Adam Thierer's Blog, page 113

Emord's "Freedom, Technology and the First Amendment" Turns 20

Twenty years ago, one of the best books ever penned about freedom of speech was released. Sadly, many people still haven't heard of it. That book was Freedom, Technology and the First Amendment, by Jonathan Emord. With the exception of Ithiel de Sola Pool's 1983 masterpiece Technologies of Freedom: On Free Speech in an Electronic Age, no book has a more profound impact on my thinking about free speech and technology policy than Emord's 1991 classic. Emord's book is, at once, a magisterial history and a polemical paean. This is no wishy-washy apologia for free speech, rather, it is a celebration of the amazing gift of freedom that the Founding Fathers gave us with the very first amendment to our constitution.

Unlike most people, Emord assumes nothing about the nature and purpose of the First Amendment; instead, he starts in pre-colonial times and explains how our rich heritage of freedom of speech and expression came about. Like Pool, Emord also makes the case for equality of all press providers and debunks the twisted logic behind much of this century's corrupt jurisprudence governing speech transmitted via electronic media. Pool and Emord make it clear that if the First Amendment is retain its true meaning and purpose as a bulwark against government control of speech and expression, electronic media providers (TV, radio, cable, the Internet) must be accorded full First Amendment freedoms on par with traditional print media (newspapers, magazines, books and journals).

After developing his thorough history of free speech and the First Amendment in the first part of the book, Emord turns his attention to competing modern theories of First Amendment construction and interpretation. He outlines and critiques the Literalist Perspective, the Narrow Intentionalist Perspective, and the Relativist Perspective. Emord instead advocates what he labels a "preservationist perspective" which is composed of two essential elements: (1) Static Barriers again government intervention and (2) Adaptive Definitions for the terms "speech" and "press."  He elaborates:

The effect of the Preservationist Perspective is to rely on the private sphere as a self-correcting mechanism. Should the government attempt to violate the private sphere, it will be barred by a high constitutional barrier. … Under the Preservationist Perspective, government regulation of who may speak or what  may be said would be strictly scrutinized and presumptively invalid. (p. 129)

Employing that framework, Emord spends much of the rest of the book demolishing the most dangerous variant of modern "relativist" thinking: the so-called "Media Access" school of thinking. Media access theories presume the existence of a mythical "right to be heard," or a "right to respond publicly." In essence, media access advocates believe that once a given media provider becomes popular enough, everyone has a "right" to speak through it. By this logic, if you build a large soapbox in your backyard, and are informative or entertaining enough to attract and retain an audience, the media access advocates apparently believe that the government should mandate that you share time on your soapbox with others in the name of "diversity." They care little about the property rights you have in that soapbox, the effort and cost associated with your efforts to build that soapbox, or your editorial freedom to determine what is uttered on that soapbox. As Emord summarizes:

In short, the access advocates have transformed the marketplace of ideas from a laissez-faire model to a state-control model. For them, if the marketplace of ideas can be viewed as the contents of a cauldron, it is not enough to await random stirring; government must burn an eternal flame beneath the cauldron, keeping it at the boiling point. Silence is not an option; the government implores: Let there be speech! (p. 293)

He continues on to point out how silly that notion is:

The First Amendment does not require any set amount of diversity in the marketplace. If everyone were to choose to remain silent, the First Amendment would not be violated, for the amendment's purpose is to deprive government of a power over the press and to leave to private citizens the decision of when to speak or not to speak and what to say. (p. 228)

While citizens certainly are at liberty to speak freely and communicate their views to others who will listen to them or air them, they do not have a right to demand access to the property of others to do so. If lawmakers could mandate that anyone who has taken the time and expense to build a soapbox to speak on must allow the rest of the world to stand on that soapbox with them in the name of "access" and "fairness," it would contort the First Amendment into a tyrannical government mandate. This would retard, not expand, genuine freedom of speech and expression. Indeed, when such media access theories have been translated into public policy — as was the case with the old Fairness Doctrine — the effect has been generally to chill speech and expression throughout media.

