8 ms·

>But why are acquisitions anti-competitive? Because now there's less competition.

alexmingoia 6y ago
Instagram didn't have to sell. Less competition isn't the same thing as preventing competition. For example, imagine three restaurants competing. Two of them make an agreement with a common supplier to shut out the third competitor. That is what I think of as anti-competitive.
- kthxbye123 6y ago
  There’s over a hundred and twenty years of antitrust enforcement in this country. Why does HN insist on reinventing antitrust law from their own intuition about what “anti-competitive” means?
  - btmoney06 6y ago
    There’s over a hundred and twenty year of antitrust law that says that conduct is improper if it leads to higher prices for consumers. Why does Yale insist that antitrust can apply when prices are 0?
    - arrosenberg 6y ago
      That philosophy emerged only 50 years ago in the 70s with the Chicago School of Economics, led Robert Bork and other ideologues.
    - bretpiatt 6y ago
      The real price to consumers isn't zero for Google or Facebook. Both platforms charge other businesses to advertise, because of the limited options businesses have to advertise they can charge high prices. Those advertising costs get passed on to consumers in the form of higher prices on products.
    - rydre 6y ago
      Price in this case is calculated by the amount of Ads you have to see, the effect on mental health because of Facebook's physiological experiments on its users, Facebook not obeying laws of smaller countries where it operates in, Facebook not paying taxes in other countries, owning Instagram - effectively the second largest competitor to Facebook is also owned by Facebook, too late to take anti discriminately actions for ads (if they were smaller and feared a boycott, they would take earlier precautions) etc. We need to look beyond the "Price = 0" narrative when we're investigating things that in this new era are free.
      - YarickR2 6y ago
        Instagram is a Facebook competitor ? That's a sick joke; those two social networks have less in common than birds and mammals
        alexmingoia 6y ago
        The Yale paper wants it both ways. If any app with friends/follows is a competitor then there’s plenty of competitors and the acquisition didn’t substantially reduce competition. Yet if only products similar to Facebook are considered competitors then they’ve never acquired a competitor.
        beagle3 6y ago
        A competitor is not defined by doing the same thing (for which you can always find a distinction), but by competing for the same customer resources. Facebook used to only have text, and people linked to pictures on (mostly) Flickr. And then MZ realized 80% of Facebook posts Link to pictures on outside websites. That’s competition for ad placement; so FB added picture storage, albums, etc. same with Videos. The customers, advertisers, previously had Flickr as an option. Now they don’t. That’s not a coincidence. And that’s not even illegal on FB’s part as long as they aren’t a monopoly - but now they are.
    - smt88 6y ago
      Facebook's consumers are businesses, and their price is not 0.
      - alexmingoia 6y ago
        The acquisition didn’t reduce competition for advertisers because Instagram didn’t have ads before Facebook owned them.
        beagle3 6y ago
        Facebook didn’t have any adverts before it had them. Neither did google, or for that matter cable TV. Unless you have inside knowledge about Instagram’s business plans, it is reasonable to assume they would have had ads sooner or later, as no other monetization scheme seems sustainable for this kind of “product”. The nipping of competition in the bud does not make it any less anti competitive.
        scarface74 6y ago
        Cable TV has always had advertising. I really wish this myth would die.
        beagle3 6y ago
        I was under the impression that it didn't in the early days in the US. For sure, in several other countries, it started without ads, and some channels stayed ad-free whereas others did get ads and getting more of them (though, nothing quite as horrible as what the US has these days -- on a recent visit to New York, my kids tried to watch Cartoon Network on the Hotel Television, and it was probably 30% ads -- never seen anything remotely close to that in UK, Germany and other countries I visit)
        scarface74 6y ago
        One of the early nationally available cable tv channels was TBS. They always had ads. Besides the original purpose of cable was to transmit network TV in remote areas.
