The argument of technical impossibility seems implausible, although it would no-doubt be difficult. Whether there can be enough engineering will mustered within the company to separate out the AdTech stack from the rest of Google's services is another question.
In terms of how the AdTech stack could look afterwards, here is a paper (I authored) advocating for the introduction of an interop layer such that users could choose which advertising network to use with Google's products and services: https://doi.org/10.36633/ulr.1113
Many of us in the antitrust/competition law community are trying. One issue, specific to digital markets, is that the field has very few people who are both legally and technically literate. If you're a technical person looking for a career shift, moving into legal policy/academia has the potential to be quite high impact for that reason.
Gods I would love to work more in a policy space, tho my background is entirely technical.
A friend of mine has been trying to get into law school for a few years; she's technically competent and plenty intelligent, but it's been hard going for her to get in, plus multiple years of education to even attempt the bar. All of that sounds like far too much sunk-cost to me to dally in and figure out if it's a path I would truly enjoy.
What ways could I engage with policy coming from a technical background that would serve as a useful stepping stone to a more policy based career, but doesn't require such an upfront cost as a law degree?
I guess it depends on your circumstances. In Europe, for instance, the cost of a degree is sometimes quite low. My gateway from tech to law was a part-time masters degree in political science, and which cost around 200 euros a semester (in Germany). That degree gave me enough experience to then apply for a PhD in law.
Which brings me to the next point. Doing a law degree and passing the bar is perhaps the obvious path to doing policy things. It’s basically the only way that you can end up actively participating in courts, for example. But there are many other options! For myself, the plan is to stay in academia and not take any bar courses (then again, who knows what will happen!). Academics have lots of potential to shift policy, especially as neutral agents who aren’t paid by either side of particular debates. Our papers are read by policymakers and judges, who often don’t have the time or resources to think deeply about particularly gnarly topics. But there are lots of other options which could also work, and I guess finding a "niche" would depend on your specific circumstances, connections and skillset.
If you’re looking to spend more time thinking about policy issues, I’d start by simply sleuthing online. Bruce Schneier, for example, regularly writes excellent pieces at the intersection of technology and policy, which are very well hyperlinked to other high quality stuff. These kinds of blogs are a great way to get into the space, as well as to learn about opportunities which are coming up. Reading journal articles that sound interesting is a good option too (and US law journal articles are often quite accessible). There are also spaces offline, such as conferences which encourage both law and tech people (there’s one happening in Brussels soon [1]), or even institutions set up specifically to operate in this space and which have in-person events (Newspeak House comes to mind [2]).
May I ask if you make comparable money to when you were in tech? This sounds like a good career-shift for me but I wouldn't want to sacrifice current quality of life.
Absolutely not! But I've never been a materialistic person and lived below my means while I worked in tech, so my quality of life didn't really drop. Although academia isn't anywhere near as lucrative as tech was, I find my work really quite fulfilling now, which counts for a lot. I have no regrets!
For posterity, if you're reading this and are interested, feel free to drop me an email if you have questions.
Call up TechCongress and offer to volunteer for a cycle.
Law school is the same as med school: if you can’t see yourself living life as something that requires a JD, skip it. Just do the thing you want to do; unless that’s “dispense legal advoce to paying clients and represent them in legal disputes” you can probably do it legally without a JD.
Also be aware you are a lawyer when you graduate law school and you don’t have to pass the bar unless that’s a requirement for your practice. For example, a general counsel of an internet startup might not have to be a member of the bar, but someone going into trial court to represent clients does. I would think you could be a staffer for a congressperson with a JD and without bar membership prettt easily.
That’s one issue, but is it even the most important thing? A lot of it is just regulatory capture, legalized political corruption (“lobbying”) and the total disfigurement of antitrust law by Bork decades ago.
I think the competition/antitrust law community is beginning to develop some effective antibodies against some of these. Bork's ideas are pretty well and truly debunked these days, and issues with regulatory capture, lobbying etc. are getting lots of attention (e.g. see this excellent paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4979205).
Once, out of curiosity, I looked into how easily someone without a formal law degree and work experience could take the bar exam "for fun", and IIRC in my state it wasn't really possible.
Note that this fine is made up of 0.04bn of fine and 1.8bn of deterrent against future anti-competitive behaviour [1]. The the 2006 fine-setting guidelines allow the Commission to do that [2].
We should read the 1.8bn lump sum (roughly 0.5% of Apple's revenue) as partially being about music streaming and app stores, but mainly a warning to all large firms which are currently jockeying for a dominant position in emerging tech like generative AI and visual computing.
The warning: play fair and compete on the merits, or see you in court.
I thought the function of fines WAS the deterrent effect? or is some aspect of this restitution? I thought this was payable to the EU itself, not spotify.
> I thought the function of fines WAS the deterrent effect? or is some aspect of this restitution? I thought this was payable to the EU itself, not spotify.
Maybe it's something akin to punative damages (https://en.wikipedia.org/wiki/Punitive_damages), where the "fine" component is assessed according to the actual harm measured and the "deterrent" amount is meant to make it sting as a punishment.
The law always needs a little something extra to deal with people like the guy who parks in handicap spaces because he can afford the fines.
Would be nice if fines like that were earmarked as probationary in the sense that if the bad behavior continues, they actually have to pay the fines plus a penalty, otherwise they get a diminished amount.
In most cases, the Commission sets a fine which is based on the harm caused by some anti-competitive conduct, with relatively small adjustments for extenuating or attenuating circumstances. In this instance it's the opposite; the economic harm was small but the adjustment was huge.
You're right that the logic - deterrence - is the same in both cases. But what's different (at least in my view), is the object of the deterrence.
Ordinary fines are designed to make anti-competitive behaviour unattractive in terms of the costs and benefits. Maybe some underhanded conduct generates €40m extra profit, but the risk of a €40m fine plus legal costs and adjustments makes it not worth it.
The trouble is that these fines might are essentially just rounding errors for large firms. In this case, a €40m fine would be tiny in relation to Apple's revenue stream (~€350bn euros a year), thus not an effective deterrent. That's for two reasons. First, the 40m figure is too low since a "significant part of the harm caused by the infringement consists of non-monetary harm, which cannot be properly accounted for under the revenue-based methodology as set out in the [Commission's guidelines]"[1]. Second, the fine is trying to to "deter [Apple and] other companies of a similar size and with similar resources from committing the same or a similar infringement"[1] even when they could absorb the ordinary (small) fine as essentially a rounding error on their cost of doing business. In that case, large conglomerates could basically just ignore competition law.
So here, the Commission is deterring all firms which have a "particularly large turnover" [2] (e.g. Big Tech firms) from using their power in one market to gain an advantage in another market, as in this case where Apple used its control over its App Store to gain an advantage in the music streaming market. The fining guidelines allow for fines to be much larger (~50x in this case) for tech giants, even if the actual infringement didn't cause that much quantifiable harm.
You're right, there's no restitution here. As you say, the fine is payable to the EU and would be paid into the EU budget.
It's insane that they think the deterrant to a single line of business should be based on the revenue of the business as a whole instead of that line of business. 0.5% of app store revenue would be far more reasonable than 0.5% of Apple revenue.
I think, in order to have the desired effect, the deterrant must be in proportion to the resources of the transgressor as a whole entity.
If its not, Apple can afford to behave anticompetitively with their appstore, hold on to an illegal position of power and use that to extract revenue for the other lines of business that they're in.
Morally, if we fine violations to the speed limit in proportion to the context of the transgression only it will not adapt to the income of the transgressor. That makes it practically legal for rich people to drive as fast as they wish.
I'd support fines for the whole business revenue if you can prove that's what the business is doing. Here it's pretty clear the app store is behaving anti-competitively to increase app store revenue. Apple doesn't sell more iPhones by making it harder to use Spotify on them.
I follow your reasoning, but by the same reasoning we could say that Apple shouldn't internally fund projects with the revenue from other projects. Each project should be supported by its own income stream.
To function as a deterrent, it needs to represent a cost that a company is unwilling to tolerate.