What is really going on here is that media access advocates are looking to transform the First Amendment into a tool for social change to advance specific political ends or ideological objectives. "Rather than understanding the First Amendment to be a guardian of the private sphere of communication, the access advocates interpret it to be a guarantee of a preferred mix of ideological viewpoints," notes Emord. "When the access advocates speak of minority views, they are almost always referring to views they believe to be inadequately represented in our society."

Thus, the danger with media access mandates is that they ultimately transform the First Amendment into an affirmative tool of the state that legislators and regulators can wield to control content and influence the editorial judgments of the press. The ultimate danger of this twisted conception of the First Amendment, Emord rightly argues, is that, "It fundamentally shifts the marketplace of ideas from its private, unregulated, and interactive context to one within the compass of state control, making the marketplace ultimately responsible to government for determinations as to the choice of content expressed." It converts the First Amendment from a shield against State action into a sword that the State can use as it sees fit. Nothing could be more dangerous and it is a complete contradiction of the original purpose and meaning of the First Amendment.

Emord's book is the perfect antidote to such misguided thinking. If you care about the First Amendment and the continuing fight for freedom of speech and technological freedom, I beg you to read Freedom, Technology and the First Amendment. It's as fresh and important today as it was 20 years ago.  A wide range of current policy tech policy debates will ultimately be decided by the courts, and which theory of the First Amendment guides them will make all the difference for the future of our digital society and real Internet freedom.

Fear Sells: Cybersecurity Chicken Littlism edition

In my ongoing work on technopanics, I've frequently noted how special interests create phantom fears and use "threat inflation" in an attempt to win attention and public contracts. In my next book, I have an entire chapter devoted to explaining how "fear sells" and I note how often companies and organizations incite fear to advance their own ends. Cybersecurity and child safety debates are littered with examples.

In their recent paper, "Loving the Cyber Bomb? The Dangers of Threat Inflation in Cybersecurity Policy," my Mercatus Center colleagues Jerry Brito and Tate Watkins argued that "a cyber-industrial complex is emerging, much like the military-industrial complex of the Cold War." As Stefan Savage, a Professor in the Department of Computer Science and Engineering at the University of California, San Diego, told The Economist magazine, the cybersecurity industry sometimes plays "fast and loose" with the numbers because it has an interest in "telling people that the sky is falling." In a similar vein, many child safety advocacy organizations use technopanics to pressure policymakers to fund initiatives they create. [Sometimes I can get a bit snarky about this.]

That Economist story cites new research by scholars who are dispassionately evaluating the actual evidence and finding that data about cybercrime is often exaggerated and skewed in various ways, often by proponents of greater government regulation — as well as greater government funding for their companies or organizations. Again, we've seen this at work for many years in the child safety arena, too. In my book, I discuss the online "predator panic" that many child safety groups blew completely out of proportion in past years.

So, next time you hear such folks advocating increased government regs and funding, ask them what they personally have to gain from it.  Chances are, quite a lot.

Additional reading:

Prophecies of Doom & the Politics of Fear in Cybersecurity Debates (8/8/11)

 

The Alternative to the Speier-Womack Internet Tax Proposal

Reps. Jackie Speier (D-Calif.) and Steve Womack (R-Ark.) have introduced "The Marketplace Equity Act," which would open the floodgates to anything-goes State-based taxation of the Internet and interstate commerce. The bill essentially sacrifices constitutional fairness at the alter of "tax fairness." Building on concerns raised by state and local officials as well as "bricks-and-mortar" retailers, Speier and Womack claim that, as "a matter of states' rights" and "leveling the plying field," Congress should bless state efforts to impose sales tax collection obligation on interstate ("remote") companies.The measure would allow States to do so using one of three rate structures: (1) a single blended state/local rate; (2) a single maximum State rate; or (3) the actual local jurisdiction destination rate + the State rate (so long as the State "make(s) available adequate software to remote sellers that substantially eases the burden of collecting at multiple rates within the State.")

This builds on a long-standing effort by some States to devise a multistate sales tax compact to collude and impose taxes on interstate transactions. In the Senate, Sen. Dick Durbin (D-IL) has floated legislation ("The Main Street Fairness Act") that would bless such a state-based de facto national sales tax regime for the Internet.

