
A Supreme Court Case That Could Give Tech Giants More Power - IntronExon
https://www.nytimes.com/2018/03/02/opinion/the-supreme-court-case-that-could-give-tech-giants-more-power.html
======
throwaway8995
I don’t want to detract too much from this discussion, but I can provide
insight into what kind of bullying company AmEx truly is, and how their ethos
permeates throughout everything they do.

I worked for AmEx for about 5 years. Everything was going great, and they
announced a 5-month paternity leave program. I’m not going to lie, but it made
it a lot easier to decide on having a child. Long story short, my son was
born, I took paternity leave, and got laid off after 2 months into my
paternity.

I get that I’m an at will employee, which is what lawyers keep telling me.
It’s true that large companies, not just tech companies exert a lot of power,
especially when it comes to swaying what’s ethical and what’s not. That’s a
whole separate discussion, but AmEx clearly used me to send a message- don’t
act on our gesture... or else. Influencing future behavior is what AmEx is
really good at. Not credit cards.

~~~
tyingq
FWIW, I have had bad experiences with AMEX chargebacks. Even when it’s obvious
their cardholder is committing fraud. There’s a sort of weird corporate
swagger that says “yeah, so what?...we’re big, you aren't”. Lost a chargeback
for non delivery when I had the cardholder’s signature on UPS paper.

~~~
mehrdadn
(Oops, seems I misread the above comment, sorry about that. Yes, similar
experience here, but from the cardholder side.)

~~~
GauntletWizard
It's the same as your experience. They're "Consumer" friendly, where the
customer is the one who holds the credit card, not the one getting paid. They
will act like dicks towards merchants because they would rather not face the
possibility of consumer backlash, even in the face of obvious fraud.

~~~
matte_black
As a consumer though I kind of appreciate having that power over a merchant if
they decide they want to fuck me over.

~~~
jliptzin
Prices would be a little lower if merchants were not beholden to fraudsters.

~~~
matte_black
No they wouldn’t and if they were they wouldn’t be significantly lower for me
to care.

------
laser
In the case being tried, why is it not straightforward to demonstrate that
higher costs for the merchants due to anti-competitive practices by credit
card companies leads to higher costs for consumers, and therefore meets the
two-sided market standard that the author fears?

I'm not sure on the edges whether the concept of harming competition for the
benefit of consumers is just, but at least in the example case I don't see how
this is an issue.

Are the standards for demonstrating harm so high that you can't make a strong
legal case that higher costs for merchants gets passed to consumers?

~~~
pravda
>higher costs for merchants gets passed to consumers?

This is a common misconception. These fees come out of merchant profits.
Otherwise, merchants would not care.

~~~
laser
Seems like six of one, half dozen of the other. The merchants are the ones
directly paying the transaction fee, but merchants only provide services to
consumers in the for-profit sector so long as they can make a profit. As a bit
of an extreme to clearly demonstrate the principle, if a business is operating
at a 3% profit margin on revenue before processing fees, and credit card
providers demand a flat 3% + $0.30 fee per transaction, then the business
becomes unprofitable, and loses $0.30 per transaction. Only one of three
things can happen here. 1. The business eventually shuts down. 2. The business
raises its prices. 3. The business cuts costs (lowers quality of product on
average? Unless can take advantage of non-harmful cost-saving mechanisms, like
informing consumers of cheaper transaction payment options, offering
incentives for such, etc. which is what is being restricted anti-
competitively). All three of these responses directly harm consumers. Case
closed?

~~~
pravda
Well, there is theory, and there is real world.

In the real world, reductions in debit card fees (in the USA, via the Durbin
Amendment) have not lead to lowered prices, just increased profits. [1]

This explains why merchants care about processing fees.

[1] From page 27 of
[https://www.law.gmu.edu/assets/files/publications/working_pa...](https://www.law.gmu.edu/assets/files/publications/working_papers/1418.pdf)

"In the year following Durbin’s implementation, gasoline retailers realized
more than $1 billion in savings from reduced interchange fees. But 'while this
should mean savings of roughly 3 cents per gallon, no savings have been passed
on to consumers.' This is particularly remarkable and instructive given that
the retail gasoline industry is highly competitive, and at least one other
study has demonstrated that gasoline excise taxes are almost instantly and
fully passed through to consumers"

~~~
argonaut
Your own report contradicts your argument all over the place.