There are a few ways to think about this. One is deterrence based on cost-benefit analysis, which is essentially a game theoretic way to think about firm behaviour. The logic here would be to fine the firm enough to deter anti-competitive behaviour, as has been mentioned.
Another way to think about it, is to say that we care about safeguarding the process of competition itself. That could include ensuring that competition is fair, ensuring that firms can enter markets, ensuring consumers get to choose which firms to consume from, etc. There's lots of precedent for that in EU competition law [1]. Taking that view, Apple was using its dominant position to restrict the economic freedom of Spotify (and others) and thereby harming the process of competition. Specifically, it limited rival firms from "fully informing iOS users about alternative and cheaper music subscription services" (as per the press release), thus harming competition.
All that to say, if we take the objective of EU competition law as being to prevent large firms from exercising power over smaller firms and to protect the process of competition in a general sense, then these big fines are easier to justify.
Honestly, these multibillion dollar fines from the EU against US tech companies always have an air of 'Since we don't really have a domestic tech industry, these judgements don't really set a precedence for domestic companies, therefore let's just systematically use fines to collect cash'. An extra tax for big US tech companies doing business in Europe. Is there some truth to this?
Or maybe the US is just too comfortable with being the home of multiple large criminal organizations? Said crime syndicates then actually get fined for committing crimes on countries with actual rule of law, unlike the oligarchic farce that is the US justice system.
> Any person or company affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. The case law of the Court of Justice of the European Union and Regulation 1/2003 both confirm that in cases before national courts, a Commission decision constitutes binding proof that the behaviour took place and was illegal. Even though the Commission has fined the company concerned, damages may be awarded by national courts without being reduced on account of the Commission fine.
Uff. Spotify can ask for damage compensation on top of those 1.8 B€, huh?! Apart from music streaming services, I don't see why the situation isn't fundamentally the same with video streaming and Apple TV, and maybe even things like VPN, or cloud services, where Apple has its own competing products now.
So... this ultimately may get really, really nasty and expensive for Apple. I am so here for it :)
Looking from the perspective of Apple, the whole situation is really annoying. Let me play the devil's advocate here. They built the iPhone, iOS and all its frameworks and the App Store. Now they are forced to act as essentially a public service provider. Philosophically, the amount of users they have shouldn't necessiate them to be treated as one. But you know, everyone wants a piece of the cake Apple thought they baked under their own terms. It's quite telling that this regulation comes from EU which are not getting nearly the tax and revenue US gets from Apple.
Yeah, and if they don't like Android either, they still have the choice of not having a phone at all, therefore not having a job, medical care, a house, ... Maybe, you should consider the context of antitrust legislation and what that entails for your argument.
And maybe baby, you should also explore, if you may be affected by a cultural economic dogma founded in times of red scare propaganda. Because these naive free market takes tend to come up a bit reflexively in some people, but are actually very rare for economic scientists.
I'm not a crazy free market maximalist or antitrust hater.. its very important in many markets.
I just don't think its really necessary or high priority for iPhones. Android is one OS like Linux is one OS, there are 5-6 big time manufacturers with their own OSes, 100s of phones at all price points. I was replying to someone complaining about the price point but there are so many great phones at lower price points. Not to mention discounted rates on plans or second hand phones.
This particular case was about Apple not allowing third party payment options. The payment market is cornered by Visa/MasterCard that charges 1% on every single transaction. They charge a huge percent rate on a constant amount of work. There are countries that operate their own payment systems that have 0 or close to 0 fees on transactions. But no one is going to go after Visa/MC in a 2-player market just like phones that hasn't reduced prices in decades? So now Spotify can stop paying fees to one monopolist and pay them to the next one down the line? These don't look like rational, considered decisions by antitrust agencies to focus on the markets that have the worst behaviour, more just piling on the current thing.
> I was replying to someone complaining about the price point
No, you were replying to someone pointing out how much Apple already got paid for their product, the infrastructure and ecosystem entry, before rent seeking from Spotify.
> So now Spotify can stop paying fees to one monopolist and pay them to the next one down the line?
Are you serious? First off, the fees differ substantially, Visa/MC is likely involved in any case, and most importantly: That's not what this lawsuit is about at all. The antitrust dynamic comes with the fact that Apple has it's own competitive service going. Spotify can't even inform its customers about alternative payment options within the app.
Not to mention, mixing the end consumer choices with Spotify's choices now does not make a lot of sense as an argument to begin with.
Oh I do exercise that right but it's not that simple. There's only so much the average citizen can do against the marketing and the network effects that a trillion+ dollar company can buy.
Luckily there's such thing as consumer protection laws in EU.
So my family can enjoy at least some protection from idiotic things such as not using industry standard charging cables (USB-C) while still marketing their product as green. And abusing their power against other companies and customers.
We're still left with jokes like a thousand dollar 8GB/256GB laptop sporting glued parts and an outdated 60hz screen (my friends 6year old phone has better screen refresh rate).
Not to mention they compare M3 performance against M1 instead of M2. There's only so much laws can do against deceiving marketing.
Ah yes, and people also have the choice not to buy cigarettes, too. Let's remove all the warnings on the boxes and cancel any law changes around trying to reduce smoking.
Devil advocate is that people cannot have more that one phone per person realistically. If every app would need a separate phone, that would be stupid. It is totally fine for a country to ask that if a company wants to sell their devices in the country, they have to follow some rules.
> They built the iPhone, iOS and all its frameworks
That's what their customers payed for when they bought very expensive iDevices. Honestly, what a weird take, considering Apple really invented this argument. iOS app devs and service providers are just as much a necessity for Apple's popularity and success. You know, the default iOS calculator app used to be a meme not that long ago...
> Appstore
Yeah really, unhappy devs should totally roll their own distribution like on every other platform since the beginning of software development. Oh, wait...
> But you know, everyone wants a piece of the cake Apple thought they baked under their own terms.
Or maybe, Apple wanting a piece of the second largest consumer market should play by its rules, considering all the commerce infrastructure they are using... Not to mention the education system they are free-riding for their engineers, courts protecting their brand and IP, police enforcing property rights, ...
If they continue the fine amount will be increased on the next one. That's how the EU plays, you get a warning, then a deterrent, if that doesn't stop the behaviour fines will continue to be levied in increasing amounts.
GDPR rules follow the same structure and are a pretty good deterrent.
> In October, the Consumer Financial Protection Bureau (CFPB) proposed a set of rules that if implemented would transform how financial institutions handle personal data about their customers. The rules put control of that data back in the hands of ordinary Americans, while at the same time undermining the data broker economy and increasing customer choice and competition. Beyond these economic effects, the rules have important data security benefits.
Let's wait and see what the remedy will be in this case. For the past few decades, antitrust enforcement has mostly relied on fines as opposed to requiring firms do something differently. As a result, courts and agencies don't have that much practice figuring out what remedies to apply. This is an area where software engineers who understand what's technically possible can come in very handy.
The devil is in the detail, and there are a few ways that "[opening up] Google's devices", "allow[ing] other app stores on its Android phones and tablets" and allowing developers to charge customers "without having to fork over a cut to Google" could be implemented.
Dropping prices below cost to wipe out competitors is predatory pricing which is prohibited under the antitrust laws. It's not always easy to prosecute, but it against the law nevertheless.
What does that mean when it comes to software though? For something like Uber or Instacart that seems pretty straightforward, but for most tech companies I'm not sure how to determine what is predatory. Otherwise aren't all unprofitable companies selling below cost?
Yes, it's a bit of a problem for the field! Like many aspects of antitrust, predatory pricing applies cleanly for an industrial-era economy but as you point out, it's less clear how to translate it into the context of 21st century informational capitalism. A significant amount of legal and economic research in the field is asking these kinds of questions, and the answers are still forthcoming.
Got it, that makes sense that its not well established. I saw from your profile that this is actually something you are studying, which is very cool! I've always wondered what the examples of this (predatory pricing -> drive out competition -> jack up prices) happening in practice are? I know Uber is the ur-example but that feels different from something like pure a saas?
