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Comment by djyaz1200 | Hacker News Reader

Tech companies that reach monopoly scale (like Apple, Facebook, Amazon) should have to disclose all their agreements and honor a "Most Favored Nation" clause giving all companies the same pricing and access as the best negotiated agreement with any one company. This is the most reasonable way I can think of without breaking them up to prevent them picking winners and losers as new opportunities emerge. If you have a better plan I'd be glad to hear it.

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This is a solved problem. Just do what most American cities do with other natural monopolies like utilities: use careful price controls to cap margins and slow rate increases. You don't need to invent some esoteric market-based solution, especially for a service where marginal costs are near zero and supply is almost infinite.

Make them a (common carrier)[https://en.wikipedia.org/wiki/Common_carrier] just like was done for WAN access in the USA. Hahahahahaha.

Absolutely not a solved problem. The utilities have no reason to innovate at that point.

In my local municipality I have no way to choose renewable energy apart from building my own power plant on my roof. That’s a complete failure of these government granted monopolies.

What incentive does the app store have to innovate now?

There's no such thing as choosing renewable energy on a grid. Energy is fungible. If you get on one of those "choose green" schemes, you're just getting the same energy but also buying some credits from somewhere else.

The regulating bodies of those utilities work hard to create incentives for them to innovate. I spent four years of my career working on energy programs with major utilities around the country in which they tried to incentive reductions in energy usage.

Which is a curious statement: why would a electrical utility want people to use less electricity?

The reason is because the regulatory agencies created incentives within the regulatory framework to encourage them to do it. Basically the regulators start with an outcome, bake that outcome into how utilities get paid, and then let the utility innovate to figure out how to do it. This led to meaningful reduction in energy usage across many markets.

I'd love to hear more, what kinds of incentives? Is it something like, "if you get X efficiency, you get N more dollars"?

There are a bunch of different models but they mostly come down to the regulatory agency (IE: the PUC) creating a pot of money for utilities that is paid out when they reach energy reduction goals.

You can learn more by looking into Demand Response programs and Demand Management programs around the country.

It's not something that should be a choice. The government should move as much power to renewable as fast as possible and you should just keep getting power. This idea of "choice" for a commodity based on how it was produced not based on any features is crazy and will never work.

What's wrong with your local power provider not incorporating renewables? There are still solar installers, and it probably a better deal overall to own your own plant, as it were.

My city recently forced every resident into an esoteric market-based solution for electricity (sold with a pack of lies about renewable energy and reduced rates) that required explicit opt-out to avoid and stay with the provider who actually generates power and services the people on its infrastructure.

Which city?

It is not a 'solved problem'. Price controls are not easy for anyone to manage. Companies can easily find ways around them in many cases.

Enabling companies to categorize themselves as 'platforms' or otherwise and then stipulating both benefits and requirements based on those labels makes a lot of sense comparatively. The general problem though is that the government isn't typically using regulations to improve freedom and competition. The government looks at regulation as a way to extract money, so solutions that encourage competition on a level playing field through market forces (like OP's) aren't given fair consideration.

> Just do what most American cities do with other natural monopolies like utilities: use careful price controls to cap margins and slow rate increases.

Nothing Apple does is a natural monopoly.

Artificial monopolies can be maintained through vertical integration. If you don't like their app store, use another one. If all they provide is the app store, that's easy, and every platform would have half a dozen or more.

But if using a different app store requires you to develop your own operating system, and convince millions of third party developers to make applications for it even before it has any users, and make your own hardware, on and on, well then it's infeasible to make a competing app store and you get an uncompetitive and abusive market.

The solution there isn't to regulate it like a utility, it's to break up the company so that the operating system isn't made by the same company as the app store and has no reason to restrict the users to only the one. Then you have competition again and don't need any regulation other than the constraint on vertical integration.

What is relevant is that the App Store is a natural monopoly within the iOS ecosystem. As long as Apple has such significant market power (including a substantial market share, especially as a percentage of revenue, not just units sold) their natural monopoly on the iOS platform will extend to them being a willing participant in an oligopoly.

Said state of affairs is the expected outcome of Apple having a natural monopoly and there being only one other substantial mobile OS market participant, who just so happens to also operate a natural monopoly for app sales - albeit a much, much more tenuous one.

> What is relevant is that the App Store is a natural monopoly within the iOS ecosystem.

That's very much not a natural monopoly, but a constraint that is forced onto the ecosystem by Apple. There is no technical reason for it existing, but it exists by design.

