Author Topic: Breaking up is hard to do  (Read 104 times)

ScottF

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Breaking up is hard to do
« on: May 23, 2020, 08:31:29 PM »
This may be covered ground but I don’t recall. Im curious what people think about the government breaking apart large, dominant online companies.

Warren at one point published a plan for her administration to break apart Google, Amazon, and Facebook. Essentially creating a new class of utility/platform and regulating them as such.

So Amazon would no longer own its marketplace (and I assume the IP that went into it) and would by law have to allow other merchants open access to sell on it.

I think there’s a discussion to be had, but I see it being more directly applicable to google than Amazon. Amazon has a death grip on retail, but can’t directly control or index what you see on the internet like google.

Google feels vaguely analogous to the Bell breakup of the 80's, where a monopoly on telephone communication drove regulation. I also don’t know how any of it would be challenged legally, probably something that Seriati or other legal nerds here might have a more informed opinion.

wmLambert

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Re: Breaking up is hard to do
« Reply #1 on: May 23, 2020, 10:12:26 PM »
...Google feels vaguely analogous to the Bell breakup of the 80's, where a monopoly on telephone communication drove regulation. I also don’t know how any of it would be challenged legally, probably something that Seriati or other legal nerds here might have a more informed opinion.

Bell is a good bellweather. Amazon is successful because it is a pure middle-man, and doesn't sell much itself, it just hosts those who do. Middle men have always been vilified by the ill-informed, not realizing that a farmer can't take his crops to every supermarket that needs it.

To me, Search engines and internet providers have become too intrusive and use their IT powers too politically. When Free Enterprise is damaged by it, then balancing it may be necessary.

Fenring

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Re: Breaking up is hard to do
« Reply #2 on: May 24, 2020, 12:24:05 AM »
Bell is a good bellweather. Amazon is successful because it is a pure middle-man, and doesn't sell much itself, it just hosts those who do. Middle men have always been vilified by the ill-informed, not realizing that a farmer can't take his crops to every supermarket that needs it.

I think people realize well enough that Amazon owns the universe because they were the first to monetize an available technology, and of course getting in first should obviously equate to dominating the entire world's marketplace forever. There's not much not to understand there. That being said, and as an aside, they actually have been getting into running their own lines, but only in certain categories of goods, where they do keep out third party vendors and instead act as buyers developing their own line (which is still provided by third parties, but under their label...)

Personally I am all for breaking up these monoliths. At the end of the day it shouldn't require a fancy education to know that a few dominant parties having vast controls over not only the marketplace but also politics and legislation, makes for an easy to spot oligarchy, which is ultimately bad for everyone except those few enjoying the gravy train. But the reason to break them up isn't as a punitive action or anything like that, but simply because despite being the first to corner the market of a new technology in culture, at the end of the day these new technologies define everyday life now and aren't a boutique website that you can opt in or out of. We *need* a centralized selling platform, and we have the technology where you should be able to go to THE website to buy the things you need. There is no reason why people should have to shop around a million competitors' sites looking for simple products when it can all be listed in one place with prices right there to see. So in that sense it's a clear-cut case for it being a utility, especially in COVID times. It's literally not even possible now to say "oh just go out to regular stores and buy it." We are well past that on a cultural level, as well presently as a medical level. That one dude should "own" the public wanting a simplified marketplace is so preposterous that it's hard for me to even put it into words. It's so absurd that it's farce. Likewise, Google has clearly become a utility of sorts, and although the odd person may use Bing, or DuckDuckGo just to make a political statement, the idea of private parties determining for us what we see when looking for info, and that this can be monetized and politicized, is well into Orwellian territory; actually more than halfway there IMO.

ScottF

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Re: Breaking up is hard to do
« Reply #3 on: May 24, 2020, 01:35:25 AM »
Amazon has done a ton of things right over the past 20 years and innovated in an environment of the quick and dead. That said, they’ve also leveraged their position to stifle competition and dominate in a way that’s unprecedented. Case in point diapers.com. They were a going concern back in 2009-ish. Bezos decided he wanted that market and was willing/able to sell diapers at a loss just long enough to drive diapers.com out of business.

Hardly unprecedented but today Amzn sells over 1M products and has the power to do that to virtually any company now. When does capitalism succeed to levels that potentially damage the greater good? I''m heavily invested in Amzn but wonder where some of these factors cross over. I also have zero faith that a bunch of politicians can legislate a better model.