I wonder if as long as there is VC money out there, the viability of this strategy is limited because the moment incumbents (even ones with overwhelming market share) try to jack up prices, they immediately create an opportunity for a startup to undercut them.
I can't think of a good example for a sass product. I'm sure it goes on though and I'm always interested in hearing about examples!
A similar strategy which seems to be quite common these days is to cross-subsidise, which is when a firm sells one product at an artificially low price by using profits it makes from selling another product. If we think about cross-subsidisation, then lots of multi-product sass offerings might fall under our scope. That said, cross-subsidisation has economic benefits, so it's not clear-cut.
As I said, to properly adjust to digital markets I think antitrust will have to identify new patterns of harm and invent new metrics to measure them. Predatory pricing (and similar offences) will always be useful, but they might just not fit well onto these kinds of markets.
It seems like the implicit assumption is that there must be a harm somewhere, we just haven't found it yet. But as a consumer, I'm not sure that is true? Even the Amazon paper seems to admit that there isn't any consumer harm to be found, only harm to smaller competitors' businesses. But that feels like an odd standard to apply since isn't any business's primary purpose to compete with / harm competitors?
> It seems like the implicit assumption is that there must be a harm somewhere, we just haven't found it yet... isn't any business's primary purpose to compete with / harm competitors?
As a general rule, firms want to escape competition in order to make higher profits. There's nothing wrong with that! Indeed, the mechanism by which economic competition generates many of its benefits is that firms innovate in order to escape competition, and for those innovations to be useful for us all. So, where does competition/antitrust law come in? In part, it's about ensuring that firms escape competition in the way that we want. Innovation and competition on the merits is good, underhanded tactics to harm competitors is bad. All competitions need these kind of rules, regardless of whether they're economic, political, sporting, etc. When you have a large population of thousands of firms, you can be sure that some of them will be trying to compete unfairly, hence the assumption that there is some harm that we're yet to find.
> there isn't any consumer harm to be found, only harm to smaller competitors' businesses
We can distinguish between 'static' and 'dynamic' harms. Static harms are those which happen in the short run, such as a cartel agreeing to increase prices or not innovate. These harms are quite concrete and easy to define. Dynamic harms are those which affect the way a market might function in the future. For instance, a harm to innovation may result in people not having access to new products. It's hard to say for sure whether these harms will actually manifest, so we're usually talking about tendencies instead of certainties. It's perfectly reasonable to consider tendencies under the law though (e.g. we might prohibit drink-driving for the same reason). Dynamic harms usually have harm to consumers as a second order effect (e.g. reduced innovation or choice).
The analogy to drunk driving makes sense, but in the context of business is it so important to get ahead of the harms that we have to legislate against pre-harms? Innovation and merit and underhanded tactics are in the eye of the beholder, and it seems like we apply a LOT of preexisting notions of who is a good company and who sucks when we evaluate behaviors. That doesn't feel like a sustainable way to write and enforce laws.
No worries :) You're right that the law shouldn't be arbitrary. Lots of what the law is applied only when a cases passes legal tests to determine if some conduct violates the law. These tests are applied the same way to everybody and are thus impartial. Naturally, there's lots of debate and research into which legal tests we should use, and what their substance is.
Firstly, I didn't spot what paper you mean other than 'related to Amazon', but it's plain to see what can happen to an Amazon. Once it's finished destroying competitor businesses the only way it can get more profit is by continuing to get paid, but ceasing to deliver services. And this is already happening in various ways. I'm sure I'm not the only person, even on Hacker News, to have grudgingly written off an Amazon purchase that simply never was delivered, a cheap and trivial thing that didn't pan out, a 'problem with this order' that the system simply ate.
At the point when you're taking consumer money and not having to do anything, that's harm. You can get away with it because your system is invincible. (I also feel like this about the insurance industry: I think it's set up to not pay, and has better legal representation than the consumer does)
To the extent that a business's primary purpose is to make money, these are successes. To the extent that the primary purpose is to hurt competitors, these are still successes, to the extent they're possible and not just undermining your position: you have to be monopolistic or at least in control to be able to pull that stuff off, but then you're wealthier, giving you more power to hurt competitors.
None of this serves a market economy for providing goods and services. It may exist, but it hurts capitalism as a functioning concept.
> I didn't spot what paper you mean other than 'related to Amazon'
Lina Khan (FTC chair) wrote an influential paper called The Amazon Paradox laying out a new antitrust doctrine which argues that rather than consumer harm, the standard for antitrust should be harm to competitors.
> it's plain to see what can happen to an Amazon... you have to be monopolistic or at least in control to be able to pull that stuff off, but then you're wealthier, giving you more power to hurt competitors.
"Can" happen is not the same as "has" or "will" happen. If they are causing consumer harm, they should be punished. But as far as I can tell, there hasn't really been strong evidence of that yet (your example of a bad delivery experience is not unique to Amazon), and I don't think we should punish pre-crimes. Ultimately, it feels like you and many others are starting from a position of "Amazon et al should not exist" and working backwards to a justification.
Great example. Another one is state governments joining a union or federal system, such as US states joining the Union or European states joining the EU, and becoming bound by federal/EU law.
That's an interesting way to look at it; governments merging into even larger entities is them giving up power?
The "government" isn't a unified mind. It's a group of individuals looking to further their career and (rarely) pursue a cause they care about. If two governments merge their law-sets into one, they aren't losing anything - the people involved are simply being promoted and gaining a broader peer influence with more vertical growth opportunities.
Or lets the local government or whatever party say "ohhh how wouldn't we have increased your well-being if not for them darn Europeans so just elect us one more time then we'll show them for good". And this line works so well, regardless if the respective party did or tried anything on the European level or not. It's the cultivated helplessness in some circles, that EU was some remote and abstract place where "things" happen and no one, not even your own representatives there, can move an inch. Same whether you're German or Luxembourgeois, it's the ideal material for promoting your own party and keeping the voters dumbed down.
> In the South, do they generally consider themselves as forced to re-join the Union, rather than having been forcefully prevented from leaving?
I don't think it is revisionism and maybe I am wrong on this, but wasn't it the Confederacy who attacked the Union at Fort Sumter which kicked off the US Civil War?
It's my understanding the Union was more or less ambivalent to the Confederacy and figured they'd let things lie then the Confederacy attacked.
I don't know enough history to say whether the Confederacy was forced to re-join or whether the states asked to rejoin in light of their government collapsing (Davis fleeing Richmond, etc). My guess would be that it was more of a failed state situation where the US had dibs on propping it back up.
What's the cause of all the flip flopping between Apple having to pay the bill or not? I think the main problem that this area of law is fundamentally uncertain and hard to apply. Legal mistakes get made, and judgements get appealed until people figure out what the law actually says.
A secondary issue is that judges in appeals courts are generalists, not tax or state aid experts. Despite this, they get landed with the hardest cases - situations that haven't been seen before which throw up new legal issues - and need to figure out what to do. Most of the time they get it right. Some of the time, they mis-interpret the law and get it wrong. That's why we have the appeals process.
So where are we up to in terms of this case, and how many more flip-flops we can expect? This article is citing an advisory opinion of one of the EU's Advocate Generals (themselves, very senior judges). These advisory opinions are issued prior to the CJEU (the highest court) making a final ruling. They are there to guide the CJEU so that the final ruling is as good as possible. Although this specific case should be finalised after the CJEU makes its ruling, I'm sure the case law will continue to evolve in the future as multinational companies push the boundaries of the EU's tax and state aid regimes.
> What's the cause of all the flip flopping between Apple having to pay the bill or not? I think the main problem that this area of law is fundamentally uncertain and hard to apply. Legal mistakes get made, and judgements get appealed until people figure out what the law actually says.
Or you know, Apple is trying really hard to not pay the tax they should and are stalling the process by throwing lawyers at it, because they want to continue their shell company scheme of reselling IP rights to avoid taxes in locales where they sell their hardware and make profit.
Is this the first time you're seeing a megacorp try their hardest not to pay their due?
What portion of Ireland's GDP is "American multinational companies" using them for tax avoidance?