"There is little doubt that the Durbin Amendment had a major effect on
consumers — and would-be bank customers — as issuers have, in various ways,
passed on some of the costs of reduced interchange fee receipts, as discussed
above"

" retailers of smaller ticket items in particular have seen increased
interchange fee costs as a result of the Durbin Amendment, and there is
anecdotal evidence that these fees are being passed on to consumers"

I didn't bother reading the entire report, either.

------
tabeth
So if you wanted tech giants to have _less_ power what exactly would you do?

I suppose you could tell your representative, but then they'd have to somehow
influence the senators of your state, but even if that happens you need a
majority rule to do something, when it comes to an eventual vote, right? Even
if they did have a majority, the Supreme Court, which is inherently stacked
one way or another, could simply negate whatever decision was made, no?

It's amazing that despite all of the technological growth, there are more
middle people than ever skimming off the top. Somehow it feels that technology
is simply making things even more inefficient.

~~~
IBM
>So if you wanted tech giants to have less power what exactly would you do?

It's really easy. This is the nuclear option, but it's very doable: eliminate
their Section 230 immunity [1]. All of these internet businesses and platforms
are running markets online, but they face zero liability for anything bad that
happens on their platform. It's what gives Google and Facebook such high
margins. They employ a relatively small number of highly paid software
engineers and let the buyers and sellers take it from there on their
marketplace.

If they were actually responsible or liable for what happened on their
platform, it would mean they'd have a lot more policing to do. And policing
costs money. Customer service costs money (which is why there's no one to call
at Facebook or Google when something's wrong with your account).

Suddenly those highly efficient, zero liability two-sided markets have a lot
more frictional costs, and that will ultimately limit their power because the
flywheel won't snowball as much.

[1]
[https://en.wikipedia.org/wiki/Section_230_of_the_Communicati...](https://en.wikipedia.org/wiki/Section_230_of_the_Communications_Decency_Act)

~~~
JoshTriplett
That isn't "give them less power", that's "kill all of them dead unless
they're huge enough to tank a massive and never-ending money pit". What you're
suggesting could be folded into an expensive but manageable cost of doing
business for companies the size of Google or Facebook, but would utterly
destroy a small company. That would shift the balance of power towards large
companies and away from small ones, and large companies don't need any more
advantages than they already have.

~~~
IBM
Look any time anyone suggests a regulation this is always what everyone
responds with. But this isn't even a new regulation, this would be the
elimination of a freebie for the tech industry.

It'd be extremely easy to limit the impact of it by not eliminating the
freebie for everyone, recognizing that there's societal value in enabling
these online marketplaces.

Think Systematically Important Financial Institutions [1]. The "too big to
fail" banks bear the toughest capital requirements, your local community bank
doesn't. The same can be done for the tech industry.

[1]
[https://en.wikipedia.org/wiki/Systemically_important_financi...](https://en.wikipedia.org/wiki/Systemically_important_financial_institution)

~~~
stale2002
Getting rid of platform immunity would result in massive censorship and
decreased freedoms for the individual USERS of that service.

These platforms would just ban everything that is slightly controversial, on
the off chance that they could be sued for it.

It is not about the rights of the companies that I care about. What I don't
want is for this kind of massive censorship to happen to the users of these
sites.

Immunity allows users to remain free and mostly unregulated. It is what makes
the internet useful.

And I care about this issue, even though it would be "legal" for these
companies to ban everything controversial, so please don't say "The 1st
amendment protects you from the government, not private companiezzz!!"

~~~
IBM
Newsflash: the thing you're afraid of happening is _already_ happening.

Google, Facebook, Amazon exercise editorial control of their platforms all the
time. They delete spam, malware, porn. Just this week Google pulled right wing
YouTube content as they moved to remove gun content [1]. They banned anything
with the word "gun" in their shopping search [2]. These were never neutral
platforms and they never pretended to be. The tech industry lobbyists cloak
themselves in the language of free speech and liberty to avert regulation, but
they have always been censoring content on their platform if it served their
commercial interests.

[1]
[https://www.bloomberg.com/news/articles/2018-02-28/youtube-s...](https://www.bloomberg.com/news/articles/2018-02-28/youtube-
s-new-moderators-mistakenly-pull-right-wing-channels)

[2] [https://www.engadget.com/2018/02/27/google-gun-shopping-
sear...](https://www.engadget.com/2018/02/27/google-gun-shopping-search-ban-
creates-issues/)

~~~
stale2002
And your proposal, to hold them liable for content on their platform, would
making things a hundred times worse, as they'd now take down more content
because they are afraid of being sued for it.