There is a better way to achieve fairness without sacrificing tax competition or opening the doors to unjust, unconstitutional, and burdensome state-based taxation of interstate sales. In a new Mercatus Center essay,"The Internet, Sales Taxes, and Tax Competition," Veronique de Rugy and I argue that:

Apart from getting chronic state overspending under control, a better solution to the states' fiscal problems than a tax cartel that imposes burdensome tax collection obligations on outof-state vendors would be tax competition.  Congress should adopt an "origin-based" sourcing rule for any states seeking to impose sales tax collection obligations on interstate vendors. This rule would be in line with Constitutional protections for interstate commerce, allow for the continued growth of the digital economy, and ensure excessive, inefficient taxes do not burden companies and consumers.v>

Vero and I have detailed this alternative plan in much greater detail in this 2003 Cato white paper, "The Internet Tax Solution: Tax Competition, Not Tax Collusion." As we explain in our new paper:

In this system, states would tax all sales inside their borders equally, regardless of the buyer's residence or the ultimate location of consumption. Under that model, all sales would be "sourced" to the seller's principal place of business and taxed accordingly. This is, after all, how sales taxes have traditionally worked. A Washington, DC, resident who buys a television in Virginia, for instance, is taxed at the origin of sale in Virginia regardless of whether he brings the television back into the District. Each day in America, there are millions of cross-border transactions that are taxed only at the origin of the sale; no questions are asked about where the buyer will consume the good. Policy makers should extend the same principle to crossborder sales involving mail order and the Internet. Under this approach, Internet shoppers would pay the sales tax of the state where the online retailer is based.

An origin-based sourcing rule has several advantages over the destination-based system States favor.

It would eliminate constitutional concerns because only companies within a state or local government's borders would be taxed.
An origin-based system would do away with the need for prohibitively complex multistate collection arrangements because states
would tax transactions at the source, not at the final point of consumption.
An origin-based system also would protect buyers' privacy rights, eliminating the need to collect any special or unique information about a buyer and to use third-party tax collectors to gather such information.
It would also preserve local jurisdictional tax authority whereas a harmonization proposal would create a de facto national sales tax system that would exclude local governments.
Finally, because it is more politically and constitutionally feasible, an origin tax may actually maximize the amount of tax
collected for states by making compliance easier and incorporating currently untaxed activities.

In closing, it is important to address the misguided claim at the heart of the Speier-Womack bill that this is a "states' rights" issue. Let's be clear what real federalism is all about. Federalism is not about "states' rights." States have powers and responsibilities, and under the Constitution — at least the proper interpretation of it — they have wide-ranging flexibility to purse different governance approaches. But that power is not unlimited. America abandoned its first constitution, The Articles of Confedertion, after just 14 years in part because untrammeled state authority was discouraging interstate trade and commerce. In their wisdom, the authors or our present Constitution made sure to include Article 1, Sec. 8, Clause 3 — the so-called "Commerce Clause" — which created and protected what might best be thought of as the world's first free trade zone – The United States of America. It remains one of the greatest achievements in constitutional and commercial history.

Thus, properly understood, federalism is about a healthy tension among competing units of government. Each has a different role and set of responsibilities, and this tension bolsters the checks and balances at the heart of our constitutional republic. [I outline all this in far more detail my 1999 book, The Delicate Balance: Federalism, Interstate Commerce and Economic Freedom in the Technological Age.]

In the context of Internet tax policy, this means that the tax power of the States can be legitimately constrained by the federal government to ensure that the interstate market is not unduly burdened with unjust levies. States certainly retain the power to impose whatever levies they wish on those actors who have a substantial physical presence in their geographic confines. That is, they can tax their own exports. Taxing imports from another State, however, is an entirely different matter, and one the necessarily requires some degree of federal oversight to ensure America's free trade zone is preserved and protected.

An origin-based sourcing rule accomplishes that goal while also leaving States the discretion to impose taxes on their own exports if they so choose. The fact that this system would lead to heated tax competition among the States is a feature, not a bug.