As long as it is legal for Apple to route the money it makes in America back to shell companies in Ireland and pay 12.5% corporate tax instead of something higher elsewhere, why would it ever stop?
Around 23% in 2020, based on the difference between GNI* and GDP. It has been higher than that in the past, but increased medical manufacturing pushed it back. It's not just American companies, but they're certainly the largest.
The most notable effect here is that you learn to be wary of any stat mentioning "GDP" or "GDP per capita".
In 2015, when the US cut-off date for many of these transfers hit, the CSO refused to release accurate corporate tax numbers because it would have identified the companies involved.
For sure they are throwing lawyers at it. It's 13bn after all. But the underlying reason for the appeal is the same; the law is not yet clear as to what should happen.
Let's assume the law isn't clear, ans since I am no tax lawyer I actually cannot tell either way, pursueing that clarity at court is exactly what I would expect from Apple and the EU to do. So, the system is working as expected here.
Laws are never are clear enough, there is always room for interpretation. Laws are not some piece of software that give predctable answers, hence courts and the whole legal system. And it is the latter one atvwork here, as intended.
This is a rationalization for convoluted legislation. The impossibility of perfection is a poor excuse for mediocrity.
Notice that we almost never hear about corporations avoiding payroll taxes or VAT. They avoid this kind of tax in particular because the rules are unusually squishy and incoherent, and every time they find another way to do it, governments respond by making it more complicated or even less coherent instead of addressing the root cause and replacing it with something clearer and simpler.
To be fair, the EU responded to this case by enacting a new directive that says "the minimum corporate tax shall be 15%".
OK, it's unfortunately 175 pages long [0] instead of seven words, but that really is the gist of it. The current legislation is a more "squishy and incoherent" set of rules [1] that say you cannot give "state aid" preferentially to any company, the technicalities of which are being litigated in the ongoing Apple case.
But this is the problem, right? You can't really do that because governments are supposed to spend tax revenue on things that benefit those in their jurisdiction. The extent of tax dollars not used for this is a measure of government inefficiency and in a perfectly efficient government it would be zero, i.e. the average taxpayer would receive benefits equal to what they pay in taxes.
What they're kind of implying is that they want multinational corporations to pay more than they receive so some other people can receive more than they pay, but they haven't actually specified who or by how much. It would be pretty silly and inefficient to deny large companies the use of government-operated transit systems or police protection, but to make it at all practical you end up creating enough exceptions that anyone can find a loophole.
I feel like the elephant in the room is this. A lot of these huge companies are monopolies or nearly so, and a large proportion of their profit is a monopoly rent. But a monopoly rent isn't attributable to a particular factory or the location of your software developers. It can't be attributed to something happening in any particular jurisdiction because it's actually attributable to something that shouldn't be happening at all, and which doesn't have any corporeal existence or physical location. So those profits naturally get declared in whichever jurisdiction has the lowest taxes.
But the problem is not that the monopoly rent is being taxed in the wrong jurisdiction or at the wrong tax rate, the problem is that the monopoly rent exists. Stop trying to pin it to a particular place and find a way to eliminate it.
Countries in Europe have been gradually tightening up on corporations avoiding payroll taxes by declaring employees as contractors. In the UK it's known as IR35 working. The EU have recently proposed the platform working directive, aimed straight at this problem.
This is not a means to avoid payroll taxes. They're still being paid by the contractor. And in a way that costs the corporation money, if contractors have to pay the tax out of after-tax income, because then they'll demand higher compensation to account for it, by the amount of the tax plus the amount of the tax due on the increase in compensation.
There are other reasons corporations prefer workers to be contractors, but that isn't it.
In the UK both employer and employee pay payroll taxes (national insurance) at about 13% of salary, additionally employers must pay a minimum of 3% of salary to a pension.
Contractors paid themselves a minimum salary to avoid the payroll taxes. They then took the rest of their earnings as dividends from their personal services company instead, the combination of payroll taxes + income taxes being higher than taxes on dividends.
Since that ruse has been heavily restricted, employers have had to increase contractor pay to make-up for contractors having to pay more income tax + national insurance.
Without getting into the nitty gritty of it, it seems pretty obvious that there is a lack of clarity given that the European Commission came to one conclusion, the General Court concluded that the European Commission was incorrect and now an advocate general for the European Court of Justice has concluded that the General Court was incorrect. These are all smart people who have spent a lot of time and effort studying the law in this area. There are a lot of extremely reductionist takes on the case in the media but the actual legal principles in dispute, and their application to the facts, are quite complex.
You keep mixing up "muddying the waters to avoid paying tax" and "lack of clarity" The "lack" you speak of is generated by a megacorporation to avoid paying their part - and you keep attributing it to the wrong party.
Corporations will always attempt to lower their costs. It's like blaming the rain for being wet.
It isn't inherently necessary to have a tax system so convoluted that these games are even possible. If you tax wages and companies employ people in your jurisdiction then they have to remit the tax. If you tax sales and people buy things in your jurisdiction then companies have to remit the tax. If you tax property and companies own property in your jurisdiction etc. etc.
The problem is governments keep trying to tax companies not based on what happens in their jurisdiction but what happens outside of it, which they can only do sometimes, and that gives the companies an opportunity to find ways to make it one of the times they can't. Just stop doing that and tax the things that actually happen in your jurisdiction.
It is the EU institutions who are disagreeing with each other, Apple have nothing to do with it. The General Court of the EU isn't muddying the waters to help Apple avoid paying tax.
> Ireland also made a no corporate subsidy deal with the EU.
That seems odd. For example, if the government provides a national healthcare system, this is effectively a subsidy to employers who can then avoid providing a health plan their employees might otherwise demand or otherwise have to pay them more to compensate for their need to pay for their own healthcare. How is this being distinguished from any other form of subsidy? Isn't subsidizing things what governments do with tax money?
Bans on state subsidies are a core principle that enables the EU single market. Otherwise the market could easily be distorted by state aid. However it’s far from simple in practice and is something the member states have been arguing about forever.
The rest of the eu has never been happy with irelands tax policy but since taxation is a national competency they can’t do anything about it directly. They can however frame it as state aid and try to attack it that way.
> Bans on state subsidies are a core principle that enables the EU single market. Otherwise the market could easily be distorted by state aid.
It seems impossible to avoid this. If one state spends money on something that benefits businesses and another spends it on something else, those businesses will prefer the first one. But this isn't actually that much of a problem because each state has finite resources and its people get to decide how to use them. If one wants to have a UBI (which might increase entrepreneurship and the number of small businesses engaged in taxable activity) and another wants to lower unemployment by attracting large employers with subsidies and a third just wants to have lower taxes, what's the problem? That one might actually work better than another?
Ireland gave Apple a tax deal. The EU is arguing Ireland as part of the EU is not allowed to set it's own tax policy. The lack of clarity is Ireland's claiming it's still a sovereign nation and can set taxes but the EU says no you're not.
That's not true. EU nations set their own tax policy freely. That's why the EU is claiming it isn't simply a tax issue, but a hidden subsidy. The EU already lost once, but they are trying again
If I was Apple or any other megacorp I would happily pay the taxes and pay them publicly because of all the goodwill and favors and all the greased politicians and folks it can buy.
It’s less hassle than lawyering and cheaper and instead you can focus on building relationships or getting other benefits than hoarding cash which Apple clearly can print like a central bank.
That might be the case for super local taxes (eg. Paying land tax to the town), but for nationwide taxes even a big company makes basically no difference. Therefore, politicians don't really care - it isn't their money and doesn't directly impact them.
In regards to taxation and regulation of services sold into the EU common market Ireland is not fully sovereign. They have their act together, this is the legal process playing out.
Aren't they still sovereign? They just might be sanction/fined by peers or kicked out of the union if they don't comply?
It's not like someone's going to declare war on Ireland and conquer them to force compliance the way a citizen breaking the law might be conquered by a police force.
it just means a tax authority disagrees with someone rich enough to see what a court thinks
public servants don’t know their laws better than private lawyers do, one of the beauties of using lawyers is that the public servants don’t know which legal rationale you are using and have no way to find out except in the court.
this is often a deterrent for them to bother, because they know they can be wrong or completely blindsided by a mixture of laws they never considered.
in this case, it wasn't a deterrent and we will find out.
but just because a tax authority disagrees doesnt mean the defendant was not compliant according to the law. it means the calculators are different and everyone has to figure out why.