It would certainly be great if the big tech companies engaged in less
censorship. Which is why we need more policies that encourage them to be
neutral platform, possibly like the utilities laws we have, instead of doing
the opposite of making them more likely to take down content.

Lets move them towards being a more neutral platform with less or no editorial
control. That would be wonderful.

~~~
JoshTriplett
> Lets move them towards being a more neutral platform with less or no
> editorial control. That would be wonderful.

Ugh, no. Editorial control and moderation makes the difference between a
community and an open sewer.

But let's make sure we don't create such a liability that nobody wants to host
user content at all. Because the easiest thing to do is to omit user content
and focus exclusively on licensed, first-party, commercial content that has a
contract associated with it. That doesn't create communities.

------
phkahler
>> American Express, for example, charges both merchants who accept its cards
and consumers who use them. Using this concept, the Second Circuit held that
the government would have to show that any price increases for merchants also
harmed cardholders, or at least didn’t benefit them. In effect, the court
introduced a dramatically new rule, making it much more difficult to win
important antitrust cases and to stop anticompetitive behavior.

How is that even relevant? The issue is weather the card company can gag a
merchant. Not just from disclosing their terms, but from recommending a
competitors card. Sounds like the second circuit has some friends.

------
jakelarkin
somehow in a case about the credit card industry, which actually extracts
monopoly rent on most personal financial transactions its more important for
author to talk about about "tech" bogeyman

~~~
Mediterraneo10
The author points out that tech companies filed amicus briefs on behalf of the
credit card industry.

~~~
gowld
No, they didn't. The NYT tried to insinuate that while concealing the relevant
details.

[http://www.ccianet.org/2018/01/ccia-files-supreme-court-
amic...](http://www.ccianet.org/2018/01/ccia-files-supreme-court-amicus-brief-
in-american-express-case/)

Washington — The Computer & Communications Industry Association has filed an
amicus brief on how the Supreme Court should look at multi-sided business
models from an antitrust perspective when it hears the upcoming Ohio v.
American Express case.

 __While CCIA does not weigh in on the substance of the financial services
issues impacting merchant fees, __the tech trade association does argue that
constraints on all sides of a multi-sided firms should be considered when
analyzing if a plaintiff has made out a prima facie case of anticompetitive
conduct. The American Express case represents the first time that an antitrust
dispute involving “multi-sided markets” — where a third party service provider
is in the business of uniting buyers with sellers — has come before the
Supreme Court of the United States.

...

“Two-sided markets” or “multi-sided firms” is a term of art in the theoretical
economics literature that refers to business models that have multiple sets of
customers, such as many of CCIA’s members. Multi-sided businesses operate
under complex economic dynamics as they must consider the effects of their
pricing and output decisions on both sets of customers, as well as the
interrelationship among the customers on each side of their business. Whether
a multi-sided firm has market power or not requires consideration of the
actual effects of multi-sidedness. Ignoring these competitive realities would
risk penalizing healthy competition to the detriment of consumers.

~~~
hedora
How do railways (freight, passengers) or telcos not meet the definition of
“multi-sided firm”? Those are the first two monopoly cases that came to mind.
Can you name any anti-trust suit ever brought against a firm with one set of
customers? (And zero suppliers/employees, if you take the argument being made
to its logical extreme)

I’m not buying the “this time it’s different” argument at all.

------
aventrix
With regard to the supreme court case itself, and the question of the credit
card merchants having an oligopoly... What's stopping Paypal, Square, Stripe,
or even Apple Pay from making the leap from payment processor to issuing their
own Credit/Debit cards?

~~~
kjksf
Bear in mind I'm guessing here.

When you use your credit card or debit card in a store, you swipe it in a
Point Of Sale terminal.

That terminal connects, via network, with payment processing software managed
by Visa (and other card suppliers) to authorize the payment and move the money
from your balance to store's balance.

If you were to create your own credit card, how would that processed? Visa is
not going to process your credit card.

In order to have your credit card processed you would have to convince stores
to upgrade POS terminals to also talk to your card authorization network.

That's just not gonna happen which is why Visa is not going to loose their
lock on credit cards.

The only viable solution would be legislation that forces Visa to process
other people's cards, maybe via some standard protocol, at a reasonable price
(and that price would have to be much, much lower that Visa's fees to make
that workable, because you want to make money on processing fees too).

