Category: Antitrust

“We Have to Entrepreneurialize Society”

Economist Klaus Schwab is the founder and organizer of the annual Davos gatherings of government and corporate insiders.

(p. R15) MR. BAKER: There has been a tremendous growth in industrial concentration, big companies getting bigger. Small companies are essentially being squeezed out. There’s a concern that it’s not just bureaucracies and supernational institutions, but companies themselves, are just too big and too remote. What can be done to address those concerns?
PROF. SCHWAB: We have to entrepreneurialize society. If we look where jobs will come from, they will come mainly from new enterprises, from medium-size enterprises. So companies and countries have to create an ecosystem which allows young people to create their own companies. We have to create new Facebook s, new Googles, and so on. Then we have the necessary dynamic situation which maintains a certain degree of competition in the economy.

For the full interview, see:
Gerard Baker, interviewer. “Nationalism vs. Globalism: A Question of Balance; Klaus Schwab, executive chairman of the World Economic Forum, on how to deal with a fractured world.” The Wall Street Journal (Tuesday, Jan. 23, 2018): R15.
(Note: bold in original.)
(Note: the online version of the interview has a date of Jan. 22, 2018.)

45 Start-Ups Working on New Processor Chips

(p. B1) SAN FRANCISCO — For years, tech industry financiers showed little interest in start-up companies that made computer chips.
How on earth could a start-up compete with a goliath like Intel, which made the chips that ran more than 80 percent of the world’s personal computers? Even in the areas where Intel didn’t dominate, like smartphones and gaming devices, there were companies like Qualcomm and Nvidia that could squash an upstart.
But then came the tech industry’s latest big thing — artificial intelligence. A.I., it turned out, works better with new kinds of computer chips. Suddenly, venture capitalists forgot all those forbidding roadblocks to success for a young chip company.
Today, at least 45 start-ups are working on chips that can power tasks like speech and self-driving cars, and at least five of them have raised more than $100 million from investors. Venture capitalists invested more than $1.5 billion in chip start-ups last year, nearly doubling the investments made two years ago, according to the research firm CB Insights.
The explosion is akin to the sudden proliferation of PC and hard-drive makers in the 1980s. While these are small companies, and not all will survive, they have the power to fuel a period of rapid technological change.

For the full story, see:
CADE METZ. “Bets on A.I. Open a New Chip Frontier.” The New York Times (Mon., January 15, 2018): B1 & B3.
(Note: the online version of the story has the date JAN. 14, 2018, and has the title “Big Bets on A.I. Open a New Frontier for Chip Start-Ups, Too.”)

“Without Amazon, We Wouldn’t Be Here”

(p. B1) KANATA, Ontario — Truth be told, the headquarters of Instant Pot don’t look much like a church.
But inside this sterile, gray office building on the outskirts of Ottawa, behind a door marked only by a small metal sign, a new religion has been born.
Its deity is the Instant Pot, a line of electric multicookers that has become an internet phenomenon and inspired a legion of passionate foodies and home cooks. These devotees — they call themselves “Potheads” — use their Instant Pots for virtually every kitchen task imaginable: sautéing, pressure-cooking, steaming, even making yogurt and cheesecakes. Then, they evangelize on the internet, using social media to sing the gadget’s praises to the unconverted.
. . .
(p. B5) I went to Kanata to get a peek behind the scenes of the Instant Pot phenomenon and meet its creator: Robert Wang, who invented the device and serves as chief executive of Double Insight, its parent company. What I found was a remarkable example of a new breed of 21st-century start-up — a homegrown hardware business with only around 50 employees that raised no venture capital funding, spent almost nothing on advertising, and achieved enormous size primarily through online word-of-mouth. It is also a testament to the enormous power of Amazon, and its ability to turn small businesses into major empires nearly overnight.
. . .
In 2010, after several months of sluggish sales in and around Ontario, Mr. Wang listed the Instant Pot on Amazon, where a community of food writers eventually took notice. Vegetarians and paleo dieters, in particular, were drawn to the device’s pressure-cooking function, which shaved hours off the time needed to cook pots of beans or large cuts of meat.
Sensing viral potential, Instant Pot sent test units to about 200 influential chefs, cooking instructors and food bloggers. Reviews and recipes appeared online, and sales began to climb.
. . .
Mr. Wang credits the device’s technological advances — most notably, a group of sensors that keep the cooker from overheating or exploding under pressure.
Instant Pot’s internet fandom also gives it a leg up. The food bloggers behind popular recipe sites like Nom Nom Paleo were early converts to electric pressure-cooking, and cookbook authors took note of the device’s cult appeal. Mr. Wang says that more than 1,500 Instant Pot cookbooks have been written, including several of Amazon’s current best-sellers.
Amazon has played a particularly large role in Instant Pot’s rise. Early on, Instant Pot joined the “Fulfillment by Amazon” program, in which Amazon handles the packing and shipping of a seller’s products in exchange for a cut of each item sold. Eventually, Instant Pot sent Amazon wholesale shipments directly from factories in China, and Amazon began promoting the machines in its major annual sales. At one point, more than 90 percent of Instant Pot’s sales came through Amazon.
“Without Amazon, we wouldn’t be here,” Mr. Wang said.