Eric Schmidt, public choice scholar

Over a week ago the Washington Post published an interview with Google's Eric Schmidt to which I've been meaning to draw your attention. He's reflecting on the relationship between Silicon Valle and D.C. days after his Senate testimony, and it's incredibly candid, perhaps because as the Post noted, "He had just come from the dentist. And had a toothache." Here are some choice quotes:

On getting told to testify:

So we get hauled in front of the Congress for developing a product that's free, that serves a billion people. Okay? I mean, I don't know how to say it any clearer. I mean, it's fine. It's their job. But it's not like we raised prices. We could lower prices from free to…lower than free? You see what I'm saying?

On regulation:

And one of the consequences of regulation is regulation prohibits real innovation, because the regulation essentially defines a path to follow—which by definition has a bias to the current outcome, because it's a path for the current outcome.

On the D.C. shakedown:

And privately the politicians will say, 'Look, you need to participate in our system. You need to participate at a personal level, you need to participate at a corporate level.' We, after some debate, set up a PAC, as other companies have.

On political startups:

Now there are startups in Washington. And these startups have the interesting property that they're founded by people who were policymakers, let's say in telecommunications. They're very clever people, and they've figured out a way in regulation to discriminate, to find a new satellite spectrum or a new frequency or whatever. They immediately hired a whole bunch of lobbyists. They raised some money to do that. And they're trying to innovate through the regulation. So that's what passes for innovation in Washington.

There's a real sense of exasperation that is almost absurd–that is, an exhausting attempt to find rationality in political decision making. Of course, there is rational decision making, it's just on a different margin. Here is Schmidt on expanding H-1B visas:

I'm so tired of this argument. I'm tired of making it. I've been making it for twenty years. In the current cast of characters, the Republicans are on our side, our local Democrats support us because our arguments are obvious, and the other Democrats don't—because they don't get it. The president understands the argument and would like to support us, he says, but there are various political issues. That's roughly the situation. That's been true for twenty years, through different presidents and different leaders. It's stupid.

The whole thing is worth reading.

David Robinson on rogue websites and domain seizures

On the podcast this week, David Robinson, a fellow at the Information and Society Project at Yale Law School, discusses his new paper, Following the Money: A Better Way Forward on the PROTECT IP Act. The bill, now being considered by Congress, targets "rouge" websites. Robinson discusses the different ways these websites host infringing content and sell counterfeit goods, as well as the remedies proposed in the bill. The measures involve two main consequences: cutting off information through the seizure of domain names by law enforcement, and cutting off financial gain by prohibiting payment processors like Visa and Mastercard from delivering profits to infringing website owners. Robinson discusses why he thinks the Act will better serve IP law if the flow of money is restricted, and not the flow of information. He goes on to discuss what he considers to be troubling about information control, including several constitutional implications.

Related Links

Following the Money: A Better Way Forward on the PROTECT IP Act , by RobinsonText of the proposed Act, opencongress.org"Dozens of law professors: PROTECT IP Act is unconstitutional", ARS Technica

To keep the conversation around this episode in one place, we'd like to ask you to comment at the webpage for this episode on Surprisingly Free. Also, why not subscribe to the podcast on iTunes?

FTC Punishes P2P Company for Unfairly Tricking Users to Share Private Data

While policymakers rush write new Net regulations to protect privacy, we keep suggesting the FTC use its existing authority more effectively to punish unfair and deceptive trade practices. The FTC has just sued FrostWire for designing their peer-to-peer software to trick users into oversharing:

FrostWire for Android… was likely to cause a significant number of consumers installing and running it on their mobile computing devices to unwittingly share files stored on those devices.  The Defendants had configured the application's default settings so that, immediately upon installation and set-up, many pre-existing files on the mobile device were designated for sharing.  These files could be shared through the Internet, and through any given… WiFi… network… with other FrostWire for Android users…  These shared files thus were available to other people in the consumer's immediate vicinity and throughout the world to download and share further. Nothing in the installation and set-up process… adequately informed consumers of the immediate consequences of installing FrostWire for Android; nor could consumers be expected to know these consequences from any prior experience with other software.

The FTC has made a pretty good case that this qualifies as an unfair practice:

Under Section 5(n) of the FTC Act, an act or practice is "unfair" if it causes or is likely to cause substantial injury to consumers that is not reasonably avoidable by consumers and is not outweighed by countervailing benefits to consumers or to competition

In particular, the FTC notes the potential harms caused by inadvertently sharing all the files on your phone:

Public exposure of the types of user-originated files that FrostWire for Android shared following a default installation and set-up could increase consumers' vulnerability to identity theft; reduce their ability to control the dissemination of personal or proprietary information (e.g., voice recordings or intimate photographs); and increase their risk of legal liability based on prohibitions against, or limitations on, making any such files publicly available for download.