Yes, I read it, including the bit that said the Irish government told Apple their tax affairs were legal.
Apple paid taxes according to the laws that Ireland had at the time. The issue is not that Apple did not pay taxes according to the law, it’s that the laws themselves were incompatible with Ireland’s other obligations.
> Apple paid taxes according to the laws that Ireland had at the time.
The TFEU/Lisbon Treaty is law in Ireland and the allegation is that the deal between Apple and the Government was in breach of Article 107, which regulates State Aid.
The ultimate arbiter of whether the deal was lawful is the CJEU. Until decided there, it is uncertain whether Apple acted lawfully.
> The issue is not that Apple did not pay taxes according to the law, it’s that the laws themselves were incompatible with Ireland’s other obligations.
This just fundamentally misunderstands the relationship between member states and the EU. The EU Treaties and subsequent Regulations (although not Directives, which must be transposed into law nationally) are actually laws across the bloc. Not foreign treaties, not state obligations, but actual laws. Furthermore they take precedence over national laws and can be enforced by the bloc at a judicial level.
In addition, whether the Government of the day gave assurances of lawfulness or not, all large enterprises know that only the courts can actually decide whether a deal is lawful or not. This is the same in most democracies, including the US.
Europe is fine the way it is. Nations should be sovereign and common economic policy should be policed via fines such as this one. Hopefully this way corpos will learn that tax dodging in Europe is counter productive
Trying to fix this via fiscal union leads to more brexits
> What's the cause of all the flip flopping between Apple having to pay the bill or not?
Basically, since Apple is located in Ireland, they must pay their taxes to Ireland. But Ireland doesn't really want Apple to pay, so that makes it complicated. The real beef is between Europe and Ireland about whether it's legal to offer "personalized" discounts, not about Apple.
relevant quote:
> it reaches back a few years, beginning with a decision in 2018 that told Apple to hand over the aforementioned €13 billion to Irish tax officials after the European Commission decided Apple and Irish authorities had together broken state aid rules.
Khan is massively pro-startup and pro-innovation. Her vision of a more decentralized economy is well aligned with the hacker mindset of the Bay Area.
The core of her agenda for antitrust is not about being anti-merger or anti-bigness. Rather, her project is mainly about creating the conditions for pluralistic, bottom-up and more "permissionless" markets. Markets where founders can build successful businesses without necessarily having to rely on large 'gatekeeper' firms as partners. To the extent that large firms are required, Khan's vision is that they shouldn't be able to use their economic power to bargain unfairly or exploitatively with smaller firms.
Part of her agenda is strengthening the merger review process. Merger review is intrinsically hard, because authorities essentially have to try and figure out what the effect will be if the merger is allowed or denied. There is no crystal ball for this, and there are rarely 'right' answers. Yet the merger regime has been very favourable to large firms over the past few decades, and there's a reasonable consensus in the antitrust community that it should be strengthened. A tighter merger process might make startup exits through acquisition less common, but it should also make it easier for startups to grow organically into large companies. In terms of creating a bottom-up and more pluralistic Silicon Valley, that seems like a win to me.
(Source: I'm doing a PhD in Antitrust/Competition Law)
I'm sure it's been mentioned elsewhere but Lina Khan's Amazon’s Antitrust Paradox[1] ranks among my favorite pieces of legal writing. I think it's all but required reading for anyone who cares about antitrust issues, irrespective of the position one lands on when it comes to specifics.
> Khan is massively pro-startup and pro-innovation
She’s also ineffective. What she believes may be noble. But the track record of execution has been so poor, you couldn’t have done better if you were trying to plant a stooge at the top.
This is an insanely misinformed take - Lina Khan's FTC has done more in the last year than they have in the preceding decade, despite a significant baked-in culture that dismisses even the concept of antitrust as being harmful. Can you point to some examples of her poor execution?
> Google will pay their lawyers a similar amount and the FTC is likely to lose again bc their case is weak!
I cannot claim to the same prior knowledge as you, but I can read a news article as well as the next person. I am not sure how you can interpret this case as a loss for the antitrust bar, no matter whether Google wins or loses.
* Set Google's claims that default search placement is not a meaningful barrier to entry next to the fact revealed in litigation that they paid 26 billion dollars for default search placement in 2021
* Communications with Apple have revealed a company so cozy with Google, that the tone is of two major players effectively dividing up the market. Even Apple partisans like John Gruber have called out Apple's hypocrisy in benefitting from this arrangement: https://daringfireball.net/linked/2023/10/27/google-aggregat...
* Internal communications were revealed that show Google choosing to goose ad rates without the slightest concern for a decline in sales — a clear sign of market power.
Of course, I don't think Judge Mehta has a great track record on this? So whether Google will lose the case is no sure thing.
But without Khan, these facts and figures are simply not here, and we are not having this debate. So while I can see some basis for your claim that Khan is a failure, I can't actually line it up with reality as I see it very well. The conversation around antitrust has changed, without a doubt, and while there a myriad reasons for that, we have to give Khan her due if we are to acknowledge that anyone has any impact on the course of human affairs at all.
I understand that the standard measure of every legal bureaucrat/official's effectiveness is their record, but as a member of the public I could give a shit. Actually, I think the obsession with perfect judicial records creates a bunch of perverse incentives and overall is poor metric of effective governance.
>Filing these speculative long shot cases wastes the FTC’s valuable time.
You know what a bigger waste of the FTC's time is? Being completely unwilling to take on any big players for years at a time because you might lose, regardless of how blatantly the flout the spirit of the law. The public loses trust in and the business community loses respect for the institution, and society suffers as a whole. It's a free pass for abysmal behavior at the highest levels.
>There are important mergers which don’t get attention bc Lina is wasting her time with Microsoft and Google.
What are these mergers and how can you be sure they didn't get any attention? Were they yet another handful of guaranteed winners that would not move the needle whatsoever when it comes to societal effects of blatant abuse of monopoly power?
> public loses trust in and the business community loses respect for the institution
To the degree Khan has been successful, it’s in the former. She has been performative, which makes the public feel good. But also ineffective, which makes business happy. (Two corporate lawyers at national firms, familiar names in Silicon Valley, have advised me to rush mergers under this FTC. You’ll get sued. But they’ll drop the ball or settle, and then the deal is done.)
Strongly disagree. Her job is to win cases and be the figurehead for a change in tone where we stop letting monopolies run the country, and she's doing the latter admirably.
If America could get their shit together we'd pass stronger antitrust laws that make winning these cases easy. It is unreasonable that it takes so much work to fix things that are obviously horrible for almost everybody.
But she's the FTC chair not the legislature. She has to work with the laws as they are not as she wants them to be. I don't believe her role is to be a figurehead for legislative change.
The very fact that the FTC is "doing things" is a complete breath of fresh air. When it fails to do them, that's a sign that the system is rigged against them working (or that the laws we need to ban the things that suck aren't in place yet). It's part of a larger movement.
It sucks that the FTC fighting uphill battles is the only way to make the changes we need. In a better world, the citizenry could make it happen through class-action suits, but the laws we need to have a better world don't exist yet.
I disagree. You don’t necessarily have to win big cases. You just have to show that you are willing to take them to court, and that alone projects power. The result is that companies are less likely to file dubious mergers, and this is exactly what we want and what is happening:
> You just have to show that you are willing to take them to court
This only deters small firms. If you can afford to fight, it’s currently worth it. The FTC will show up unprepared [1], and you will win. Wall Street loves Lina.
*If* you are taken to court, it’s probably always worth the fight, losing such a trial has massive consequences.
However, in the past, that was an empty threat, the FTC would only take cases to court that they would win 100% - which vastly errs on the side of caution. It also meant that you could basically expect never to be challenged on a merger.
That has changed now. Now, there is a real chance that your mergers and anticompetitive behavior will get examined and THAT is the deterrent. The new FTCs behavior causes ripples long before an actual court case.