    - onion2k 6y ago
      Why does Yale insist that antitrust can apply when prices are 0? "Consumers" on Facebook are ad buyers, not users. Prices aren't 0 - Facebook's revenue was $70bn in 2019. That comes from businesses buy ads. Everything Facebook does to dominate the social media space is about selling more ads for more money. That's why they buy competitors, shut down rivals, and aggressively do what they can to drive prices for the ads on their platforms up.
      - btmoney06 6y ago
        If we’re focusing on ad buyers instead of users, then why isn’t the relevant market just all “advertising companies” (instead of social media companies)? When you compare Facebook to other advertising companies, their market share dwindles. Google holds the advertising throne.
        onion2k 6y ago
        Google's 2019 revenue was $162bn. They're only twice as big as FB by that metric, and they have far less than twice the market share.
- jlmorton 6y ago
  Antitrust legislation is not designed to protect other companies, it's designed to protect consumers. In the United States, when the Justice Department blocks a merger, it is not simply deciding to disallow the merger. It does not have the power to do so. Instead, the actual mechanism is via antitrust lawsuit. If the merger is likely to reduce competition to such an extent that it would harm consumers, and if the Justice Department is so inclined, the Department files an antitrust lawsuit to block it.
  - alexmingoia 6y ago
    I don't think the legal code for preventing acquisitions says anything about consumers. 15 USC §18 says "No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly." Nevermind that, let's say it is about protecting consumers. How have consumers been harmed by the Instagram acquisition? Facebook didn't shut them down, substantially change the product, or force users to use their other products. IIRC Facebook reduced the price of WhatsApp by removing the dollar fee.
    - mav3rick 6y ago
      In the long run, this has stifled innovation. No social startup gets funding, as FB either crushes them or buys them out for cheap.
      - blackoil 6y ago
        "Cheap" is not an adjective which people used to describe those acquisitions at the moment.
    - netcan 6y ago
      Are you asking "why is a monopoly bad?" or "why do acquisitions representing large market share promote monopoly?" The 2nd one is quite obvious. Afterwards, there is less competition and the aquire has increased their market share, buying power, control of a supply chain, platform, infrastructure or some other market dominance position. The 1st one... Do you prefer a theoretical reason? Empirical examples? rhetorical, political, philosophical? There are lots of reasons why monopolies are harmful. The legislation itself, and the reasoning behind it was liberal-economics... ie "capitalism." Capitalism, from a pro-captialist perspective, works because of a superior price system. Monopolies break price systems, whether they are public or private monopolies. There are a lot of other reasons too. Since this is about digital monopolies and "platform" is a primary form of market dominance.... Compare to WWW-vs-AOL. One was a closed, private, system where a single companies dominates a primary bottleneck. One was open. Do you think the WWW would have achieved what the WWW achieved if they had won that platform war?
- fsckboy 6y ago
  ? but you are wrong. Buying your competitors is only possible because you offer them more than they agree they are worth. Why would you do that? because reducing competition will earn you more money through your anticompetitive actions.
- rorykoehler 6y ago
  I can think of a billion reasons why you're right in theory and wrong in practice.
- deathgrips 6y ago
  Doesn't matter. It results in less competition. The government's goal is to promote competition.
- beagle3 6y ago
  Snapchat refused to sell, and Facebook pushed 3 different Snapchat competitors at the same time as a result, none of which were a success on their own - but which did make a significant dent in Snapchats growth. This is a “I’ll push you out of the market by taking a loss” behavior, similar to MS inclusion of IE in Windows. Whether or not NS or SC was/is a good product is irrelevant. This is the behavior that antitrust legislation is supposed to stop. The law iirc does not require that prices increase directly; rather that customers be harmed (of which price increase is a possible expression) The customers in this case are advertisers, and they are definitely harmed - there are now two online advertising venues, Google and Facebook, both making outsized profits because they are the only two games in town. (Which on its own is NOT illegal - but using dominant position to maintain it, as Facebook has done with e.g. Onavo, instagram, Snapchat) is anticompetetive.