Tom Sydnor raised similar concerns about the design of P2P software in Congressional testimony on HR 1319, the "Informed P2P User Act" two years ago.

So if the FTC already has the authority to punish such unfair software design, why does it need sweeping new powers, again? Maybe policymakers should focus on ensuring the agency has the eforcement resources it needs to punish such unfair practices. That might start, for instance, with hiring more technologists to monitor such practices.

But one thing's clear: This case will set a strong precedent to encourage companies to think about "privacy by design" much more effectively than a government mandate that they design their sites in certain ways. That's thecommon law of privacy at work.

Online Gambling & the Perils of Prohibition

Over the weekend, Janet Morrissey of The New York Times posted an excellent article on the U.S. government's continuing crackdown on Internet gambling. ("Poker Inc. to Uncle Sam: Shut Up and Deal") Ironically, her article arrives on the same week during which PBS aired the terrific new Ken Burns and Lynn Novick documentary on the history of alcohol prohibition in the United States. It's a highly-recommended look at the utter hypocrisy and futility of prohibiting a product that millions of people find enjoyable. If there's a simple moral to the story of Prohibition, it's that you can't repress human nature–not for long, at least, and not without serious unintended consequences. Which is why Morrissey of the Times notes:

And so the poker world now finds itself in a situation many liken to Prohibition. America didn't stop drinking when the government outlawed alcoholic beverages in 1919. And, in this Internet age, it won't be easy to prevent people from gambling online, whatever the government says. "It's a game of whack-a-mole," says Behnam Dayanim, an expert on online gambling and a partner at the Axinn Veltrop & Harkrider law firm. "They've whacked three very large moles, but over time, more moles will pop up."

Exactly right (except that it should be "whac" not "whack"! There's no K in whac-a-mole.)  It reminds me of the paper that my blogging colleague Tom Bell penned back in 1999 for the Cato Institute with its perfect title: "Internet Gambling: Popular, Inexorable, and (Eventually) Legal." As Tom noted back then:

Consumer demand and lost tax revenue will create enormous political pressure for legalization, which we should welcome if only for its beneficial policy impacts on network development and its consumer benefits. We should also welcome it for a more basic reason: as the Founders recognized, our rights to peaceably dispose of our property include the right to gamble, online or off.

Again, you can't hold back human nature and the effort of millions to pursue happiness as they see fit. It was true of alcohol and it will be true of online gambling–eventually.

And although it represents the worst argument for legalization, Tom was right about the tax revenue benefits as a primary factor leading to legalization. As Morrissey notes in her Times piece:

Uncle Sam is leaving a lot of money on the table. Over 10 years, legal online gambling could generate $42 billion in tax revenue, according to the Congressional Committee on Taxation. An estimated 1.8 million Americans played online poker last year, and some make a living at it. Because of the legal issues in the United States, online card rooms typically base their computer servers elsewhere, in places like Costa Rica or, in the case of Full Tilt, in the Channel Islands.

It was the same story back during alcohol prohibition, of course. All the "money left on the table" was snatched up by foreign governments and organized crime, who were all too happy to satisfy the thirst Americans had. Some State governments have already realized this and are taking steps to partially legalize online gambling and get in on the action, as Morrissey reports:

Oddly enough, Internet gambling is already legal in the nation's capital. Earlier this year, the District of Columbia became the first jurisdiction in the United States to legalize it. Officials there said they hoped the move would bring in $13 million to $14 million a year in tax revenue. But Washington may only be the start. Several bills now working their way through the House of Representatives would give online poker the run of the country.

Again, as Bell's paper argued, it's popular, inexorable, and it will eventually be fully legal. We just have to be patient while some lawmakers play through this latest silly experiment in legislating morality.

