WSJ: Lina Khan is getting ready to hit Apple with a monopsony hammer

From Christopher Mims’ “How the FTC Is Reshaping the Antitrust Argument Against Tech Giants” in Saturday’s Wall Street Journal:

Since mid-1980s Reagan-era reforms of antitrust law, the test for whether a company is a monopolist has been whether its dominance harms consumers—usually through higher prices or shoddy goods. It has been hard to make that charge stick against companies that offer many of their services free, like Google and Meta Platforms (née Facebook), or at (usually) competitive prices, like Amazon; or that take a cut of what seems to be a big, competitive market, like Apple does with apps.

The FTC, under its Biden-appointed chairwoman, Lina Khan, has been shifting the terms of the argument, focusing less on harm to consumers or even rivals, and more on how the bigness of Big Tech harms companies that are, in essence, its partners.

To understand, we have to look at an unusual word the FTC has used of late: “monopsony.” If a monopoly is a market with one dominant seller, a monopsony is its inverse, a market where one buyer is pre-eminent. Monopolists can gouge consumers. A monopsonist has the same power over sellers.

My take: The article goes on to ask whether Khan has the tools or the staff to enforce her antitrust doctrine. It’s ironic that it came out of a thesis she wrote about Amazon and the Apple books case.

21 Comments

  1. David Drinkwater said:
    I guess I’ll just pull a Jerry Doyle and repeat myself verbatim:

    Apple took success from somewhere that didn’t exist … and created the App Store!

    I can’t believe how all these ingrates are whining.

    I’ll add that this is not a monopsony: anyone can sell on the App Store (within the rules -and the rules are the same for everyone).

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    January 29, 2022
    • Alan Birnbaum said:
      Definition of a Monopsony:

      Simple: A market situation in which there is only one buyer.

      More detailed: The three key characteristics of monopsony are: (1) a single firm buying all output in a market, (2) no alternative buyers, and (3) restrictions on entry into the industry. Single Buyer: First and foremost, a monopsony is a monopsony because it is the only buyer in the market.

      Since the consumer is the buyer ( NOT Apple) , I miss how this would apply.Also, Android vs IOS marketplaces are the 2 entries into the industry.

      Another interesting term: Oligopsony

      The fast-food industry is a good example of an oligopsony. A small number of large buyers including McDonald’s, Burger King, and Wendy’s buys a huge amount of the meat produced by American ranchers. That gives the industry the ability to dictate the price they are willing to pay. And that’s not illegal.

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      January 29, 2022
  2. Michael Goldfeder said:
    Every time I see the name; Lina Khan I have flashbacks to the concept: “Children should be seen and not heard.” Let alone installed as the head of a major governmental agency.

    “Ms. Khan, then a legal scholar, weighed in on the decision at the time, writing that it showed “stunning disregard for traditional antitrust principles.”

    Writing a term paper in law school doesn’t equate with the title: “Legal Scholar.” I can only imagine the discussions around the water cooler by those career members of the rank and file at the FTC about her utter lack of credentials to be named the head of their agency. She’s ill equipped for trying to put her grandiose “legal scholar” principles into action inside of a Federal Courtroom. A place she has only seen while on a field trip from school.

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    January 29, 2022
    • Fred Stein said:
      Thank you Michael. Agree 100% and add…

      In academia, one can associate with ‘schools’ of thought, not real school. In other words, group think. In group think, those that don’t conform usually leave or are eased out. It is highly unlikely that Lina picked a viewpoint that refuted years of publications by her thesis advisor. In courts the challenges are much tougher, ultimately to the supreme court.

      In short and being harsh, we have a student, not a thinker.

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      January 29, 2022
    • Robert Paul Leitao said:
      Michael: In your view, how long would it take for any FTC action to work through discovery, conversations with Apple, potential court action and/or negotiations with Apple to resolve the issues or cause Apple to change its strategy?

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      January 30, 2022
      • Michael Goldfeder said:
        @Robert: the quickest anything would get to trial in the Federal system once the FTC filed a lawsuit would probably be about 15-18 months without any further variants curtailing trials. The Federal District Court for the Central LA area, along with Riverside and Orange County paused all jury trials for three weeks back on January 6, 2022. Federal Courts operate on the “Rocket Docket” which means once a case is filed, it will move forward with very fast velocity. Hence, the FTC better take their time before pulling the trigger as the pace is fast and furious once a case is put on the docket.

        I’m not certain what the FTC has in place for their trial attorneys, but anyone working there who has a modicum of actual legal courtroom front line experience will tell Lina that taking on Apple without a well thought out legal strategy will not end well. This is where a novice, or in her case idealist, will find out instantly that writing term papers doesn’t prepare you for courtroom litigation. Her theoretical ideas on antitrust fall well short of the mark for the standard set forth in the US Code.

        While she will never actually do any litigation, her lofty ideas will be sending her legal team into the breach with IMO, not much of a legal case from the factual perspective. Like Don Quixote tilting at windmills.

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        January 30, 2022
        • Robert Paul Leitao said:
          Thank you, Michael. Litigation is not only expensive for the government, it’s also resource intensive. Apple can scale its legal resources at will and I really don’t see anything getting resolved for years. Secondly, I can see Apple releasing more branded subscription services and definitely changing the services revenue mix. In other words, Apple can strategically address the issues long before there’s a day in court.

