@scleland: The Huge Hidden Public Costs (>$1.5T) of U.S. Internet Industrial Policy

[Editor Charlie sez:  Scott Cleland takes an excellent deep dive into the “leechonomics” of the safe harbors afforded to the special people who are members of the Internet Association and the Digital Media Association.  This corporate welfare was most recently replicated in the punitive Music Modernization Act retroactive safe harbor bolstering profits from copyright infringement for the special people which passed the House Judiciary Committee on the same day that the Congress cut back the CDA 230 safe harbor for the same special companies and cut their profits from sex trafficking.]

This post introduces a new white paper here with a first-of-its-kind, cost-estimation model of the cumulative hidden public costs of U.S. Internet industrial policy* entitled: “Internet Platform Corporate Welfare and Leechonomics.” *U.S. Internet-first, industrial policy in the 1996 Telecom Act, effectively exempted only Internet companies from: all U.S. communications law, regulation, and public responsibilities; normal non-communications Federal/State regulation; and normal civil liability for what happens via their platforms and business models.

Nutshell Summary: Sweeping Government exemptions and immunities from risks and costs overwhelmingly favor zero-sum, parasitic policy arbitrage and corporate welfare, which perversely fosters unproductive “leechonomics.” U.S. Internet policy most incents platform business that maximizes arbitrage spreads, i.e. taking maximal societal risk that un-immunized competitors can’t take, where the benefits can be capitalized by platforms, and the costs socialized to the public (>$1.5T), because the government has only exempted and immunized platforms from normal accountability and responsibility for consumer welfare.

Read the post on The Precursor Blog

@ScottCleland: How Did Americans Lose Their Right to Privacy?

Americans want their right to privacy restored.

Prior to 1996, Americans had a well-established, offline right to privacy based on the Fourth Amendment of the U.S. Constitution and several strong federal privacy statutes passed in 1974, 1974, 1978, 1984, 1986, 1988, 1994, and 1996.

In 1996, Congress also unwittingly and effectively set in motion an exceptional erosion of Americans’ established offline right to privacy when it passed the Telecom Act, which specially exempted and immunized Internet platforms from normal governmental accountability and consumer protection responsibilities.

Over two decades, this Wild West Internet industrial policy, which has been interpreted by Internet platforms and the courts, has eroded bit by bitAmericans established offline right to privacy witha de facto U.S. online privacy piracy policy today.

In practice, America’s Internet law has transmogrified into open season on American consumers’ personal data. That’s because the U.S. Government effectively immunized Internet platforms’ in advance, from civil liability for the collection, use, and monetization of personal information online, that otherwise could be illegal to do offline.

Read the post on The Precursor Blog

@scleland: Why Amazon Buying WholeFoods Will Attract Serious Antitrust Scrutiny

In proposing to buy WholeFoods for $14b, Amazon has surprisingly invited unwelcome serious antitrust investigation into, and public discussion about, Amazon’s core conflicted retail/MarketPlace business model and the many alleged predatory, discriminatory, and unfair standard Amazon business practices, that Amazon commits, not only in the grocery business segment, but in all other retail segments.

In statingthe parties expect to close the transaction in the second half of 2017,” that means Amazon expects no serious antitrust investigation of whether the transaction “substantially lessens competition,” and thus no “second request” from antitrust authorities requesting more information and questions to answer.

If a “second request” comes, which is likely, there is no way the companies can continue to “expect” the deal will be approved in 2017. That’s because such an investigative process effectively does not have any deadline for the reviewing authority, DOJ or the FTC, to either: approve, approved with conditions, or challenge the deal….

The combination of: the likely multiple alleged anticompetitive behaviors; the likely number of complaints and complainants; the online-offline complexity of investigating the complaints; the importance of this case as an online-offline antitrust merger precedent; the exceptional size, scope, reach, speed and non-transparency of Amazon’s online business; and the expected high-public profile of this transaction; all would auger for the reviewing authority to err on the side of caution and investigate the transaction fully.

Let me be clear here about what I am saying and not saying.

First, what’s obvious here is that the transaction will attract a lot of concern in private and publicly in multiple dimensions. That’s precisely because of the many serious implications this “Everything Store” proposed transaction will have for the future of competition in many markets, which in turn will delay Amazon’s transaction timetable.

…[M]ost of the antitrust concern will come with the exceptional market power that Amazon wields online, combined with the under-appreciated conflict in its business model where half of its retail revenues come directly from consumer-customers, and the other half of its retail revenues come from its MarketPlace offering where Amazon is the mall and gatekeeper for around 15 of its top 20 grocery competitor-customers, that have had to capitulate to Amazon’s market power and operate on Amazon Marketplace in order to reach all their offline customers online.

In layman’s terms, the problem Amazon’s retail intermediary model causes competitors is that it simultaneously is a direct retail competitor overall, at the same time it is the dominant online broker that has disintermediated its competitors from their customers when they are in the online world, and in that broker role, they are routinely criticized as not being an “honest broker” or as being a “non-neutral platform,” that routinely self-deals anti-competitively, because Amazon has market power to extract it with impunity, and no antitrust or regulatory accountability to speak of – to prevent it.

[T]his transaction review is the first genuine opportunity and powerful legal process for those alleging anti-competitive harm by Amazon to have antitrust authorities’ full ear in a confidential process where warranted.