TheDeamon

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Re: Breaking up is hard to do
« Reply #4 on: May 24, 2020, 12:19:44 PM »
Google feels vaguely analogous to the Bell breakup of the 80's, where a monopoly on telephone communication drove regulation. I also don’t know how any of it would be challenged legally, probably something that Seriati or other legal nerds here might have a more informed opinion.

Alphabet/Google definitely is headed for the Bell Communications breakup. There is no case they can realistically make to defend themselves on that front.

As you covered, Amazon is a more interesting situation, but if the claim about Diapers.com holds valid, they're venturing into Anti-Trust territory and should be monitored for potential future behaviors of that nature, at which point they get to look forward to having things broken apart.

Facebook is in the interesting position of my being unable to think of a scenario where existing laws/precedents can be leveraged against it very easily. You could try to make a monopoly claim against them, but that's about as far as you can go on that.Of course, I haven't been actively tracking everything Facebook has its fingers in at this point, it certainly is plenty creepy in terms of some of it can and does do. But the argument against Facebook basically  boils to "I think you're too big as a company." (In raw terms of dollar valuation, I don't think it employs all that many people)

Now what Facebook should be getting attention directed at them for is the legal protections they currently enjoy and revisiting the regulatory environment they operate in. Google and to a lesser extent Amazon, also fall into that club.

They're benefiting from Tech legislation passed during the mid-late 1990's which were based on the then current understanding of what tech companies(Which included Google even then) were "reasonably capable" of doing. And on that front, I think the easiest fix on that front in regards to determining "Reasonably" capable would be enact legislation that increases requirements as a company's size grows. As a "0.1% of operating revenues" ask for "compliance" (as an arbitrary number) would certainly qualify as "reasonable" in most people's books. But you get a massive difference on the other end of things when you then compare a start-up company to Alphabet for example. 0.1% for compliance in the Startup could be $100 or less, while for Google and company you could be talking about tens of million of dollars per year. They have the resources available to be able to comply with stricter regulations, as they've now been demonstrating over the past few years.

If they don't want to deal with the new stricter regulatory/liability environment they find themselves in, well. They can always break their own company apart so they fall into one of the less-strict categories.

wmLambert

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Re: Breaking up is hard to do
« Reply #5 on: May 24, 2020, 12:52:09 PM »
Amazon has done a ton of things right over the past 20 years and innovated in an environment of the quick and dead. That said, they’ve also leveraged their position to stifle competition and dominate in a way that’s unprecedented. Case in point diapers.com. They were a going concern back in 2009-ish. Bezos decided he wanted that market and was willing/able to sell diapers at a loss just long enough to drive diapers.com out of business.

Hardly unprecedented but today Amzn sells over 1M products and has the power to do that to virtually any company now. When does capitalism succeed to levels that potentially damage the greater good? I''m heavily invested in Amzn but wonder where some of these factors cross over. I also have zero faith that a bunch of politicians can legislate a better model.

Good points, but overriding it is the basic Free Market. There are at least a dozen or more huge middle-man Amazon-like companies offering the same service, and if they can become as successful, then they will supplant Amazon. There are also boutique middle-men who specialize more. Their success depends on having the goods at a fair price. Amazon does have all the assets already in place, and the ability to wage a monopolistic war to squeeze out competitors, but we also have anti-monopoly laws already in the book.

Kmart went under not because their buyers bought the entire supply made by producers, and could offer the "lowest price guarantee" because only they had the entire supply of a given model. No one could sell an equivalent item, even at a loss-leader price. They went under because the buyers got greedy and bought trainloads of shoddy "bowling shirts" (for kickbacks from the producer) and tried to pass them off as high-fashion tops. By the time Antonini was hired as the new CEO, and gave golden parachutes to the old-time buyers, it was already too late to save the brand. Kmart also had the great strategy of putting every item in the store at a loss-leader price point at different times over the year. (A loss-leader is a sales price which is less than the price Kmart bought it for wholesale - in order to drive traffic, because the average shopper who came in for the sale also bought enough other items to make a substantial profit.) If you shopped at the right time, you could purchase anything in inventory for the best price anywhere. It was when the inventory got too shoddy, and Rainman said "Kmart sucks!" that the store went bust. Antonini did some good things (he hired Jacquelyn Smith as a fashion spokesperson - I voted for Claudia Schiffer at the time - and he got rid of the bad buyers, but was too late to avoid the hit to the corporate image.)

Amazon could follow the same history. That is what competition is all about.

Big box stores can follow the loss-leader paradigm to drive sales, whereas internet sales are usually singletons, so there never is a loss-leader price offered.