Taking Bites from the Apple

by S.M. Oliva
Mises Economics Blog
Jun. 13, 2010

It’s starting to look like the Federal Trade Commission’s aborted “review” of the Google-AdMob merger was just a pretext towards the regulator’s real target, Apple Inc. The FTC said it decided not to attack Google due to Apple’s recent moves in the mobile web advertising market. And now the FTC is poised to attack Apple, reports the Wall Street Journal:

WASHINGTON--The U.S. Federal Trade Commission will investigate whether Apple Inc.’s business practices harm competition in the market for software used on mobile devices, people familiar with the situation said.

For weeks, the FTC has been engaged in negotiations with the Department of Justice over which agency would review allegations by companies that say they’re being shut-out of one of the most important emerging computing platforms.

Adobe Systems Inc. has been engaged in a public feud with Apple over its decision to ban Adobe’s Flash video technology from Apple devices. This week, Google Inc. complained Apple’s new rules on developers could bar Google and other rivals from selling ads inside iPhone and iPad applications, such as games.

[ . . . ]

Some industry representatives are coming to Apple’s defense.

“The iPhone was just introduced three years ago, and all of a sudden (Apple is) being accused of being a monopolist? To me, it’s absurd,” said Gary Shapiro, president of the Consumer Electronics Association, in an interview. “They don’t even have a dominant position in smart phones--that’s Blackberry.”

However, some antitrust enforcers say that if they wait until a tech company has cornered a market it may be too late. The technology sector has powerful “network effects” that, some say grant outsize advantages to first movers and make it particularly difficult for competitors to break in.

The FTC will have a wealth of information to mine for its probe. It recently completed a six-month investigation of Google’s $750 million acquisition of AdMob Inc., giving its lawyers knowledge of the mobile-ad market that Apple has also entered.

Two things that should stick out here: First, the fact that the DOJ and FTC have to “negotiate” to decide who gets jurisdiction confirms that antitrust is not a valid form of “law.” If there’s no way to know in advance who enforces the law -- to say nothing of what the law actually prohibits -- then what you have is a glorified form of mob rule.

Second, the Journal’s refusal to identify the “antitrust enforcers” who are calling for preemptive attacks on Apple helps explain why these same “enforcers” are trying their best to save traditional, newspaper-based journalism. The Journal acts as a one-way conduit for mid-level bureaucrats to safely level anonymous threats against private companies. There’s little risk that these taxpayer-funded lawyers will be identified or held accountable for their statements.

Now as to the merits of this story, I’d just say one thing. The FTC is not concerned about hypothetical firms that might be shut out of the market by Apple. One can’t protect that which doesn’t exist. No, the FTC is concerned because other existing companies -- i.e., Adobe and Google -- diverted a portion of their sizable resources away from developing better products and towards unproductive lobbyists (er, antitrust counsel). The FTC wants to encourage this trend, because of course many of today’s “antitrust enforcers” would like to become unproductive lobbyists themselves.