July, 2011

In a Washington Post op-ed entitled "A smarter approach to cutting red tape," Cass Sunstein, the White House's Regulatory czar, laid out a laudatory plan for Federal executive agencies "to eliminate burdensome requirements that hinder economic growth and job creation," with a big loophole problem -- the plan does not apply to "independent" agencies like the FCC and its burdensome net neutrality regulations in the Open Internet order.

It makes no sense that the FCC's net neutrality regulations, the veritable poster child of "unjustified burdens and pointless red tape," have escaped:

Netflix's General Counsel, David Hyman, hypocritically and deceptively blasted the broadband industry for its natural migration to usage-based bandwidth pricing in his fact-challenged WSJ op-ed: "Why Bandwidth Pricing is Anti-competitive."

First, it is both ironic and hypocritical that the largest subscription video provider in the United States by subscribers, Netflix,  criticizes the normal economic practice of usage-based pricing as anti-competitive when other companies do it, when Netflix has long priced and capped its business offering based on consumer usage.

Mr. Hyman must have known Netflix would look self-serving and hypocritical if people knew:

The fundamental rationale undergirding the FCC's net neutrality regulations in the December Open Internet Order appears to be crumbling before our eyes in both the U.S. and the EU -- enough so to raise the question -- could they be "dead regs walking?"

The FTC is centering its Google antitrust investigation on Google's predatory search practices that anti-competitively abuse Google's dominant market power to thwart competition.

• As the dominant online information access gatekeeper, Google has unique market power over the one place online where every business needs to be able to compete in order to be found by potential customers.
• At core, Google's predatory search practices manipulate search results to anti-competitively advantage some Google content and disadvantage some competitors' content, all while misrepresenting to the public that Google's search business is unbiased and never manipulates search results.

Google's Predatory Search Practices

The FTC would not have launched this investigation if it did not believe Google has dominant market power in search advertising, and as such, has special legal obligations to not abuse its market dominance to impede competition -- market obligations that non-dominant firms do not have.

Kudos to Ev Erhlich for an outstanding Huffington Post op-ed: entitled: "Why Liberals Should Think Twice About Net Neutrality."

• It effectively explains why net neutrality violates common sense and why opposition to net neutrality regulation should not be a partisan issue.

Media reports apparently missed the subtle, but important and telling political weakening since April of the Administration's official position in defense of the FCC's beleaguered Open Internet Order.

To see the first free-market legal argument explaining how Google's market behavior systematically harms consumers under antitrust law, read my Forbes op-ed: "Google's Deceptive Practices Harm Consumers."

• This is important because Google and its defenders believe the benefits Google provides consumers are the bedrock of a winning antitrust defense.

Few have grasped the huge significance that it is the FTC (with its unique supplemental Section 5 authority) and not the DOJ, that is investigating Google for antitrust.

Most also have missed how vulnerable Google is to the charge that many of its marketing practices are illegal deceptive misrepresentations of its business.

My Forbes op-ed link is here.

The latest strategic demonization of private enterprise by the radical information commons movement to promote net neutrality comes from Ms. Rebecca Mackinnon of the New America Foundation, who recently charged that private corporations have too much power over the Internet and effectively should be regulated as common carriers, when she previewed her upcoming book "The Consent of the Governed" at the TEDGlobal conference in Edinburgh, which was covered by the New York Times.

Ms. MacKinnon in her talk, employed a ridiculously bad and outrageous analogy that Internet users should fight against Internet companies' Internet tyranny like the barons in England fought King John's tyranny in 1215 by writing the Magna Carta.

How Google's deceptive and predatory search practices harm consumers is the focus of Part VIII of my four-year antitrust research series on Google. (See www.Googleopoly.net for the whole series.)

I. Summary:

My Googleopoly VIII white paper here presents evidence of four things of import to the FTC's current antitrust investigation of Google:

Those interested in the ultimate legal fate of the FCC's beleaguered Open Internet order, should not miss Randy May's outstanding analysis of the D.C. Appeals Court's latest thinking on the FreeStateBlog.

Simply, Randy keenly spotlights a very relevant recent D.C. Court of Appeals decision overturning an SEC rule as a precursor/analogous decision of how that court will likely view the FCC's controversial Open Internet Order.

• Randy shows the Court currently has little patience for sloppy unsupported legal decisions (like the FCC's Open Internet order) where the agency "failed to make a rational connection between 'the facts found and the choices made.'"