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Comment by drdaeman | Hacker News Reader

I wonder, besides classical antitrust stuff (which doesn't seem to work at all), is there some sort of measures that would make the process inverse, making giant corporations want to disperse into smaller autonomous companies?

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After citizens united the feedback loop of corruption became too strong.

Company pays for candidates advertisements so they can win primary -> can only vote on candidates that companies voted for first -> politicians are responsive to their benefactors -> politicians de-regulate/ignore mergers/grid lock themselves -> companies are able to centralize more power -> company increases their influence over the government to get even more influence...

This un-virtuous cycle means the only way out is unions (or french-ery).

We have openly corrupt supreme court justices who laugh in our face and say "what are you gonna do about it?" Pelosi said "I can trade stock on companies I regulate" and basically said "what are you gonna do about it?"

Government intervention can only come after we have an answer for corrupt politicians saying "what are you gonna do about it?"

Kroger and Albertsons are gonna merge... "what are you going to do about it?"

We have no way to hold our leaders accountable.

On either side of the aisle.

Corporations actually don’t spend that much on advertising. It’s mostly super PACs that benefit from Citizens United. Many of them are funded by wealthy individuals, not corporations.

Regulation. If you forbid verticals on a market, you might prevent mergers or create splits. E.g. american cinema where studios are forbidden from having their own saloons and are forced to license their products. Currently made irrelevant by the streaming services where the rule does not apply.

Regulation often has the opposite effect by raising barriers to entry and reducing competition.

Regulation against vertical integration should have much less of such an effect.

I think that is a simple view of regulation.

"You must do this" style regulation like GDPR does raise barriers of entry.

"You can't do this," style regulation like trust busting doesn't seem like it would involve raising barriers to entry. It seems like it would lower them.

On GDPR, broadly speaking it's more "you can't" than "you must".

Don't keep people's data and you're fine.

Granted, some businesses need to keep some data as a matter of doing business. But the problem that pre-gdpr businesses have with the rules is that they were set up with the mindset that keeping everything is free.

A startup need merely nuke stale accounts. So it's an advantage over the incumbents, who have to figure out deletion in databases that weren't designed for it.

The startup now has to spend $X more implementing handling those regulations rather than building an MVP and finding PMF. This might be the difference between success and failure. Thus there will be fewer successful startups than in the world without the regulation.

Conversely a big corporation will lose some % of profit to dealing with the regulation (or perhaps it will just raise prices if it’s not competitive). But it’s not an existential concern.

It rather depends on whether something has large constant cost that is punishing for small companies and negligible for large.

For example if something requires producing 10 000 pages of legalese it will block new companies and be not so problematic for large ones.

Or when company needs to heavily research what exactly they can offer/sell and it requires massive effort (it technically is "you can't do this" one).

You just repeated a mantra without thinking through it. Regulation is whatever it is made to be.

It is made to be a barrier to competition. Good luck setting up an in compliance web store based on the current sales tax rules that Amazon basically brought to us.

Could you try to clearly explain how regulation against vertical integration raises the barrier to competition? I can't come up with any explanation where it doesn't lower the barrier.

Vertical integration is a value add. By restricting it, you make it harder for challengers who want to start with vertical integration. Example: vertical integration restrictions prohibit car manufacturers from operating dealerships. Tesla used vertical integration in other states to lower costs and create a cheaper electric car business. With tighter rules against vertical integration you may not have tesla.

If the goal of regulation is to prevent vertical integration, it is not really helpful to say "oh, but doing this will prevent vertical integration!". Yes, of course it will, that's what we said it should do.

You might think this is a bad idea, but it's not a downside of the regulation.

Vertical integration isn’t an end goal of businesses or regulation. it’s also hard to even define.

If I introduce regulation to prevent vertical integration, how is preventing vertical integration not the end goal of that regulation? I really don't understand what you're trying to say.

It’s hard to have an undefined goal. Where do you put the horizontal lines ?

I don't think it's an undefined goal, so I don't worry about the difficulty. :)

It's easy to say it's defined until your forced to define it to others.

If vertical integration is illegal, does that mean: 1) Farms can't sell directly to customers via their own store? 2) A restaurant or grocery store needs to use Uber or Door Dash to deliver? 3) A logistics company can't own any warehouses 4) A store can't own any distribution centers or logistic systems. 5) A website can't self-host, either on their own server or via a dedicated server. It must be hosted via SaaS.

I'm sure there's more examples that blur the line of vertical integration that can be hard to determine in a fair, just manner.

What about industries where it is difficult or impossible to crack without a large investment? In that case, new competitors might arise from established companies expanding vertically, but very few can come from brand new companies.

Might be the kind of thing where more nuanced legislation helps, e.g. allowing vertical expansion if there are few existing competitors but disallowing it for healthy markets.

> What about industries where it is difficult or impossible to crack without a large investment? In that case, new competitors might arise from established companies expanding vertically, but very few can come from brand new companies.

Established companies are always free to create a new company which is structured in a way that it is not vertically integrated. And so what if a large investment is required? If established companies cannot integrate vertically, the field is open for investments by people who cannot subsidize their prices to beat the competition.

I fear that structuring the companies that way will eliminate the advantage of being vertical and so the investment would revert to not being worth it.

Do you maybe have concrete examples for industries with margins so small that vertical integration is the only way for viable investments?

Blame the state and local governments (and especially the disparity among them) for that. Amazon and other big realtailers just said it's not fair that we have to deal with sales tax if smallecommerce.com doesn't.

Sales tax is a perfect example of how the government will never give up tax revenue it has come to depend on. The original proposal is that sales tax was fair, because the local business is using local resources (land, employees, infrastructure). Obviously not true with an out-of-state web store. Delivery companies already pay local taxes for the actual shipping, so there shouldn't be any claim against the retailer itself. Use tax, in many areas, was already designed to handle this case, but the government decided that it's easier to go after Amazon than to rely on taxpayers being honest.

But in practice it is usually made to be what the grandparent said

Currently the SEC disclosure work scales sub-linearly with size. Because you only need to report on 'material information' and what counts as material is about relative size.

Forcing companies to report on any effort above 1 mil might make reporting on big companies so horrible they prefer to split up?

Maybe progressive taxation of companies, where they pay more tax the larger they become?

If their revenue would increase, would they not be taxed more?

The amount taxed is not relevant. It's the tax rate that would grow higher.

Revenue is not taxed, only profit (revenue-expenses) is.

Might be to much nuance in dealing with the obvious tax-dodge of a company splitting up into a conglomerate of subsidiaries.

But I do very much like the idea.

Corporate income taxes are already terrible for health and create awful incentives. Ultimately corporate profits go to individuals so we should only tax them at that point. (Or have just a consumption tax, which kind of solves all these problems)

Block more mergers. It’s easier than breaking companies up afterwards.

Larger companies breaking up happens all the time too. It’s part of the natural business cycle.

Tax the fuck out of them. On income, not profits, based on marketshare they own.

Graduated corporate income tax.

It's real simple. Want a lower tax rate? Do a demerger.

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