point in time is quite challenging. The Internet is allowing new innovations and emerging companies to thrive like never before, and in the blink of an eye, we could see the next game changer become a household name. Nowhere is this more prevalent than in the consumer-technology space.
Unfortunately, potential action by government regulators poses significant risks and threats to the incredible momentum of innovation - to the detriment of consumers.
Innovation has blurred market definitions for these devices and services, and the constant change and improvement in today’s devices and software satisfy the fondest dreams of antitrust theory: quality products, new competitors entering new and different markets seemingly every week, many choices readily available and reasonable prices through the miracle of competitive markets. A single device, such as an Android phone or iPhone, or a Web subscription such as Apple’s iCloud service can replace multiple previous generations of technology. Today’s consumer devices are multifaceted unlike ever before - smartphones, tablets and netbooks are capable of virtually everything a desktop computer can do, and the powerful software that operates these devices, along with the Internet, makes them even more functional.
All of this great technology, cross-functionality and near-constant innovation and improvements lead to a blurring of the lines between where one market stops and another begins. Markets simply are harder to define credibly, which creates problems for antitrust enforcers and other well-intentioned regulators.
As a former commissioner at the Federal Trade Commission, I am well aware of the necessity for rational regulation when markets fail or when those within the market act in noncompetitive ways. In today’s information- and innovation-technology business marketplace, separating what might be legitimate antitrust concerns from the frivolous complaints of competitors promoting regulatory intervention they know lacks merit solely to disadvantage another competitor can be quite challenging for the regulators.
During my tenure at the FTC, it was evident that our bureaucratic processes sometimes would have difficulty keeping up with changes in the information-technology industry. Keeping pace with innovation has been challenging, remains so today and will be so for the foreseeable future as we witness continuing convergence of technologies, functions and products. An overzealous regulator, struggling to keep pace and be informed of the rapidly changing technology and product markets, can make some really bad mistakes that easily could do the market and, ultimately, consumers more harm than good.
Think about how markets change. Digital-camera makers and cellphone makers compete against each other in what once was two distinctly separate markets. Similarly, social-media platforms and smartphone apps are quickly becoming go-to destinations for finding information once sought through traditional search engines such as Google, Bing and others. Consumers using the Android and iOS platforms are using specialized search applications to replace traditional search altogether - Yelp for reviews, Amazon for shopping and Kayak for travel, to name a few. The introduction of Apple’s Siri on iOS only scratches the surface of what search may look like in the future.
The entrance of these platforms and applications into search is an important milestone for antitrust regulators to note as they continue their investigation of Google. This month, Sens. Herb Kohl and Mike Lee of the Senate subcommittee on antitrust, competition policy and consumer protection sent a letter to the FTC reiterating many of the claims made against Google during the subcommittee’s hearing in September. However, they still failed to address the incredibly dynamic variables driving the marketplace.
In a world where traditional search engines are being threatened by new ways to gather information, Google must innovate. Adding companion features and services to its main search product enables Google to remain relevant and highly competitive. In fact, all of the general search engines have moved away from the traditional 10 blue links to a more useful and thoughtful search-engine design.
Antitrust regulators, especially my former colleagues at the FTC, would be well-served to realize that the pace of innovation is serving consumers well. The first rule of government ought to mirror the Hippocratic oath - “First, do no harm.” These innovations, the speed with which they occur and the plethora of companies big and small in the game provide an “embedded” antitrust protection in the marketplace. Competition in the technology sector is alive and well. It is exciting to imagine what is yet on the horizon for consumers if we let competition prevail without the government trying to pick winners and losers.
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