  - scarface74 6y ago
    Snapchat refused to sell, and Facebook pushed 3 different Snapchat competitors at the same time as a result, none of which were a success on their own - but which did make a significant dent in Snapchats growth. So FB pushed an offering that consumers didn’t want and it wasn’t successful - all of this without government intervention.
    - beagle3 6y ago
      It didn't have to be successful to harm Snapchat (which it arguably did), and that's exactly the problem: Facebook put out, at roughly the same time, 3 products competing with Snapchat and among themselves. You can surely weasel out some explanation for this product strategy that does not include "suffocating Snapchat", but neither Facebook nor any other company that I'm aware of has done anything similar[0]. And the only reasonable reason Facebook will do that, and can afford to, is its monopoly -- the use of which to further itself is likely an antitrust violation. [0] Apple regularly does multiple competing products - but they are all internal. Only the "winner" is put on the market.
      - scarface74 6y ago
- onion2k 6y ago
  Less competition isn't the same thing as preventing competition. Buying a competitor so they can't compete with you is preventing competition. You might have a definition that says it's not, but that just means your definition is wrong. The FTC and United States Department of Justice Antitrust Division examine every significant merger to test whether or not it's anti-competitive. Every government has a department looking at mergers and acquisitions for this reason (https://www.ftc.gov/policy/international/competition-consumer-protection-authorities-worldwide https://www.ftc.gov/policy/international/competition-consume...).
- Nasrudith 6y ago
  Some of anti trust historically has included too much higher of a barrier to effective entry which is how vertical monopolies are coherent as a concept. The issue isn't that owning a chain of iron mines, steel refineries, and factories using the steel stop anyone from running one or their own chains of those things but that to be a competitor a massive amount of capital is required. Effectively creating say an effective hundred million dollar moat to be competitive. In which case the investment might not even be worth the revenue earned as returns diminish as it is either duplicate the production of the leader to match economies of scale or lose by produce more expensive commodities. I don't quite agree with it philosophically (vertical intergration done right boosts efficency for everyone and done wrong only hurts themselves making it ironically procompetitive for those who don't make the same mistakes) but I can see the logic behind it.

Instagram didn't have to sell. Less competition isn't the same thing as preventing competition. For example, imagine three restaurants competing. Two of them make an agreement with a common supplier to shut out the third competitor. That is what I think of as anti-competitive.

kthxbye123 6y ago
There’s over a hundred and twenty years of antitrust enforcement in this country. Why does HN insist on reinventing antitrust law from their own intuition about what “anti-competitive” means?
- btmoney06 6y ago
  There’s over a hundred and twenty year of antitrust law that says that conduct is improper if it leads to higher prices for consumers. Why does Yale insist that antitrust can apply when prices are 0?
  - arrosenberg 6y ago
    That philosophy emerged only 50 years ago in the 70s with the Chicago School of Economics, led Robert Bork and other ideologues.
  - bretpiatt 6y ago
    The real price to consumers isn't zero for Google or Facebook. Both platforms charge other businesses to advertise, because of the limited options businesses have to advertise they can charge high prices. Those advertising costs get passed on to consumers in the form of higher prices on products.
  - rydre 6y ago
    Price in this case is calculated by the amount of Ads you have to see, the effect on mental health because of Facebook's physiological experiments on its users, Facebook not obeying laws of smaller countries where it operates in, Facebook not paying taxes in other countries, owning Instagram - effectively the second largest competitor to Facebook is also owned by Facebook, too late to take anti discriminately actions for ads (if they were smaller and feared a boycott, they would take earlier precautions) etc. We need to look beyond the "Price = 0" narrative when we're investigating things that in this new era are free.
    - YarickR2 6y ago
      Instagram is a Facebook competitor ? That's a sick joke; those two social networks have less in common than birds and mammals
      - alexmingoia 6y ago
        The Yale paper wants it both ways. If any app with friends/follows is a competitor then there’s plenty of competitors and the acquisition didn’t substantially reduce competition. Yet if only products similar to Facebook are considered competitors then they’ve never acquired a competitor.