TechFreedom/FOSI COPPA (Livecasted) Panel in DC October 12

TechFreedom, in association with the Family Online Safety Institute (FOSI), will host a lunch panel with a number of leading experts to discuss the FTC's recently-proposed revisions to the Children's Online Privacy Protection Act (COPPA). Opening remarks will be delivered by the Federal Trade Commission's Phyllis Marcus, a Senior Staff Attorney at the Division of Advertising Practices. Afterwards, the panel will discuss the FTC's proposals and what they mean for children, parents, Internet companies and innovation.

FOSI CEO Stephen Balkam will serve as master of ceremonies. The panel will be moderated by Berin Szoka, President of TechFreedom, and will include:

Jim Dunstan, TechFreedom
Kathryn Montgomery, American University
Dona Fraser, Entertainment Software Rating Board
Rebecca Newton, Mind Candy

The event will take place at the Top of the Hill Banquet and Conference Center at the Reserve Officers Association (One Constitution Ave NE, Washington DC 20002) on Wednesday, October 12 from 12:30 to 2:30pm, and include a complimentary lunch. Space is limited so please click here to register.

In addition, you can let everyone else know you'll be coming or watching the livestream (page will be updated when event begins) by joining the Facebook event page.

You can also keep up with the event by following the Twitter discussion at the #COPPA hashtag.

Public Interest Groups Across Spectrum Oppose Net Neutrality Regulation, Too

Yesterday's Wall Street Journal's story on the legal challenge to Net Neutrality regulation opens as follows:

Efforts by public interest groups to get a legal challenge to the Federal Communications Commission's new "net neutrality" rules heard somewhere other than the U.S. Court of Appeals for the D.C. Circuit belly-flopped Thursday when the D.C. Court won the case in a random lottery.

I've responded with the following comment:

The first sentence of this article reinforces the common misconception that "public interest" groups support net neutrality regulations while only corporations oppose them.

In fact, many large corporations have supported these regulations, while a wide array of public interest, non-profit groups oppose the FCC's net neutrality regulations. Those include a variety of free market groups such as TechFreedom (my own think tank), the Competitive Enterprise Institute, FreedomWorks and Americans for Tax Reform, but also left-leaning civil liberties groups such as the Electronic Frontier Foundation, which called the FCC's rules a "Trojan Horse" for other regulation because they set a dangerous precedent that would give the FCC broad powers in other areas, such as content regulation or copyright.

If a Democratic FCC can invent the authority to issue Net Neutrality rules, an FCC Chairman appointed by a socially conservative president could implement the agenda of censorship advocates such as the Parents Television Council's founder Brent Bozell—which might explain why those groups have supported the Net Neutrality regulation.

FCC Commissioner Robert McDowell demolished the idea that these Internet regulations would serve the "public interest" in a scathing dissent when the FCC issues these illegal rules. He emphasized that real net neutrality problems could be handled first through mediation processes and, if necessary, through consumer protection and antitrust laws.

ACS Blog Debate on Google: Putting Consumer Welfare First in Antitrust Analysis of Google

[I am participating in an online "debate" at the American Constitution Society with Professor Ben Edelman.  The debate consists of an opening statement and concluding responses.  Professor Edelman's opening statement is here.  I have also cross-posted the opening statement at Truthonthemarket and Tech Liberation Front. This is my closing statement, which is also cross-posted at Truthonthemarket.]

Professor Edelman's opening post does little to support his case.  Instead, it reflects the same retrograde antitrust I criticized in my first post.

Edelman's understanding of antitrust law and economics appears firmly rooted in the 1960s approach to antitrust in which enforcement agencies, courts, and economists vigorously attacked novel business arrangements without regard to their impact on consumers.  Judge Learned Hand's infamous passage in the Alcoa decision comes to mind as an exemplar of antitrust's bad old days when the antitrust laws demanded that successful firms forego opportunities to satisfy consumer demand.  Hand wrote:

we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organization, having the advantage of experience, trade connections and the elite of personnel.

