tech

U.S. lawsuits against Facebook could force it to sell Instagram, WhatsApp

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By Diane Bartz, Nandita Bose and David Shepardson

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© Thomson Reuters 2020.

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If the owners of Instagram and Whatsapp voluntarily and legally sell their businesses to FB, what's the problem? They weren't coerced or forced to sell, were they?

-4 ( +3 / -7 )

Why don't conservatives just make their own sites? They should be proactive rather than just complain about very ambitious and successful business people. Didn't Melania say "Be best"?

-5 ( +2 / -7 )

If the owners of Instagram and Whatsapp voluntarily and legally sell their businesses to FB, what's the problem? They weren't coerced or forced to sell, were they?

The benefits of a competitive market economy are only possible when you have enough firms in a market to have effective competition. When Adam Smith and David Ricardo described the benefits of competitive markets they described markets with a near infinite number of buyers and sellers. There were so many sellers and buyers that no single market participant could do anything to affect the market price. Price and output are set where supply equals demand at the market price, which it turns out is the lowest price possible before businesses leave the market. At that price output is maximized while prices and profits are minimized. This is the most beneficial situation for a nation as the most goods are available at the lowest prices. This is why economists prefer competitive market economics.

Everyone knows monopoly, one seller in a market, is bad. They set output and price where marginal revenue equals marginal cost. This maximizes profit but also results in higher prices and less output. The difference in price between what the monopolist charges and what would be charged in a competitive market, called a "monopoly rent", represents a wealth transfer from consumers to producers and is considered by economists to be a dead weight loss to the economy. Monopoly is as bad as socialism in economic terms. Sometimes worse.

When you have too few sellers, what is called oligopoly, those sellers can exert a degree of monopoly market power, allowing them to restrict output below what would be produced in a fully competitive market and raise prices above that possible in a fully competitive market enjoying a degree of monopoly rents. Without regurgitating a century of econometric studies on the subject, there needs to be a minimum of six sellers with roughly equal market share to see the benefits of a competitive market. Not two big firms with 90% of the market and four or five little firms competing at the edges (think FedEx vs UPS and all the little players picking up any crumbs left over). No, you need at least six nearly equal sized firms competing head to head to get the benefits of competition. With the big tech giants we have several very big monopolies and many more oligopolies with considerable market power and that enjoy monopoly rents as a result.

Remember those monopoly rents represent a dead weight loss to the economy and are a wealth transfer from consumers to producers. This is why nearly every capitalist nation has anti trust laws that allow the government to prevent mergers that would create oligopoly situations or outright monopolies, and those laws can also be used to break up monopolies and oligopolies if a nation so chooses. The US has refused to use these laws for too long and as a result a great many major markets, not just the tech sector, but transportation and many consumer goods markets and foods are dominated by big oligopolies. If you ever wondered why you feel so poor while big corporations sit on literally a couple of trillion dollars in unspent cash balances this is a big part of the reason why. It isn't creeping socialism that is hurting capitalist economies all over the world but rather creeping oligopoly and monopoly.

6 ( +9 / -3 )

those sellers can exert a degree of monopoly market power, allowing them to restrict output below what would be produced in a fully competitive market and raise prices above that possible in a fully competitive market enjoying a degree of monopoly rents

Welcome to Japan, where we are conditioned to almost eschew value for money. With Facebook, we are conditioned to eschew our very privacy itself.

0 ( +1 / -1 )

What makes this lawsuit frivolous is that back in 2012, Facebook accounted for 95% of the market share. But they still approved the sale of Instagram and what's app. Facebook market share has shrunk and now they are basing their entire argument on a sale that they approved.

1 ( +1 / -0 )

Imagine becoming a billionaire and not selling anything?

At least the dude running Amazon get goods out to consumers at competetive haggling and prices.

Instagram sells nothing.

What's app sells nothing.

FB sells nothing.

...in Asia though at least, LINE does sell things and offers lots of things that can benefit lots of consumers without crushing upstarts and competitors.

I disagree with the Tortoise above.

0 ( +0 / -0 )

May be legislators are not happy that the very popular whatsapp used globally is free sending phone companies that were fleecing people with astronomical phone bills have been put to sleep. Gone are those days one had to buy phone cards to call abroad, I don't think anyone wants to return to those times.

1 ( +1 / -0 )

Welcome to Japan, where we are conditioned to almost eschew value for money.

Well, most of the world outside the US haggles over price. It seems routine in Asia for shoppers to argue with merchants, pleasantly of course, to lower the price of something they wish to buy. It's just an ingrained every day thing. You don't see that very often in the US. Americans just pay whatever is on the price tag without even a whimper. My wife has taught me the value of haggling price and even in the US it can work.

Worse yet Americans see all the different brand names on the shelf and are fooled into thinking all these brands represent different companies. The fact is that all those brands are owned by two or three really big corporate oligopolies who between them control over 90% of that market. Even what seem like small boutique brands like Toms of Maine tooth paste or some "microbrews" are owned by a big oligopoly. Colgate-Palmolive owns Toms of Maine, and most other tooth paste brands on the store shelves. Miller-Coors, a merger of two giants, owns 20 beer brand names. Anheiser Busch owns brands like Goose Island, Blue Point, 10 Barrel, Elysian Brewing Company, Four Peaks Brewery, etc., etc.. Between them Miller-Coors and Anheiser Busch control over 90% of the US beer market. That is emphatically not good for competition or for the consumer. It doesn't get any better in the soft drink, bread or snack foods isles either. Consider that Pepsico owns Frito-Lay and that Pepsico and Coca-Cola own over 90% of the soft drink market in the US. I could go on about how the consumer is being raped by monopolies and oligopolies. The tech sectors is highly visible but doesn't affect the consumer to the degree that oligopoly and monopoly in consumer goods affects those same consumers. Not even close, but do you think anyone in Congress is going to try to break up FedEx, UPS, Anheiser Busch or Pepsico? Fat chance of that !

0 ( +0 / -0 )

These types of antitrust cases would take years. And Google has lots of expensive lawyers

Don't expect anything anytime soon

FB sells nothing.

FB sells you (the user) - to the advertisers and information gatherers

"When something is free, you're the product"

0 ( +0 / -0 )

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