~~~
paulie_a
I work on a platform that actually has private labeled credit cards baked in.
From my understanding this is not unusual, just under utilized

~~~
kjksf
What is "private labeled" in this context?

I have a credit card from Wells Fargo. It's still made by Visa and Visa takes
its cut of credit card processing fees.

My point is that in practice you can't issue a credit card and avoid Visa (or
Mastercard) processing fees.

You would have to get most merchants to upgrade their POS terminals to support
your payment network and that's not going to happen.

~~~
paulie_a
Your point is completely false. You missed 2 major vendors of credit cards
plus 2 additional minor ones.

Technically there are 26 different cards most POS terminals support. 11 of
those are Visa or MasterCard

Edit: "Private labeled" is considered anything a normal gateway will accept
and go into the generic category. Which absolutely exists

------
feelin_googley
"An assessment of market power is the initial inquiry under the indirect
method. In this case, the parties had stipulated 2013 network market shares of
Visa, 45 percent, Amex, 26.4 percent, MasterCard, 23.3 percent and Discover
(not a defendant here), 5.3 percent."

"(The states did not seek review of the 2nd Circuit's decision that they
failed to make a prima facie case under the indirect method.)"

Have the states have conceded that Amex lacks market power?

"Gorsuch reiterated that in the absence of market power, a vertical
restriction "is not within the cognizance of the antitrust laws." And, without
more, a 26 percent share of a market does not constitute power."

How much direct harm can be caused by a firm that lacks market power?

------
abraae
I don't live in the US or the EU, but the more you see situations like this
(privacy legislation is a similar area), the more glad I am that the US does
not dominate global commerce, and perhaps is even purposefully moving away
from such leadership positions.

This is a situation where competitors may be able to get started in the EU (or
other large market), and grow to scale there, shielded from this kind of anti-
competitive behaviour.

Eventually, the existence of clearly successful businesses offering products
at a lower cost outside the US might increase the pressure inside the US for
change and for a fair playing field.

------
nokcha
>A bipartisan consensus has formed around this idea. Senator Elizabeth Warren
has charged tech giants with using their heft to “snuff out competition,” and
even Senator Ted Cruz — usually a foe of government regulation — recently
warned of their “unprecedented” size and power.

>But the decision in a case currently before the Supreme Court could block off
that path, by effectively shielding big tech platforms from serious antitrust
scrutiny.

The case before the Supreme Court concerns interpretation of statutory
provisions, not Constitutional law. A bipartisan consensus in Congress could
negate the Supreme Court ruling simply by amending the Sherman Antitrust Act.

~~~
jakelazaroff
_> A bipartisan consensus in Congress could negate the Supreme Court ruling
simply by amending the Sherman Antitrust Act._

Sure, but is that likely to actually happen? Just because Congress could
possibly negate a court ruling doesn't mean there's nothing to see here.

------
jessaustin
Kudos to the Justice Department! This is the sort of thing they should do more
of.

Who the fuck is on the 2nd Circuit bench and where do they get off inventing
"a new concept to create a special set of rules"? Has there never been a firm
that served two distinct sets of customers? How long has Amex itself existed,
and how did they conduct business before this new concept was invented by
judges not legislators? Corruption on parade!

Fortunately the Republicans have packed the SC with "originalists" who will be
eager to slap down this new-concept bullshit... haha well one can dream,
right?

------
hcnews
Just consider this, Amazon refuses to sell (some) Google products because of
their whims from time to time. Maybe this extends to other brands/companies
other than Google that I haven't even heard about. Isn't this bad for the
consumers? How has Amazon been able to make this decision without any
consequences?

~~~
gowld
Because Amazon hasn't been ruled a monopoly yet.

------
sqdbps
[Deleted]

~~~
adventured
Telecom doesn't even deserve to be in that batch. A $50 or $70 cell plan is
close to meaningless next to the cost of home ownership, education and
healthcare.

Cell plans also have not gotten more expensive over 30 years inflation
adjusted. When you include what you actually get in plans today, they've
gotten cheaper vs 30 or 20 years ago.

Cable Internet as another example, hasn't gotten expensive out of line with
inflation over the last 20 years. While simultaneously what you can do with
cable Internet has dramatically increased.

Those other items on the other hand, have seen cost inflation dramatically
beyond other consumer goods.

Telecom costs a median American $100 to $150 per month. That's more like the
cost of a home insurance policy.

~~~
jessaustin
Doesn't it seem as if, when amortized over all home residents and mobile
callers, more resources would be required to build a home than to provide
mobile service?