Antitrust has come a long way since then.  By way of contrast, today's antitrust analysis of alleged exclusionary conduct begins with (ironically enough) the U.S. v. Microsoft decision.  Microsoft emphasizes the difficulty of distinguishing effective competition from exclusionary conduct; but it also firmly places "consumer welfare" as the lodestar of the modern approach to antitrust:

Whether any particular act of a monopolist is exclusionary, rather than merely a form of vigorous competition, can be difficult to discern: the means of illicit exclusion, like the means of legitimate competition, are myriad.  The challenge for an antitrust court lies in stating a general rule for distinguishing between exclusionary acts, which reduce social welfare, and competitive acts, which increase it.  From a century of case law on monopolization under § 2, however, several principles do emerge.  First, to be condemned as exclusionary, a monopolist's act must have an "anticompetitive effect."  That is, it must harm the competitive process and thereby harm consumers.  In contrast, harm to one or more competitors will not suffice.

Nearly all antitrust commentators agree that the shift to consumer-welfare focused analysis has been a boon for consumers.  Unfortunately, Edelman's analysis consists largely of complaints that would have satisfied courts and agencies in the 1960s but would not do so now that the focus has turned to consumer welfare rather than indirect complaints about market structure or the fortunes of individual rivals.

From the start, in laying out his basic case against Google, Edelman invokes antitrust concepts that are simply inapt for the facts and then goes on to apply them in a manner inconsistent with the modern consumer-welfare-oriented framework described above:

In antitrust parlance, this is tying: A user who wants only Google Search, but not Google's other services, will be disappointed.  Instead, any user who wants Google Search is forced to receive Google's other services too.  Google's approach also forecloses competition: Other sites cannot compete on their merits for a substantial portion of the market – consumers who use Google to find information – because Google has kept those consumers for itself.

There are two significant errors here.  First, Edelman claims to be interested in protecting users who want only Google Search but not its other services will be disappointed.  I have no doubt such consumers exist.  Some proof that they exist is that a service has already been developed to serve them.  Professor Edelman, meet Googleminusgoogle.com.  Across the top the page reads: "Search with Google without getting results from Google sites such as Knol, Blogger and YouTube."  In antitrust parlance, this is not tying after all.  The critical point, however, is that user preferences are being satisfied as one would expect to arise from competition.

The second error, as I noted in my first post, is to condemn vertical integration as inherently anticompetitive.  It is here that the retrograde character of Professor Edelman's analysis (and other critics of Google, to be fair) shines brightest.  It reflects a true disconnect between the 1960s approach to antitrust which focused exclusively upon market structure and impact upon rival websites; impact upon consumers was nowhere to be found.  That Google not only produces search results but also owns some of the results that are searched is not a problem cognizable by modern antitrust.  Edelman himself—appropriately—describes Google and its competitors as "information services."  Google is not merely a URL finder.  Consumers demand more than that and competition forces search engines to deliver.  It offers value to users (and thus it can offer users to advertisers) by helping them find information in increasingly useful ways.  Most users "want Google Search" to the exclusion of Google's "other services" (and, if they do, all they need do is navigate over to http://googleminusgoogle.com/ (even in a Chrome browser) and they can have exactly that).  But the critical point is that Google's "other services" are methods of presenting information to consumers, just like search.  As the web and its users have evolved, and as Google has innovated to keep up with the evolving demands of consumers, it has devised or employed other means than simply providing links to a set of URLs to provide the most relevant information to its users.  The 1960s approach to antitrust condemns this as anticompetitive foreclosure; the modern version recognizes it as innovation, a form of competition that benefits consumers.

Edelman (and other critics, including a number of Senators at last month's hearing) hearken back to the good old days and suggest that any deviation from Google's technology or business model of the past is an indication of anticompetitive conduct:

The Google of 2004 promised to help users "leave its website as quickly as possible" while showing, initially, zero ads.  But times have changed.  Google has modified its site design to encourage users to linger on other Google properties, even when competing services have more or better information.  And Google now shows as many fourteen ads on a page.

It is hard to take seriously an argument that turns on criticizing a company simply for looking different than it did seven years ago.  Does anybody remember what search results looked like 7 years ago?  A theory of antitrust liability that would condemn a firm for investing billions of dollars in research and product development, constantly evolving its product to meet consumer demand, taking advantage of new technology, and developing its business model to increase profitability should not be taken seriously.  This is particularly true where, as here, every firm in the industry has followed a similar course, adopting the same or similar innovations.  I encourage readers to try a few queries on http://www.bing-vs-google.com/– where you can get side by side comparisons – in order to test whether the evolution of search results and innovation to meet consumer preferences is really a Google-specific thing or an industry wide phenomenon consistent with competition.  Conventional antitrust analysis holds that when conduct is engaged in not only by allegedly dominant firms, but also by every other firm in an industry, that conduct is presumptively efficient, not anticompetitive.