      - beagle3 6y ago
        A competitor is not defined by doing the same thing (for which you can always find a distinction), but by competing for the same customer resources. Facebook used to only have text, and people linked to pictures on (mostly) Flickr. And then MZ realized 80% of Facebook posts Link to pictures on outside websites. That’s competition for ad placement; so FB added picture storage, albums, etc. same with Videos. The customers, advertisers, previously had Flickr as an option. Now they don’t. That’s not a coincidence. And that’s not even illegal on FB’s part as long as they aren’t a monopoly - but now they are.
  - smt88 6y ago
    Facebook's consumers are businesses, and their price is not 0.
    - alexmingoia 6y ago
      The acquisition didn’t reduce competition for advertisers because Instagram didn’t have ads before Facebook owned them.
      - beagle3 6y ago
        Facebook didn’t have any adverts before it had them. Neither did google, or for that matter cable TV. Unless you have inside knowledge about Instagram’s business plans, it is reasonable to assume they would have had ads sooner or later, as no other monetization scheme seems sustainable for this kind of “product”. The nipping of competition in the bud does not make it any less anti competitive.
        scarface74 6y ago
        Cable TV has always had advertising. I really wish this myth would die.
        beagle3 6y ago
        I was under the impression that it didn't in the early days in the US. For sure, in several other countries, it started without ads, and some channels stayed ad-free whereas others did get ads and getting more of them (though, nothing quite as horrible as what the US has these days -- on a recent visit to New York, my kids tried to watch Cartoon Network on the Hotel Television, and it was probably 30% ads -- never seen anything remotely close to that in UK, Germany and other countries I visit)
        scarface74 6y ago
        One of the early nationally available cable tv channels was TBS. They always had ads. Besides the original purpose of cable was to transmit network TV in remote areas.
  - onion2k 6y ago
    Why does Yale insist that antitrust can apply when prices are 0? "Consumers" on Facebook are ad buyers, not users. Prices aren't 0 - Facebook's revenue was $70bn in 2019. That comes from businesses buy ads. Everything Facebook does to dominate the social media space is about selling more ads for more money. That's why they buy competitors, shut down rivals, and aggressively do what they can to drive prices for the ads on their platforms up.
    - btmoney06 6y ago
      If we’re focusing on ad buyers instead of users, then why isn’t the relevant market just all “advertising companies” (instead of social media companies)? When you compare Facebook to other advertising companies, their market share dwindles. Google holds the advertising throne.
      - onion2k 6y ago
        Google's 2019 revenue was $162bn. They're only twice as big as FB by that metric, and they have far less than twice the market share.
jlmorton 6y ago
Antitrust legislation is not designed to protect other companies, it's designed to protect consumers. In the United States, when the Justice Department blocks a merger, it is not simply deciding to disallow the merger. It does not have the power to do so. Instead, the actual mechanism is via antitrust lawsuit. If the merger is likely to reduce competition to such an extent that it would harm consumers, and if the Justice Department is so inclined, the Department files an antitrust lawsuit to block it.
- alexmingoia 6y ago
  I don't think the legal code for preventing acquisitions says anything about consumers. 15 USC §18 says "No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly." Nevermind that, let's say it is about protecting consumers. How have consumers been harmed by the Instagram acquisition? Facebook didn't shut them down, substantially change the product, or force users to use their other products. IIRC Facebook reduced the price of WhatsApp by removing the dollar fee.
  - mav3rick 6y ago
    In the long run, this has stifled innovation. No social startup gets funding, as FB either crushes them or buys them out for cheap.
    - blackoil 6y ago
      "Cheap" is not an adjective which people used to describe those acquisitions at the moment.