There is a difference between „I will never get taken to court“ and „I will probably get taken to court, and then I will probably win but honestly, all bets are off“.
> She has lost her big cases! She is ineffective. That’s the metric which matters.
I posted this above, but I am going to repost it just to make sure the point is made (sorry if it feels like I am spamming).
From [1]
> You wouldn’t realize this success if you listen to the conventional wisdom in politics, because Wall Street is pushing a public narrative that antitrust agencies are losing in courts, and therefore they are losing their ability to stop deals. But this isn’t true, because if it were, you wouldn’t see regular reports from business publications lamenting the decline in deals, and writing things like “The average size of mergers completed is now at the lowest level in 20 years.” And you wouldn’t have deal-makers on CNBC calmly describing how hard it is to get mergers done.
So what you claimed as the only metric that matters isn't true, but why let facts get in the way of a good soapbox.
Also since you are an economist and clearly misinformed about how law works, let me add this bit of nuance. You cannot win cases when judges will deliberately misinterpret the law Congress passed. From [2]
> And yet, this epiphany, that markets are politically structured and don’t have a will of their own, hasn’t made it to one very important place: the judiciary. The same week Sullivan gave his speech, a panel of three D.C. Circuit Court judges struck down a monopolization case against Facebook on the grounds that markets self-correct. "Many innovations may seem anti-competitive at first but turn out to be the opposite,” wrote the panel, “and the market often corrects even those that are anti-competitive." The D.C. Circuit Court panel was bipartisan, and included Republican appointees Karen L. Henderson and Raymond Randolph, as well as Obama appointed judge Robert Wilkins.
> These words undermine Congressional statute, and may devastate the ability to use antitrust law against digital platforms, at least in the D.C. Circuit. The specific procedural question was on the right of state attorneys general to bring an antitrust case over a violation that happened years earlier, as Federal enforcers can. Three judges made a policy decision to disallow that, even as Congress had just passed a law a few months earlier to make it easier for states to participate in antitrust enforcement.
> In other words, the power of judges is massive, and judges openly and often thwart the will of Congress. And this power is not necessarily based on partisan or traditional ideological affiliations.
Deliberate or not, a large part of the judiciary has been brought up in an environment where mergers are good and markets will magically correct this otherwise. That obviously needs to change and will take more time. Also Biden nominating judges that worked to get mergers done doesn't really help.
I think she certainly has pounded the table, and started a bunch of actions, but I am not sure what she has actually accomplished / delivered so far. I think she hasn't yet delivered any meaningful results yet, so I will reserve my judgement till there's any real outcome.
In this recent podcast, Lina Khan explicitly mentions deterrence as a tool in FTC's arsenal and the overall recent setbacks.
I do think that getting companies worth $1T to behave is going to take multiple attempts and here we give lots of leeway to Founders and others to iterate and refine.
I would like to give Lina Khan the same chances to iterate and refine as I very strongly support the grand parents views of how important this is to innovation and for startups.
> Lina Khan explicitly mentions deterrence as a tool in FTC's arsenal
That’s cute. In the real world, most executives will take a few months of mean words from a largely-ignored regulator in exchange for a deal. Deterrence needs to be backed up, in the end, to actually deter.
Considering how shit scared Facebook is and Amazon seems to be on the acquisitions front, I'd say it's a strategy that's working to a degree. That being said, it has allowed so much leeway with Microsoft though, but I'd say that it's going to end very badly for Microsoft over the next decade, assuming there isn't a president let loose who can give Big Tech more leeway and a looser hand.
> You wouldn’t realize this success if you listen to the conventional wisdom in politics, because Wall Street is pushing a public narrative that antitrust agencies are losing in courts, and therefore they are losing their ability to stop deals. But this isn’t true, because if it were, you wouldn’t see regular reports from business publications lamenting the decline in deals, and writing things like “The average size of mergers completed is now at the lowest level in 20 years.” And you wouldn’t have deal-makers on CNBC calmly describing how hard it is to get mergers done.
You heard the news about Microsoft-Activision and assumed that all mergers that were challenged are going through. There is a lot more to antitrust than what is showing up in HN readers' typically tech-focussed news.
Yes, she is. I have done M&A. Because the FTC is almost guaranteed to forget to do its homework, e.g. forgetting to “even provide an actual figure or range for [the defendant’s] market share at any point over the past ten years,” this is a golden age for an M&A banker [1].
Wouldn’t whistleblower compensation be more effective and scalable for American consumers than picking random fights? The SEC’s program blew away expectations.
I mean to call her ineffective we'd need to know how hard the task is. Given the FTC has been a regular target of budget gutting and having hostile chairs appointed for decades, we don't have that information.
And a deeply deeply biased court system that has been nothing but pro-business for ages.
Borkism has been the law of the land & figuring out to how take a judicial system which has been winnowed to just a small narrow view & make it reconsider mandates it used to have, long long ago, requires not just good casework but courts that have re-developed some appetite for ruling in businesses.
> can you point to anybody who has been more successful at reclaiming power from megacorporations?
Given she has been a net boon to M&A, anyone. In the last years, I’d flag the Illinois, California and Massachusetts legislatures, as well as Warren and Wyden, federally. Several state attorneys general come to mind, too.
Sending a zealous rookie into the field may placate the base. But it’s a gift to experienced players; it’s why you’re seeing her acceptance from Wall Street, the folks paid to close mergers. Khans ideas are solid. As a Congressional staffer, or even Congresswoman, she’d be great. But spending a year learning to manage a team is a dead giveaway to corporate interests.
You will get exactly no answer. Before her the ideas were not even on table. Shes gonna get bashed for anything but oh boy imagine US regulation body that actually tries to do what is in the job description. That must piss of so many.
She's not pro-startup and pro-innovation - at least not from anyone who's actually in those fields. If you ask anyone, they'd ask her to go away -- if the people you're pro are against you, then maybe you should rethink your stance.
like who? I work in tech, and I think she's great. Are we pretending the industry isn't full of Peter Thiel "competition is for losers" aspiring monopolists? This industry has, for probably 15 years now been captured by people whose entire business model is to eliminate competition and collect platform rent. Our opinions are about as reliable as Volkswagen's opinion on emissions.
Matt Stoller is actively lobbying for Lina Khan on the Hill. He is an active advisor to JD Vance and Elizabeth Warren [0][1]. The NGO he his lobbying with is primarily funded by Soros and Omidyar [2] (former chairperson of Ebay, and the owner of The Intercept). He also used to work with her (along with Chopra and other ex-Warren staffers) at New America
This is not to say that he's a good guy or a bad guy, but his newsletter is just another of the hundreds that are published by Donor Organizations for lobbying related reasons. [3]
Edit: downvote me for tone, not for content. I'm a Democrat myself and I've helped people pass some legislation we all love when I worked on the Hill.
I would call it mostly the opposite (and have given detailed critiques of why before on HN, citing where he is eliding facts or just literally spouting nonsense).
I used to subscribe, and read carefully, for years, so this is not a drive by sort of view ;)
He certainly appeals to a certain group of people, but I would not call it particularly accurate or correct. He will frequently leave out facts to make a point, even when the facts literally point in the opposite direction. The more I dug, the more obvious this becomes, but it only really takes comparing a single opinion or two to his take on them to become disillusioned with his view.
I gave up completely when his view of why the DOJ keeps losing literally became "the judiciary is corrupt"
You see - it can't be that the DOJ is wrong, or sucked, that he's wrong, or that his theories are wrong, or anything like that. No, you see, it's everyone else that's the reason.
I think he's drunk a little too much of his own koolaid.
There are better newsletters if you are looking for a more objective view. If you want subjective but good, that's harder, but Matt ain't it.
> I gave up completely when his view of why the DOJ keeps losing literally became "the judiciary is corrupt"
Why is that your view if that is what literally happens in a court of law?