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          January 30, 2022
  3. Fred Stein said:
    The sad part is that there are real corporate abuses. Phone companies jack up rates surreptitiously. Credit cards slam naive people to charge penalties and usurious rates. And how about the supposedly aggrieved Epic, who seeks unfettered access to teenager buying useless virtual goods with their parents CCs.

    And the DoD, or other .gov’s, can’t really boot Oracle, or HP or Cisco who basically own the databases or data networks.

    5
    January 29, 2022
  4. CG said:
    Great to have Lina Khan go after the App Store so she can make a name for herself all while masquerading under the premise that she has the consumers, partners, competitors etc.. best interest in mind. Make no mistake about it, Lina Khan cares only about Lina Khan and where her career goes from here.

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    January 30, 2022
  5. Arthur Cheng said:
    Not to be political, I just cannot understand how you can name someone just out of law school (she graduated in 2017) without any practical law experience to head a major federal commission.

    9
    January 30, 2022
  6. Michael Goldfeder said:
    @Arthur Cheng:

    Her appointment reminds me of an old movie called: “The Flight of the Phoenix.” If you haven’t seen it is a great watch with a tremendous cast. I don’t want to ruin the movie by giving away anything in this post, but the principle at play in that movie is analogous to her being appointed to head the FTC with the skill set of a toddler in the world of real life legal litigation.

    3
    January 30, 2022
  7. I saw Monopsony in the headline and thought it was a new word Philip coined for ‘monopoly case invented by Sony.’ Sony, along with Microsoft & Softbank, bankrolls the less than Epic antitrust thesis of Tim Sweeney. As I’ve hinted before, antitrust cases almost require a Sherman tank to move forward in the courts. Breaking up is hard to do. Unintended targets pop up and start to complain. Sony takes 30% from game developers, this case could nip at Sony profits. Google sits in the same cross-hairs.
    Years later, the case may get adjudicated but this administration doesn’t appear to have years to push forward a case against Apple. That’s only if DoJ lawyers get upgraded to the latest Apple MacBooks.
    Look how long the xx86 CPU case took the EU. A decade before getting tossed in 2021. Standard Oil Co. of New Jersey controlled 91% of oil refineries. 3 families owned most Standard Oil shares. Ohio sued Standard Oil in 1890 and won, so Standard shaved off Standard Oil of Ohio. Problem solved. DoJ didn’t start until 1909 and finally succeeded in 1911. Once broken into pieces, Standard Oil of NJ stock holders ended up with shares in many valuable companies still in existence today.
    In the extreme Apple shareholders would end up with shares of Apple App Store, Inc, Apple Mac Inc, Apple Health Inc. Apple Cars, Inc, Apple Wearables, Inc., etc.
    This will not happen because Attorney Khan does not have the luxury of a long game and Apple & Google will never run out of money to hire the best lawyers willing to file appeals.
    Ms Khan needs to redirect her wrath into collaborative efforts at reform, whatever that looks like to her. She is no Kenesaw Mountain Landis.

    2
    January 30, 2022
    • Robert Paul Leitao said:
      Thomas: I enjoyed reading your thoughtful post. In my view, one of the risks of bringing action against Apple is being proven wrong. The length of time involved in developing a strong and potentially persuasive case and the odds of having it successfully adjudicated, in my view, make taking that step imprudent. I agree with your view. Working cooperatively with the industry on desired reforms would be a more effective use of time and resources. As we often say at Apple 3.0, “Being profitable isn’t illegal.” Nor should it ever be considered illegal or even unethical. As the late labor leader Samuel Gompers famously said, “The worst crime against working people is a company that fails to operate at a profit.”

      0
      January 31, 2022
      • Robert: Governments never seem capable of staying caught up with developments in tech, while teenagers ride waves of new tech like surfers off Maui. These cases cost millions of taxpayer dollars and accomplish nothing valuable. Politician and agencies fine and issue regulatory threats against popular platforms mainly to garner voter sentiment. Regulations against Cambridge Analytica-style attacks on Elections in many nations appeared long after industry and certain politicians (Brexit, Cruz) severed ties and shut down those ops. By the the time the SEC issues any meaningful or ill-conceived guidance on Bitcoin every nation on earth will have their own unique blockchain-supported crypto. New York just outlawed Vaccination Card/false data entry forgery a month ago. Some states never will. Fed is clueless on the issue. Always a catch-up game.
        Every politician should be required to spend a day with classes of high school juniors or seniors, just listening and learning, not asking canned questions to support a desired position. Next they regularly need to sit with tech company employees, not Tim Cook but the actual people developing new products. Few leaders take the time to listen to the future taking shape around them now. I think leadership’s absence from public spaces in many cases is an indication of the weakness of their positions.

        3
        January 31, 2022
    • Steven Philips said:
      @ Thomas: The wrath of Kahn? 🙂 Sherman (tank) anti-trust? 🙂 You’re on a roll!

      2
      January 31, 2022
      • Steven: Like prizes in a box of Cracker Jacks, huh? Still kicking myself for not crediting songwriters Howard Greenfield & Neil Sedaka for “Breaking Up Is Hard To Do.”

        3
        January 31, 2022

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