There's no historical evidence of natural monopolies existing at the scale of cities. There are multiple American examples of decades long competition in utilities. The economic rationale for politicians to give their friends local monopolies long postdates the practice of doing so.

> The Myth of Natural Monopoly

> Most so-called public utilities have been granted governmental franchise monopolies because they are thought to be "natural monopolies." Put simply, a natural monopoly is said to occur when production technology, such as relatively high fixed costs, causes long-run average total costs to decline as output expands. In such industries, the theory goes, a single producer will eventually be able to produce at a lower cost than any two other producers, thereby creating a "natural" monopoly. Higher prices will result if more than one producer supplies the market.

> Furthermore, competition is said to cause consumer inconvenience because of the construction of duplicative facilities, e.g., digging up the streets to put in dual gas or water lines. Avoiding such inconveniences is another reason offered for government franchise monopolies for industries with declining long-run average total costs.

>It is a myth that natural monopoly theory was developed first by economists, and then used by legislators to "justify" franchise monopolies. The truth is that the monopolies were created decades before the theory was formalized by intervention-minded economists, who then used the theory as an ex post rationale for government intervention. At the time when the first government franchise monopolies were being granted, the large majority of economists understood that large-scale, capital intensive production did not lead to monopoly, but was an absolutely desirable aspect of the competitive process.

http://mises-media.s3.amazonaws.com/rae9_2_3_3.pdf

The price the users pay to Facebook is their privacy and attention. What would a price cap for that look like?

Better plan? How about we stop letting tech companies reach "monopoly scale"?

The market is globally competitive. How would expect tech companies to compete if you have policies that continuously place them at a disadvantage against global competitors.

Tariffs don't solve these problems either. OP's suggestion is pretty decent idea relative to playing wack a mole with price fixing while trying to make sure your country's corps can compete on the global market.

>How would expect tech companies to compete if you have policies that continuously place them at a disadvantage against global competitors.

We can look at a map of most popular messaging apps per country in the light of todays downtime and see that they don't or they compete with themselves.

It also shows the only places where competition can grow to a scale where it can even hope to start competing and survive is where there's first a protectionist policy in place favoring domestic players.

It's not a free market, it has never been a free market, and this is just another part of a market that should also be regulated.

> The market is globally competitive.

If national governments are going to allow companies to be trans-national, then we clearly need trans-national regulatory authorities. This isn't rocket science.

People act like corporations are immutable acts of divine intervention. They are an artifact we create and we are free as a society to change their parameters however we wish.

I agree, but there may be certain things like electric power grids, sewer systems, messaging systems, high bandwidth ISPs, where it may not make a lot of sense to have two (or not two in a particular geographic location). In that sense you may need some regulation.

Sure, but why limit this to tech companies? Let's also apply this to banks, landlords, governments, grocery chains, and employers in general.

Why should I not get the best wages, negotiated employment agreement, interest rates, lease terms, and deal with the IRS on taxes that I really don't want to pay as my most successful peer?

Banks bend over backwards for their VIP customers, why shouldn't they do the same for me?

My neighbours didn't get a rent increase this month because my landlord likes them, why should I have to negotiate for getting the same thing?

Bill on my team got a 30% bonus this year, I also want a 30% bonus... And would love to see this sort of thing codified in law.

Having this requirement when dealing with tech monopolies is uniquely helpful because in some cases there is no alternative. We can always rent, shop or bank other places. I'd argue where there isn't a thriving marketplace of choice monopolies should have to have the same rules with all their partners.

You can always use other software as well. The only reason HN believe Apple to be a monopoly is because the product they purchased does what it was advertised to do - security through chain of trust via an good-but-imperfect organization. It's only a legal monopoly if the courts say so, and the judge in Epic v Apple defined the market in a way that actually made sense - they aren't a monopoly on mobile game purchases, but they did took anticompetitive actions in that market to stifle competition.

> I'd argue where there isn't a thriving marketplace of choice monopolies should have to have the same rules with all their partners.

They can't have a monopoly on iPhones because the iPhone isn't a market - it's a device where the App Store is the killer feature. There are other products you can buy that compete with the iPhone and its app store.

Apple as of years ago was capturing over 90% of all the margin in smartphones (https://www.cnbc.com/2016/11/23/apple-captures-record-91-per...). I'd argue that represents a monopoly in paid smartphones. Our option as users is either buy a phone from Apple or accept what is essentially a free service from Google (you have to buy the hardware)... who are giving that away to solidify their search monopoly. This to me doesn't represent a thriving marketplace of user choice.