Read the post on the Precursor Blog

@scleland: Google’s ad blocking exposes the company’s hypocrisy on net neutrality

Let me be crystal clear: I strongly agree with advertisers and the advertising industry that there are way too many consumer-unfriendly ad formats and automated bad actors running amok on the Web. Legitimate and accountable ad blocking can be a good and necessary solution.

However, as we recently learned from Wall Street Journal, “Google plans to introduce an ad-blocking feature in the mobile and desktop versions of its popular Chrome browser.”

The problems spotlighted in this piece are not with ad blocking, nor with Google participating in legitimate and accountable ad blocking. The problem is first with Google’s hypocrisy, and secondly with Google’s monopolistic behaviors involving Google Chrome, Search, Android, and advertising. Those issues raise legitimacy and accountability questions specific to Google’s ad blocking.

Read the post on The Hill

@scleland: How Google Is Anti-employment Anti-property & Pro-regulation

Google’s unprecedented Obama Administration influence and its self-serving anti-employment, anti-property, and pro-regulatory policy agenda, are on a collision course with the job-creating, pro-property, deregulatory Trump Administration growth agenda.

Keep watch to see who adapts to whom and how.

I.  Google’s Unprecedented Lobbying Influence

Current Alphabet-Google Chairman Eric Schmidt enjoys the privilege of being the onlycorporate leader of a publicly-traded company on the President’s nineteen member Council of Advisors on Science and Technology.

Coincidentally, former senior Google executive from 2003-2014, Megan Smith, is the U.S. Chief Technology Officer, responsible for all tech policymaking in the Executive Branch.

Coincidentally, Former Google Deputy General Counsel for intellectual property from 2003-2009, Alexander Macgillvray, is the Deputy U.S. Chief Technology Officer for intellectual property & privacy policy.

Coincidentally, former Google Senior Engineer from 2006-2013, Mikey Dickerson, is Deputy U.S. Chief Information Officer and Administrator of the U.S. Digital Service, a new organization and position.

Renata Hesse, Google’s former outside antitrust defense counselis coincidentally now Acting U.S. Assistant Attorney General for Antitrust, who coincidentally is the lead liaison with EU antitrust authorities concerning the EU’s three pending monopolization cases against Google.

Former Google Deputy General Counsel and head of patents and patent strategy from 2003-2012, Michelle Lee, is coincidentally now Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent & Trademark Office, who coincidentally joined the USPTO just when Google faced several new serious patent lawsuits.

And coincidentally yet again, the U.S. Register of Copyright, Maria Pallante, just got fired coincidentally after she disagreed with Renata Hesse and Google’s position on a music copyright consent decree and with the FCC-Google position that FCC authority should supersede copyright in the FCC’s Set-Top Box rulemaking.

Coincidentally, Google employees visited the Obama White House 427 times per White House Logs including 128 visits coincidentally by Google’s lobbyist Joanna Shelton alone, many more times than any other special interest.

And a final coincidence, Google also has generated the most “revolving door” moves of any company with this Administration with 251 Google employees either entering the government or government employees joining Google, according to the Google Transparency Project.

Read the post on the Precursor Blog

@scleland: Did Google and Facebook Pass on Twitter to avoid Antitrust Investigation?

What No Bids for Twitter Tell Us about Google Facebook & Online Advertising by Scott Cleland

What does it tell us that no company ultimately bid to buy Twitter over the last month despite several reported brand-name interested buyers?

Twitter is the eighth-most-visited Internet site in the world; the best site in the world for real-time content; and is one of the few public companies in the marketplace that is growing revenue at a 20% annual rate – and no one even submitted a low-ball bid for Twitter? What is going on here?

Apparently, it tells us that there are only two companies in the world that could grow, leverage and monetize Twitter to make it worth roughly $20b under current circumstances – Alphabet-Google and Facebook — and they both practically can’t buy Twitter for antitrust reasons.

Let’s analyze why.

Read the post on the Precursor Blog.

@scleland: Why Did Google & Facebook Stop Competing With Each Other?

Good thing Renata Hesse is on the case!

The evidence shows that Google & Facebook — by far the world’s most dominant Internet gatekeepers – are not an Internet advertising “duopoly,” but worse, two separate Internet advertising monopoly platforms, one in search advertising and another in social media advertising.

That’s because search and social media advertising are not competitive substitutes for each other, but are proving to be synergistic advertising complements to each other in company marketing campaigns, because generally search advertising excels at lead generation and local business visibility while social media advertising generally excels at building brand awareness and interactivity with consumers.

Tellingly, after beginning to directly compete in social in 2011 and in search in 2013, Google and Facebook both abruptly, coincidentally, and effectively stopped competing directly with each other in both the search and social media markets in 2014.

Apparently, they either jointly agreed in 2014 to divide up the marketplace and no longer directly compete with each other to maximize their exceptional mobile growth and profitability; or they concluded independently — from their initial directly competitive forays into the other’s core markets — that the other commanded unbeatable monopoly network effects, so not directly competing with each other would maximize their exceptional mobile growth and profitability.

This profound lack of competition among the world’s two most dominant Internet edge platforms is highly relevant to: the EU antitrust charges against Google in search, mobile, and advertising, and the EU’s privacy investigations into Google and Facebook; antitrust authorities’ antitrust investigations of Google and these markets in the U.S. and around the world; and also the FCC’s core competitive assumptions underlying its Open Internet Order, and its proposed Title II ISP privacy rules and Set-Top Box unbundling rules.

Read the post on the Precursor Blog