The main thrust of my critique is that Edelman and other Google critics rely on an outdated antitrust framework in which consumers play little or no role.  Rather than a consumer-welfare based economic critique consistent with the modern approach, these critics (as Edelman does in his opening statement) turn to a collection of anecdotes and "gotcha" statements from company executives.  It is worth correcting a few of those items here, although when we've reached the point where identifying a firm's alleged abuse is a function of defining what a "confirmed" fax is, we've probably reached the point of decreasing marginal returns.  Rest assured that a series of (largely inaccurate) anecdotes about Google's treatment of particular websites or insignificant contract terms is wholly insufficient to meet the standard of proof required to make a case against the company under the Sherman Act or even the looser Federal Trade Commission Act.

It appears to be completely inaccurate to say that "[a]n unsatisfied advertiser must complain to Google by 'first class mail or air mail or overnight courier' with a copy by 'confirmed facsimile.'"  A quick search, even on Bing, leads one to this page, indicating that complaints may be submitted via web form.
It is likewise inaccurate to claim that "advertisers are compelled to accept whatever terms Google chooses to impose.  For example, an advertiser seeking placement through Google's premium Search Network partners (like AOL and The New York Times) must also accept placement through the entire Google Search Network which includes all manner . . . undesirable placements."  In actuality, Google offers a "Site and Category Exclusion Tool" that seems to permit advertisers to tailor their placements to exclude exactly these "undesirable placements."
"Meanwhile, a user searching for restaurants, hotels, or other local merchants sees Google Places results with similar prominence, pushing other information services to locations users are unlikely to notice."  I have strived in vain to enter a search for a restaurant, hotel, or the like into Google that yielded results that effectively hid "other information services" from my notice, but for some of my searches, Google Places did come up first or second (and for others it showed up further down the page).
Edelman has noted elsewhere that, sometimes, for some of the searches he has tested, the most popular result on Google (as well, I should add, on other, non-"dominant" sites) is not the first, Google-owned result, but instead the second.  He cites this as evidence that Google is cooking the books, favoring its own properties when users actually prefer another option.  It actually doesn't demonstrate that, but let's accept the claim for the sake of argument.  Notice what his example also demonstrates: that users who prefer the second result to the first are perfectly capable of finding it and clicking on it.  If this is foreclosure, Google is exceptionally bad at it.

The crux of Edelman's complaint seems to be that Google is competing in ways that respond to consumer preferences.  This is precisely what antitrust seeks to encourage, and we would not want a set of standards that chilled competition because of a competitor's success.  Having been remarkably successful in serving consumers' search demands in a quickly evolving market, it would be perverse for the antitrust laws to then turn upon Google without serious evidence that it had, in fact, actually harmed consumers.

Untethered from consumer welfare analysis, antitrust threatens to re-orient itself to the days when it was used primarily as a weapon against rivals and thus imposed a costly tax on consumers.  It is perhaps telling that Microsoft, Expedia, and a few other Google competitors are the primary movers behind the effort to convict the company.  But modern antitrust, shunning its inglorious past, requires actual evidence of anticompetitive effect before condemning conduct, particularly in fast-moving, innovative industries.  Neither Edelman nor any of Google's other critics, offer any.

During the heady days of the Microsoft antitrust case, the big question was whether modern antitrust would be able to keep up with quickly evolving markets.  The treatment of the proferred case against Google is an important test of the proposition (endorsed by the Antitrust Modernization Commission and others) that today's antitrust is capable of consistent and coherent application in innovative, high-tech markets.  An enormous amount is at stake.  Faced with the high stakes and ever-evolving novelty of high-tech markets, antitrust will only meet this expectation if it remains grounded and focused on the core principle of competitive effects and consumer harm.  Without it, antitrust will devolve back into the laughable and anti-consumer state of affairs of the 1960s—and we will all pay for it.