90% of global smartphone profits does not mean 90% of devices in the market. It's been demonstrated for years that iPhone users are much more likely to pay for apps. It's possible to be extremely profitable and not have a monopoly on the market because the iPhone isn't just an appliance but a Veblen good as well.

It does however mean Apple has significant market power. Almost by definition: in a very counterfactual perfectly competitive smartphone market, everyone sells at cost and there aren't any profits. Reducing it to monopoly vs. not-a-monopoly is drawing too bright a line.

And I don't really think iPhones are a Veblen good exactly. Targeted at higher-income buyers? Yes. Valued as much for design as aesthetics? Absolutely. But pretty sure a $500 iPhone would outsell an otherwise-identical $800 iPhone, nevertheless.

Any of those a monopoly?

Technically or reasonably speaking?

You snark, but legally preventing banks from offering better rates to favored clients would probably be a good thing for society and the banks themselves. After all, plenty of charming and well liked clients have turned out to be terrible credit risks.

Favored clients in this case aren't slick guys in a suit, I'm talking about people who want the bank to manage billions of dollars for them, as compared to me and my shitty savings account that may or may not have any money in it.

Credit scores are a very good thing. Someone who pays their bills on time shouldn’t have to pay the same rate as someone who always skips the bill, and without them, every loan would have 10% interest at least, even for mortgages

The concept is fine. The implementation is garbage (in the US), and insufficiently transparent.

"but why limit.. " assumes we do things in an absolute manner. But we don't. All rules and regulations are arbitrary to an extent. We have different rules depending on the situation, the entity, etc. We get to pick and choose the rules that we think will benefit society the most.

Might be too broad. Especially as the scale gets smaller I think that non-quantitative aspects can reasonably affect who you want to do business with. For example, if I'm annoying and rude to my local mechanic and he starts charging me extra to deal with my bullshit I don't really see a problem with that.

There does start to be a problem however if he's the only mechanic in town or if he charges more or less based on race or some other protected class.

I think it's a very hard in general to find the balance on problems like this one, and I don't expect you can come up with a one size fits all rule.

I agree with everything you just said but without the irony.

We could also just put a tax of 100% on any revenue in excess of $10bn a year and nip this entire society-destroying problem in the bud.

It's an interesting thought experiment at least. What would the hidden incentives of something like that be?

For example, if a company wanted to keep growing, it would have to split organically into separate corporate entities. What would stop them establishing "favored" relationships with each other? Say for example Facebook splits out "Zuckerburg data centers inc" - what's to stop them pricing themselves above market to avoid taking on other customers, and then giving FB a hefty discount? You could mandate that there be no board overlap, but shareholders would probably receive a split.

If Zuckerberg data centers wants to keep growing, then at some point they will have to find external customers.

You'd need to actually draft a law rather than write it on a napkin and there would be armies of very well paid lawyers trying to avoid it, but that's common to any attempt to break up concentrated power.

In that context it wouldn't be all that hard. You'd need to figure out some definitions for common ownership, joint enterprise, and so on. A lot of those laws and definitions already exist. It's only really in the last few decades that we've abandoned antitrust law but we have successfully done things like this in the past.

When have we capped the potential revenue of companies successfully in the past? I've never heard of it

Why not $9bn a year?

You got to start the discussion somewhere.... For me, I t think that it should be related to the number of employees.

A cap on employees would probably be a negative thing, but a cap on revenue per employee would incentivise hiring people

that's the solution

Talking about monopolies, why does Facebook and HN have network issues at the same time.

Maybe people visit other sites when the ones they would have used go down? I don't know for sure but it is a plausible explanation for me.

makes sense but at the same time it surprises me

That -sounds- simple, but it isn't, and in reality any company would easily bypass that by simply creating other companies to take some of the revenue. They already do that to avoid international taxes. As an example, the US charges tax on all income coming to a US company so companies have entities in countries like Ireland and Luxembourg to keep that money out of the US government's reach.

So Apple might have $100B stuck in Ireland, unable to bring it to the US, but it doesn't matter, that money still counts for their shareholders.

And it's the same thing here. If you try to tax $10B they'll just have 100 companies all making $9.9B/yr, in a variety of different countries, completely separate from each other, and you're back where you started.

And while this would be extremely complicated/expensive for them to manage, it'd be profitable because the alternative is to get a 100% tax on those profits.