  - netcan 6y ago
    Are you asking "why is a monopoly bad?" or "why do acquisitions representing large market share promote monopoly?" The 2nd one is quite obvious. Afterwards, there is less competition and the aquire has increased their market share, buying power, control of a supply chain, platform, infrastructure or some other market dominance position. The 1st one... Do you prefer a theoretical reason? Empirical examples? rhetorical, political, philosophical? There are lots of reasons why monopolies are harmful. The legislation itself, and the reasoning behind it was liberal-economics... ie "capitalism." Capitalism, from a pro-captialist perspective, works because of a superior price system. Monopolies break price systems, whether they are public or private monopolies. There are a lot of other reasons too. Since this is about digital monopolies and "platform" is a primary form of market dominance.... Compare to WWW-vs-AOL. One was a closed, private, system where a single companies dominates a primary bottleneck. One was open. Do you think the WWW would have achieved what the WWW achieved if they had won that platform war?
fsckboy 6y ago
? but you are wrong. Buying your competitors is only possible because you offer them more than they agree they are worth. Why would you do that? because reducing competition will earn you more money through your anticompetitive actions.
rorykoehler 6y ago
I can think of a billion reasons why you're right in theory and wrong in practice.
deathgrips 6y ago
Doesn't matter. It results in less competition. The government's goal is to promote competition.
beagle3 6y ago
Snapchat refused to sell, and Facebook pushed 3 different Snapchat competitors at the same time as a result, none of which were a success on their own - but which did make a significant dent in Snapchats growth. This is a “I’ll push you out of the market by taking a loss” behavior, similar to MS inclusion of IE in Windows. Whether or not NS or SC was/is a good product is irrelevant. This is the behavior that antitrust legislation is supposed to stop. The law iirc does not require that prices increase directly; rather that customers be harmed (of which price increase is a possible expression) The customers in this case are advertisers, and they are definitely harmed - there are now two online advertising venues, Google and Facebook, both making outsized profits because they are the only two games in town. (Which on its own is NOT illegal - but using dominant position to maintain it, as Facebook has done with e.g. Onavo, instagram, Snapchat) is anticompetetive.
- scarface74 6y ago
  Snapchat refused to sell, and Facebook pushed 3 different Snapchat competitors at the same time as a result, none of which were a success on their own - but which did make a significant dent in Snapchats growth. So FB pushed an offering that consumers didn’t want and it wasn’t successful - all of this without government intervention.
  - beagle3 6y ago
    It didn't have to be successful to harm Snapchat (which it arguably did), and that's exactly the problem: Facebook put out, at roughly the same time, 3 products competing with Snapchat and among themselves. You can surely weasel out some explanation for this product strategy that does not include "suffocating Snapchat", but neither Facebook nor any other company that I'm aware of has done anything similar[0]. And the only reasonable reason Facebook will do that, and can afford to, is its monopoly -- the use of which to further itself is likely an antitrust violation. [0] Apple regularly does multiple competing products - but they are all internal. Only the "winner" is put on the market.
    - scarface74 6y ago
onion2k 6y ago
Less competition isn't the same thing as preventing competition. Buying a competitor so they can't compete with you is preventing competition. You might have a definition that says it's not, but that just means your definition is wrong. The FTC and United States Department of Justice Antitrust Division examine every significant merger to test whether or not it's anti-competitive. Every government has a department looking at mergers and acquisitions for this reason (https://www.ftc.gov/policy/international/competition-consumer-protection-authorities-worldwide https://www.ftc.gov/policy/international/competition-consume...).
Nasrudith 6y ago
Some of anti trust historically has included too much higher of a barrier to effective entry which is how vertical monopolies are coherent as a concept. The issue isn't that owning a chain of iron mines, steel refineries, and factories using the steel stop anyone from running one or their own chains of those things but that to be a competitor a massive amount of capital is required. Effectively creating say an effective hundred million dollar moat to be competitive. In which case the investment might not even be worth the revenue earned as returns diminish as it is either duplicate the production of the leader to match economies of scale or lose by produce more expensive commodities. I don't quite agree with it philosophically (vertical intergration done right boosts efficency for everyone and done wrong only hurts themselves making it ironically procompetitive for those who don't make the same mistakes) but I can see the logic behind it.