The crystal ball of antitrust regulators is cracked
On July 27, CEOs from four of the largest U.S. tech companies — Amazon, Apple, Facebook, and Google — will testify before Congress on competition in the digital marketplace. This follows a large wave of anti-tech backlash premised on the idea that modern tech giants have a disproportionate amount of market power and control. Many observers notice the size of these tech companies and struggle to imagine how they might ever face meaningful competition in the absence of government intervention. But history provides us with some much-needed perspective on how fast things can change in the modern tech economy.
Rewind the clock 15 years, to 2005, and try to remember what you did when you wanted to rent a movie. Chances are that you would drive to Blockbuster or Hollywood Video to get a physical DVD, or even a VHS tape. Today, that ritual seems antiquated and, in the midst of our current lockdown, even a bit dangerous. Yet, millions of people did it every week.
But then a giant wave of creative destruction came crashing down, first in the form of online rentals by mail, and then instantaneous video streaming via high-speech broadband networks and dozens of video streaming platforms. Blockbuster’s downfall was gradual, but everyone knew it was coming. Just one Blockbuster store remains open, in Bend, Ore., and it has become a kind of tourist attraction, standing as a relic of a bygone technological era. Hollywood Video is long gone.
Back in 2005, antitrust regulators apparently didn’t think this could happen, and the Federal Trade Commission (FTC) moved to derail the merger of the two video-rental giants. Under the traditional antitrust playbook, that made some sense: It was a “horizontal merger” of the two market leaders in the field. From the regulatory perspective, that would have almost certainly resulted in excessive market power and harmed consumer welfare.
Senior Research Fellow
Mercatus Center, George Mason University