Facebook’s New Crypto

Facebook made the announcement that they were launching their new cryptocurrency.  They also let it slip who was backing it and it’s a blue ribbon cadre of backers.  Having an independent corporation launch its own crypto doesn’t surprise me.  It’s only a question of time before someone like Amazon follows suit.

What is more interesting to me is the antitrust issues.  In their announcement, Facebook took pains to say that they have established a “regulator” that will ensure that data stays private and doesn’t cross the bridge into Facebook which heavily mines personal data.  Let’s just say that Facebook hasn’t engendered a lot of trust when it comes to how it uses data.

The other day, I came across this from the Department of Justice on antitrust. Assistant Attorney General Makan Delrahim at a recent conference on antitrust in Tel Aviv, Israel said,

First, as the Microsoft case and other enforcement actions involving digital technologies show, we already have in our possession the tools we need to enforce the antitrust laws in cases involving digital technologies.  U.S. antitrust law is flexible enough to be applied to markets old and new.

Second, in order to understand what conduct is anticompetitive and thus unlawful, the Antitrust Division works hard to become expert on the commercial realities of the digital economy.

Broadly speaking, in some digital markets, the competition is for user attention or clicks.  If we see the commercial dynamics of internet search, for example, in terms of the Yellow Pages that were delivered to our doors a generation ago, we cannot properly assess practices and transactions that create, enhance, or entrench market power – and in some cases monopoly power.

Like the old monopolies, firms operating in digital markets are typically built on proprietary technology.  The most successful ones seek to build and leverage networks that drive down costs while amassing a large number of customers.  Eventually, the more customers a platform has, the more valuable it may be for each individual user.  Economists would refer to this phenomenon as an example of network effects.  In many ways, AT&T and Microsoft leveraged network effects to create or heighten barriers to entry.

Third, clever positioning should not obscure what is otherwise ordinary evidence of an antitrust violation.  Where a company has market power, enforcers should be circumspect about conduct that does not plausibly advance a legitimate business objective and transactions that eliminate competition.  Depending on the commercial realities of a given market, enforcers may uncover facts that support taking a longer-than-usual view of entry.

Finally, the Antitrust Division does not take a myopic view of competition.  Many recent calls for antitrust reform, or more radical change, are premised on the incorrect notion that antitrust policy is only concerned with keeping prices low.  It is well-settled, however, that competition has price and non-price dimensions.

Precedent in antitrust has largely relied on a standard put forth in the 80s by Justice Robert Bork where analysis centered on price and economic benefit for consumers.  He never saw the internet coming and the freemium model of business coming.  I am not convinced antitrust is the answer to the issues that Big Tech and society have.  Antitrust is not a panacea, and it rarely works the way implementers want to see it work.

At the same time, we ought to take a really hard look at what’s going on.  Google and Facebook dominate ads.  The WSJ explains Google’s dominance in three charts.  What happens when Google issues its cryptocurrency for its mobile Android platform?

While we are being smothered by Big Tech, we are also being smothered by Big Government. Here is a quick video posted by the Claremont Institute with John Marini on exposing the growing influence of the “administrative state”.  By administrative state, I mean the Executive Branch bureaucracy of the government; not the Legislative Branch which is the Congress if you don’t remember your Middle School Constitution class.

Those duel forces are very limiting to choice and freedom.  That impacts innovation.  No innovation, no progress.  No progress, stagnation.