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The FTC As a Threat To Tech Innovation

· August 21, 2012

InnovationIn a post about Twitter several weeks back, we concluded that “[a] threat of government action can be just as debilitating to innovation as premature enforcement intervention into the marketplace.” Although the subject then was vertical integration, the same is true of broader antitrust issues, like mergers, and tech policy issues such as privacy. When the rules are ambiguous, and enforcement discretion allows for a wide range of subjective governmental decisions, uncertainty breeds business timidity because rivals can game the process.

A Wall Street Journal opinion piece by L. Gordon Crovitz on Monday made this same point. Commenting that Google’s proposed acquisition of travel guide publisher Frommer’s could disrupt the travel market even further — and reacting to all-too-typical calls by Google’s competitors for “close” Federal Trade Commission review of the deal — Crovitz wrote:

As a regulatory matter, there is real risk that the current antitrust review by the FTC will block innovation in the search industry. The agency could freeze Google into its historic way of doing business by stopping it from delivering answers directly (removing the consumer benefit) and by banning acquisitions such as Frommer’s…. For the technology companies that are supposed to be the drivers of our economy, this kind of regulatory uncertainty is a growing burden. The response to innovation by one company should be more innovation by others, not competitors calling in lawyers and lobbyists.

The FTC’s Threat to Web Consumers | WSJ.com.

Could not have said it better ourselves!
 

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.

Innovation

New technologies are constantly emerging that promise to change our lives for the better. These disruptive technologies give us an increase in choice, make technologies more accessible, make things more affordable, and give consumers a voice. And the pace of innovation has only quickened in recent years, as the Internet has enabled a wave of new, inter-connected devices that have benefited consumers around the world, seemingly in all aspects of their lives. Preserving an innovation-friendly market is, therefore, tantamount not only to businesses but society at large.