What does that mean when it comes to software though? For something like Uber or Instacart that seems pretty straightforward, but for most tech companies I'm not sure how to determine what is predatory. Otherwise aren't all unprofitable companies selling below cost?
Yes, it's a bit of a problem for the field! Like many aspects of antitrust, predatory pricing applies cleanly for an industrial-era economy but as you point out, it's less clear how to translate it into the context of 21st century informational capitalism. A significant amount of legal and economic research in the field is asking these kinds of questions, and the answers are still forthcoming.
Got it, that makes sense that its not well established. I saw from your profile that this is actually something you are studying, which is very cool! I've always wondered what the examples of this (predatory pricing -> drive out competition -> jack up prices) happening in practice are? I know Uber is the ur-example but that feels different from something like pure a saas?
I wonder if as long as there is VC money out there, the viability of this strategy is limited because the moment incumbents (even ones with overwhelming market share) try to jack up prices, they immediately create an opportunity for a startup to undercut them.
I can't think of a good example for a sass product. I'm sure it goes on though and I'm always interested in hearing about examples!
A similar strategy which seems to be quite common these days is to cross-subsidise, which is when a firm sells one product at an artificially low price by using profits it makes from selling another product. If we think about cross-subsidisation, then lots of multi-product sass offerings might fall under our scope. That said, cross-subsidisation has economic benefits, so it's not clear-cut.
As I said, to properly adjust to digital markets I think antitrust will have to identify new patterns of harm and invent new metrics to measure them. Predatory pricing (and similar offences) will always be useful, but they might just not fit well onto these kinds of markets.
It seems like the implicit assumption is that there must be a harm somewhere, we just haven't found it yet. But as a consumer, I'm not sure that is true? Even the Amazon paper seems to admit that there isn't any consumer harm to be found, only harm to smaller competitors' businesses. But that feels like an odd standard to apply since isn't any business's primary purpose to compete with / harm competitors?
> It seems like the implicit assumption is that there must be a harm somewhere, we just haven't found it yet... isn't any business's primary purpose to compete with / harm competitors?
As a general rule, firms want to escape competition in order to make higher profits. There's nothing wrong with that! Indeed, the mechanism by which economic competition generates many of its benefits is that firms innovate in order to escape competition, and for those innovations to be useful for us all. So, where does competition/antitrust law come in? In part, it's about ensuring that firms escape competition in the way that we want. Innovation and competition on the merits is good, underhanded tactics to harm competitors is bad. All competitions need these kind of rules, regardless of whether they're economic, political, sporting, etc. When you have a large population of thousands of firms, you can be sure that some of them will be trying to compete unfairly, hence the assumption that there is some harm that we're yet to find.
> there isn't any consumer harm to be found, only harm to smaller competitors' businesses
We can distinguish between 'static' and 'dynamic' harms. Static harms are those which happen in the short run, such as a cartel agreeing to increase prices or not innovate. These harms are quite concrete and easy to define. Dynamic harms are those which affect the way a market might function in the future. For instance, a harm to innovation may result in people not having access to new products. It's hard to say for sure whether these harms will actually manifest, so we're usually talking about tendencies instead of certainties. It's perfectly reasonable to consider tendencies under the law though (e.g. we might prohibit drink-driving for the same reason). Dynamic harms usually have harm to consumers as a second order effect (e.g. reduced innovation or choice).
The analogy to drunk driving makes sense, but in the context of business is it so important to get ahead of the harms that we have to legislate against pre-harms? Innovation and merit and underhanded tactics are in the eye of the beholder, and it seems like we apply a LOT of preexisting notions of who is a good company and who sucks when we evaluate behaviors. That doesn't feel like a sustainable way to write and enforce laws.
No worries :) You're right that the law shouldn't be arbitrary. Lots of what the law is applied only when a cases passes legal tests to determine if some conduct violates the law. These tests are applied the same way to everybody and are thus impartial. Naturally, there's lots of debate and research into which legal tests we should use, and what their substance is.
Firstly, I didn't spot what paper you mean other than 'related to Amazon', but it's plain to see what can happen to an Amazon. Once it's finished destroying competitor businesses the only way it can get more profit is by continuing to get paid, but ceasing to deliver services. And this is already happening in various ways. I'm sure I'm not the only person, even on Hacker News, to have grudgingly written off an Amazon purchase that simply never was delivered, a cheap and trivial thing that didn't pan out, a 'problem with this order' that the system simply ate.
At the point when you're taking consumer money and not having to do anything, that's harm. You can get away with it because your system is invincible. (I also feel like this about the insurance industry: I think it's set up to not pay, and has better legal representation than the consumer does)
To the extent that a business's primary purpose is to make money, these are successes. To the extent that the primary purpose is to hurt competitors, these are still successes, to the extent they're possible and not just undermining your position: you have to be monopolistic or at least in control to be able to pull that stuff off, but then you're wealthier, giving you more power to hurt competitors.
None of this serves a market economy for providing goods and services. It may exist, but it hurts capitalism as a functioning concept.
> I didn't spot what paper you mean other than 'related to Amazon'
Lina Khan (FTC chair) wrote an influential paper called The Amazon Paradox laying out a new antitrust doctrine which argues that rather than consumer harm, the standard for antitrust should be harm to competitors.
> it's plain to see what can happen to an Amazon... you have to be monopolistic or at least in control to be able to pull that stuff off, but then you're wealthier, giving you more power to hurt competitors.
"Can" happen is not the same as "has" or "will" happen. If they are causing consumer harm, they should be punished. But as far as I can tell, there hasn't really been strong evidence of that yet (your example of a bad delivery experience is not unique to Amazon), and I don't think we should punish pre-crimes. Ultimately, it feels like you and many others are starting from a position of "Amazon et al should not exist" and working backwards to a justification.