> The best way to explain Bidenomics is to listen to a judge Biden recently appointed to the D.C. district court, Ana Reyes, who was hostile to the Antitrust Division when they brought a case against two smartlock makers. Last month, Reyes sat on an American Bar Association panel where she attacked the idea of stronger antitrust enforcement, focusing specifically on her skepticism around labor-related claims. She bragged to the audience of defense attorneys that during the antitrust case she heard, she 'pranked' government lawyers by spending three minutes pretending to dismiss their key witness, before saying ‘April Fools. "I have never in my life heard stunned silence," she later said gleefully.
> Having a corporate lawyer bully turned judge appointed by Biden killing an antitrust suit brought by Biden officials is a great example of Bidenomics, because it shows the lack of coherence of this administration’s policy. I’m a big fan of Federal Trade Commission Chair Lina Khan, but another Biden judge - Jacqueline Corley - let through the largest big tech merger of all time, when Microsoft bought Activision, after Khan challenged the deal.
What are your thoughts on increased scrutiny on M&A for the Big Tech Companies affecting the liquidity of startup equity?
Meaning, if Big Tech can't buy startups because Big Brother doesn't let them, then how does that impact VC which is based on the principle of there eventually being some liquidity for their investments (which increasingly, are not IPOs).
The VC side isn't my area so I don't think I have very good thoughts on it. Perhaps somebody with more expertise can chime in. That said, there's lots of great work about financialization and antitrust coming out, and I should probably read up on it.
With that caveat, I think it's plausible that some startups are/were getting VC funding not because they were good businesses, but rather because they presented enough of a competitive threat to a big tech firm that there was a good chance of a large acquisition. The net effect of those acquisitions is probably to transfer some of the surplus from Big Tech companies into the VC/founder ecosystem. Is that good? Maybe for the founders and VCs. From a social perspective though, we want to ensure that startups can meaningfully contest incumbent firms' market positions, and that can't happen if all the startups get acquired before they get a chance to do so.
> Part of her agenda is strengthening the merger review process. Merger review is intrinsically hard, because authorities essentially have to try and figure out what the effect will be if the merger is allowed or denied. There is no crystal ball for this, and there are rarely 'right' answers. Yet the merger regime has been very favourable to large firms over the past few decades, and there's a reasonable consensus in the antitrust community that it should be strengthened. A tighter merger process might make startup exits through acquisition less common, but it should also make it easier for startups to grow organically into large companies. In terms of creating a bottom-up and more pluralistic Silicon Valley, that seems like a win to me.
Serious question: what is the "antitrust community"?
Can you shed some light on the theory that making mergers more difficult would either a) make it easier for startups to grow organically or b) benefit society in general?
If the upside from working at or creating a startup is due to some combination of IPO or acquisition (this is of course a simplified model), and acquisitions are made more difficult, why do you assume that IPOs would become more likely or more lucrative? Once upside is removed from the startup ecosystem, how will potential employees and founders respond at the margin? I'm struggling to see an equilibrium here that involves more rather than less money and work poured into startups.
>> Serious question: what is the "antitrust community"?
Members:
- lawyers who work in the agencies on antitrust
- lawyers who work in competition practices of major law firms
- lawyers who work as competition counsel in-house at large firms
- legal scholars (in law schools) who write on these issues
- economists who work in the same agencies (FTC and DoJ)
- economists who work in the litigation consulting industry
- economists who work in academia on antitrust and competition issues (anyone in an economics department who lists “industrial organization” as a research field).
Plus our various groupies and hangers-on, who are numerous, because our parties are amazing…
Whatever "antitrust community" might be, if exists, almost by definition will be filled with people who are on balance biased towards more extreme enforcement of antitrust. Otherwise they would have no reason for being.
So not surprising at all that the "antitrust community" on average would be pro an FTC witchhunt whatever the basis may be on paper.
Do you consider yourself part of the "antitrust community?" Ok, if so, please let me know then, "doing it right," in your own opinion, entails doing more or less than is done now, in aggregate?
> Serious question: what is the "antitrust community"?
Not the poster, but I would assume it refers to the people who follow developments in antitrust law and the enforcement thereof (so antitrust lawyers, basically).
Well, and lawyers-turned-professor and/or treatise authors (who are typically professors). Often the experts turn towards academia if they're truly in it just to know everything about the field. So, Hovencamp, etc.
The "antitrust community" is people working in antitrust law/policy/academia who write, tweet, speak at conferences, etc. Two caveats are that a) this is my view based on personal observations, and b) that a consensus doesn't mean that everybody agrees. Undisputedly however, there is a lot of academic work these days which comes to the conclusion that merger review should be strengthened. For instance, see [1].
Khan's aim isn't necessarily to make mergers more difficult, or to prevent them per se. Rather, it's to make a more concerted effort to prevent mergers which on balance, appear not to be in the public interest. There are several reasons why a merger might be harmful.
First, some mergers are "killer acquisitions" whereby a large firm will acquire a "nascent" competitor and then discontinue its product (e.g. [2]). One danger here is that killer acquisitions nip start-up competition in the bud, such that new firms don't have a chance to grow and compete against incumbent firms. That's a problem because competition means that consumers, rather than incumbent firms, ultimately get to choose market outcomes. If there is no choice, then consumers can't choose. The ultimate failure mode here is some kind of command economy where monopoly firms get to make most of the decisions about how markets work and consumers get little say at all.
Second, mergers lead to market concentration because you're taking a market with n firms and moving to a market with n-1 firms. Market concentration isn't inherently bad, indeed, some markets are 'naturally' concentrated. That said unconcentrated markets are generally preferred to concentrated ones because concentrated markets can lead to things like tacit collusion (which has similar outcomes to a cartel) [3].
Third, if there is a real possibility for startups to grow organically and challenge large incumbent firms for the market, then theory goes that VC funding could be stimulated on the promise of a potentially huge return. For instance, a VC might be willing to fund a firm if there's a 5% chance that it will be the next Google, but not if there's a 10% chance that it gets acquired in a year or two.
You make a good point regarding acquisitions, IPOs and the personal incentives to work at a startup. I'm not assuming that IPO's would become more likely or lucrative; I don't have a view on that (except perhaps what I said in the previous paragraph). I guess if a firm was going to be successful, and a merger wasn't an option then it would eventually IPO instead, no? That might lead to delayed compensation, but it shouldn't affect the viability of a solid business. Fewer acquisitions might end up with some firms failing before IPO which would have otherwise been acquired. That's bad from the perspective of those at the firm, but isn't inherently bad from a social perspective. After all competition necessarily entails winners and losers. If all else fails, there is a 'failing firm defence' which would allow an acquisition if the only other option is the firm going out of business [4].
Finally, the lack of enforcement over the past few decades hasn't given regulators much opportunity to "learn" what is a good/bad merger. A more active merger review policy would entail regulators building up expertise and fine-tuning their approach. It's important to remember that merger control isn't necessarily adversarial. At its best, it's a positive-sum dialogue between firms who want to do business and regulators who are trying to provide public-minded oversight.
> I guess if a firm was going to be successful, and a merger wasn't an option then it would eventually IPO instead, no?
No, most businesses don't grow revenue fast enough to be IPO-worthy (or, as with WhatsApp and Instagram when they were acquired, don't make enough revenue to even be viable standalone businesses).
But even putting all that aside, what about the personal freedom argument?
If a founder wants to sell their company because they're tired of running it (this is a job that comes with immense personal sacrifice), or wants cash to take care of family, or sick parents, etc, should the government have the right to force them to keep it running?
The societal implications of the above feel absurd.
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]
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.
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.
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.
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 :)
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.
> A tighter merger process might make startup exits through acquisition less common, but it should also make it easier for startups to grow organically into large companies.
This is a contradiction.
If the likelihood of acquisition goes down, so does the likelihood of startup funding. Which means the likelihood of growing into a large company goes down too.
I don't think it's a good idea to want a world where companies like Google are less likely to come about.
What you are missing is when the acquisition happens or the size of the firm being acquired. The blocked M&As are on firms that are already setting the market.
Google cannot come about now. There is literally no need to have the world's most used search engine, mobile OS, browser, video streaming website, maps application under the same corporate umbrella. Only one of these was built in-house, every other one was acquired.