Taxes aren't easy. And calling a company that sells phones a "society-destroying problem" is a bit hyperbolic, don't you think?

There’s nothing simple about it. It would require pages of statute as well as regulatory guidance, and some of the most wealthy and capable forces in our modern world would be arrayed against it trying to avoid and evade the rules.

None of those things make the proposal impossible however.

It would be a dismal society indeed if we unilaterally surrendered to every instance of centralized malevolent power without a fight.

Too easy to get around, as soon as company A starts making $11B they make a new company B that charges $1B for some random service, probably "consulting".

Thats actually what a lot of firms do, and what was really prominant in the Cannabis industry;

Cannabis companies couldnt do "real banking" do to federal shenanigans.

So instead why dispensaries would do, is make another LLC who buys the building and all the building permits that are municipally regulated - then as the municipality zoned and approved locations and projects for dispensaries and distribution licenses (which had a multitude of their own specific restrictions)

They would then rent the facilities for ridiculous rental amounts which the rental company would legally be able to put into any regular bank - then make loans to the cannabis companies and dispensaries for whatever operating expenses were needed.

This got really ugly when Med Men, based out of LA, was made really public because of douchebaggery happening in the company revealing how they had been gaming their own investors etc...

So what happens to the company spending 10.5bn to earn 11 bn? They just get a net loss of 0.5 bn?

edit: Or lets pick a real example and see how that works out. ArcelorMittal is a major steel provider. They sold $53B last year. They had a tough year though, so their final net loss was actually about half a billion.

Under your proposal, they would have lost 43 billion dollars. Uh oh, you just collapsed the steel industry.

I assume the idea is that large companies such as this would have a period of time to scale down operations to the largest size where it still makes sense, and then more competitors would pop up to take over the market share they leave behind. I’m not defending the proposal since I’m too ignorant to have an opinion worth speaking out loud, but that was my interpretation at least.

It’s even simpler. They’d split up into pieces.

Seeing as how there are very few massive companies that weren’t created by piecing together smaller companies in the first place it shouldn’t confuse anyone. Also companies spin off parts constantly when they think it’s in their interest so they idea they won’t know how to do it is frivolous.

You could certainly make an argument that my $10bn number is too low, or that there should be a sliding scale of some sort but the concept and it’s likely outcome is very easy to understand.

It's a silly idea because plenty of companies have high revenue and low profit (or net loss), and are not anti-competitive in the slightest. An arbitrary revenue cap doesn't help the situation at all, as evidenced by the steel company.

Disincentivizing growth is... dumb.

Nah. Splitting up ArcelorMittal is a fucking great idea.

Our competitive landscape is being absolutely choked by anti-competitive behavior, monopoly, and single point of failure problems in supply chains, labor markets, commodities markets, and everything else.

It’s unsafe and bad for society and we should take decisive and aggressive action to stop it.

Instead we’re so accustomed to it and dulled into submission by decades of corporate PR efforts that people will somehow think it makes sense to reflexively advocate for lawless monopolists[0] on message boards in the name of “growth”.

[0] https://www.reuters.com/article/us-arcelor-africa-antitrust-...

https://www.hindustantimes.com/business/arcelormittal-fined-...

https://www.luxtimes.lu/en/business-finance/arcelormittal-fi...

I am sympathetic to your argument, but it would be stronger if you didn't project the "why" onto a large group of people. It's pretty clear that the reasons are complex, nuanced, and possibly only a problem at scales most of us never encourage. (I think there are probably also benefits of the large size, e.g. Walmart has completely changed what you can buy for low prices, which has incredible value to many people)

Also, I'm not sure the SPOF problems are a result of anti-competitive behavior - AIUI, it's because JIT delivery between different entities is far more cost effective, and the human brain tends to ignore hidden risks.

While I would definitely entertain extreme tax tiers at high revenue limits (like $10B/yr), it is important to note that there is value in Apple making money.

There are a lot of jobs created between the $10B and $1T levels. And as citizens of Apple's home nation, it greatly benefits us that those high-quality jobs are available.

A 100% tax (or even 80%) tax would discourage a lot of products from existing. Apple would probably move down to simply offering just phones and apps only and removing everything else. I know that sounds good in theory, but there are indirect benefits for these other services that they offer, in addition to jobs. It also bolster's California's economy all the way down to bodegas, bars, restaurants, and hobby shops.

So an alternative tax like 60% on revenues above $50B that can not be deducted against might be a more reasonable alternative.

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