You say there is 'literally no need'. How are you so confident in making such a claim for the rest of us?
I, as a consumer, would rather make that decision myself. If you don't want to use Google Maps that's up to you. I don't see why you'd force me to do the same.
As it stands, Maps falling under Google means that I and many others on this planet, from Africa to the Middle East to Asia and others, get to use it for free because it's subsidised by Google's search ads.
A standalone maps company would have to charge money to run the service. People around the world (along with businesses small and large) would be poorer if this were the case.
I defend your choice to dislike this state of affairs. But it's rather difficult to defend a proclivity to take choice away from the rest of us.
> A standalone maps company would have to charge money to run the service.
Yes. That is typically how businesses work. That cost is being subsidized by an uber-entity that is slurping private data of its more economically valuable customers at every turn. Why is it fair to do that?
> But it's rather difficult to defend a proclivity to take choice away from the rest of us.
Where is my choice to step out of this Big Brother ecosystem? If Maps was so awesome, why did Google acquire Waze? And why was it allowed to?
Are you assuming maps will be free forever? One possible future is that once the standalone map companies are out of business prices will begin to rise or ads will become so frequent that the experience of using maps will be severely degraded.
There's an old-fashioned solution where they just need to make their own money and have good growth strategy. Or get a loan with properly worked out figures.
I'm kinda hoping we're getting to the lessons learned point of easy debt burn it till you make it startup culture.
I'm not saying a company should never be permitted to accept an acquisition offer. I'm just saying that getting acquired shouldn't be Plan A or their "only exit" as you put it. They should foremost try to make it as their own company, and if that was never going to be feasible for them, then maybe society is better off without that sort of company in the first place.
There was some buzz about "competitive compatibility", making it so sites couldn't lock in user so much.
I wish we saw more action on that front. That feels like the remedy to the status quo being so well entrenched, like a precondition for a competitive digital world. Just trying to block Mergers & Acquisitions might some day allow new giant powers to arise & compete, but we need a system where competing & growing a presence isn't so outright impossible.
She made her career or reinventing the definition of monopoly to include Amazon and big tech companies to date. At worst she’s a cynical, corrupt government apparatchik who uses the massive hammer of the government to bully productive industries and enrich herself with fame and money. At best she is an ignorant, foolish government apparatchik who squeezes the goose laying golden eggs to death and then wonders how she managed to make the worlds most innovative place completely barren of innovation, vitality thus dooming her society. She almost makes me want to vote republican, and that’s saying something as I’ve never voted republican my entire life.
Please don't post in the flamewar style, call names, or fulminate on HN. It's not what this site is for, and destroys what it is for, and you can make your substantive points without any of it.
Massively idiotic take. She isn't enriching herself by pursuing this agenda, which she began developing as a law student. On the contrary, had she gone into biglaw to work on antitrust defense for companies like Amazon and Apple, that would be a path to cynical self-enrichment.
We have no evidence that the implementation of her policies or whatever she is pursuing has or will "make the worlds most innovative place completely barren of innovation, vitality thus dooming her society" (what a bloviating fucking diva you are).
She also isn't the only one who thinks the market dominance of these big tech firms has been an impediment to innovation and disruption because smaller startups can't compete, get bought and squashed early, etc.
If someone does things that are bad out of sincere moral belief they’re just as bad as if they did them out of desire for enrichment. Khan’s attempt to return anti-trust law to its roots of ignoring consumer harms and straightforwardly punishing size and success is bad.
So "who cares if someone is accusing her of bad faith and other bad acts, given that her policies are bad"? Does that make logical sense or seem fair to you?
Like, maybe her policies are bad, I'm not sure, but the other poster a) just went for baseless accusations against her that are not only not supported by any evidence, but actually undermined but facts as they exist; b) acted as though the hyperbolic consequences they ascribed to her policies actually do in fact exist.
Mergers seem like the smaller concern for innovation. The big concern from the point of view of a startup is "what if BigCorp just imitates your product and puts you out of business?"
Historically, this situation has been managed through intellectual property laws, not antitrust. But patents as applied to software are a kludge, both tying up tech that should be free (particularly when that technology is a file format) and failing to protect innovations that should reward their developers. And copyright just doesn't cut it.
Good point. I don't think the FTC is myopically focused on mergers, but on anti-competitive behaviour in general. That said, I don't think we have a good handle on the imitation problem, there's probably some great research questions to ask in that area.
Can you provide some links to anything that supports that? Her antitrust philosophy is built on a hostility to business success as such so I don’t see why she would have any positive disposition to smaller businesses.
There are lots of different views about the goals of antitrust law and policy, but few (if any) are hostile to business. Khan is pro-business but also, broadly speaking, pro-dispersion of economic power within the economy. That means having fewer 'gatekeeper' firms which exercise power over key economic bottlenecks, and at the same time, a greater focus on helping smaller and medium sized businesses succeed.
For a concrete reference regarding small business, see this recent speech of hers [1,2].
The most recent NPR planet money podcast played their first episode on Ida Tarbell and Standard Oil, the old Bork episode on changing antitrust law enforcement then followed up with a half hour interview with Khan.
https://www.npr.org/podcasts/510289/planet-money
There’s arguments she makes for fair competition and for monopolies being capable of making anti consumer marketplace decisions. I assume that you are not saying there should not be anti trust or anti monopoly laws, that’s a different argument I think. She doesn’t say anything like what you are claiming here.
Thats kind of disappointing. If certain companies are using certain patents to prohibit trade or commerce then that should be fair game to sue companies for.
Lina Khan's vision is one of contempt of the law and disregard of due process. A society where rules are made up on the fly based on whats popular and where the political wind blows [1]
Lina Khan's direct actions of regulation-by-the-hip , and continued losses in the courtroom, will weaken actual anticompetitive powers, and ultimately favor monopoly generation by big entrenched players [1]
I dont want the govt to make up rules on the fly. Even if its going after monopolistic companies. Because I know its only a matter of time until the govt uses the same pretext to come after me, too.
> A society where rules are made up on the fly based on whats popular and where the political wind blows
Sorry, where do you think laws come from? They’re not written on stone tablets at the top of a mountain. They’re written by people for people. If you prefer Robert Bork’s hands off approach to markets that’s your prerogative but we can’t separate laws and regulations from their consequences. There’s no question in my mind that Amazon’s market share allows them to push their weight around in ways that raise prices for consumers as well as stifle competition and make workers’ lives worse.
Every State Attorney General could have gone after the Amazon sales tax avoidance game, yet it went on for over a decade even after it was well-known. We need people in government who are willing to equally apply existing laws. It's up to the people to pressure each State's top attorney to take action on various laws.
SCOTUS is unfortunately more powerful than Congress, at least because they're more capable of doing things.
Luckily they're more aligned with consumer welfare, which is good, as opposed to Khan's hippie "everything big must be bad" standard. This only supports small business owners and VCs, who are probably the most evil people in the US.
I don't think it's correct to paint Khan as following a "big is bad" standard. For instance, in [1] she explicitly says the opposite:
> Antimonopoly does not mean ‘big is bad.' The New Brandeisians—like Justice Brandeis—recognise that certain industries tend naturally towards monopoly. This is especially true of networks. In such cases, the answer is not to break these firms up, but to design a system of public regulation that prevents the executives who manage this monopoly from exploiting their power. A second goal is to ensure that executives face the right incentives to provide the best service possible to everyone who relies on the monopoly to sell or to buy a particular product or service. In the past Americans have used both direct government regulation, and various forms of antimonopoly law and policy, to achieve these ends.
I would believe what she said if she was doing this, but instead she's suing tech companies and asking them to break up in silly ways which is… not that.
Rules absolutely have to be made up on the fly. They are a tool to move society from where it is to where we want it to be. Carving them in stone just creates a game for people to exploit. Dynamic rules means people need to understand and follow the intent of the law.
In terms of how the AdTech stack could look afterwards, here is a paper (I authored) advocating for the introduction of an interop layer such that users could choose which advertising network to use with Google's products and services: https://doi.org/10.36633/ulr.1113