For the full story, see:
KEVIN ROOSE. “The Shift; Instant Pot’s Inner Sanctum.” The New York Times (Mon., December 18, 2017): B1 & B5.
(Note: ellipses added.)
(Note: the online version of the story has the date DEC. 17, 2017, and has the title “The Shift; Inside the Home of Instant Pot, the Kitchen Gadget That Spawned a Religion.”)

“Reject the Dark Side: Free the Net!”

(p. C5) HEALY Matt, what’s a culture/politics tidbit most people don’t know?
FLEGENHEIMER Washington’s most prolific consumer of pop culture is very likely … Ted Cruz. Amateur “S.N.L.” historian, ’80s movie buff and instigator of a Twitter feud with Mark Hamill over net neutrality. He explained the meaning of “Star Wars” to Luke Skywalker. It was very Cruz: @HammillHimself Luke, I know Hollywood can be confusing, but it was Vader who supported govt power over everything said & done on the Internet. That’s why giant corps (Google, Facebook, Netflix) supported the FCC power grab of net neutrality. Reject the dark side: Free the net! Ted Cruz 12:25 PM – Dec 17, 2017
ROGERS ’80s movie buff?
FLEGENHEIMER “The Princess Bride”! Life on the campaign trail with Ted Cruz was basically months of “Princess Bride” imitations with an occasional discussion of Obamacare.

For the full commentary, see:
MATT FLEGENHEIMER and KATIE ROGERS. “‘S.N.L.’ Kimmel. Covfefe.” The New York Times (Weds., December 27, 2017): C1 & C5.
(Note: ellipsis, bold and caps, in original.).
(Note: the online version of the commentary has the date DEC. 26, 2017, and has the title “Kimmel, Covfefe, ‘Wonder Woman’: Washington on Pop Culture in 2017.” The commentary/discussion is credited to Flegenheimer and Rogers, but Patrick Healy also participated. There are a few minor differences in how the print and online versions present the Cruz tweet. The quote above, follows the print version.)

Firms Compete in Product Market and Cooperate in Parts Market

(p. B1) When the iPhone X goes on sale next month, Apple Inc.’s rival, Samsung Electronics Co., has good reason to hope it is a roaring success.
The South Korean company’s giant components division stands to make $110 from for each top-of-the-line, $1,000 iPhone X that Apple sells.
The fact reflects a love-hate dynamic between the phone makers that is one of the more unusual relationships in business. While each company vies to get consumers to buy its gadgets, Samsung’s parts operation stands to make billions of dollars supplying screens and memory chips for the new iPhone–parts that Apple relies on for its most important product.

For the full story, see:
Timothy W. Martin and Tripp Mickle. “Samsung To Benefit If iPhone X Is a Success.” The Wall Street Journal (Tues., Oct. 3, 2017): B1 & B5.
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the story has the date Oct. 2, 2017, and has the title “Why Apple Rival Samsung Also Wins If iPhone X Is a Hit.”)

Connecticut Upholds Car Dealerships’ “Lucrative Stranglehold” on New Car Market

(p. A23) Connecticut and Tesla should be a perfect fit. But lawmakers failed to act on a bill in this year’s regular legislative session (for the third straight year) that would have legalized direct sales by Tesla, whose business model is rooted in selling directly to consumers.
The culprit? Heavy lobbying by the state’s car dealerships.
Thanks to Connecticut’s decades-old franchise laws, new cars can be sold only through licensed franchises independent of carmakers. Even though only about 5,500 zero-emission cars have sold in Connecticut since 2011, Tesla’s effort to cut out the middlemen would undermine the lucrative stranglehold that car dealerships have on the new car market.
. . .
. . . , the National Automobile Dealers Association claimed franchise laws “keep prices competitive and low.” However, a 2009 paper by an economist at the Justice Department’s Antitrust Division instead concluded that “car customers would benefit from elimination of state bans on auto manufacturers’ making direct sales to consumers.” The paper pointed to a study by a Goldman Sachs analyst in 2000 that found that direct manufacturer sales could lower costs by 8.6 percent, with most of the savings resulting from more efficient matching between consumer demand and supply, and a subsequent reduction in inventory.
No wonder the Federal Trade Commission has criticized franchise laws as a “special protection” for these dealers — “a protection that is likely harming both competition and consumers.”

For the full commentary, see:
NICK SIBILLA. “‘Connecticut Should Be Tesla Turf.” The New York Times (Fri., JULY 7, 2017): A23.
(Note: ellipses added.)
(Note: the online version of the commentary has the title “Connecticut Should Be Tesla Country.”)

The Department of Justice research paper, mentioned above, is:

Bodisch, Gerald R. “Economic Effects of State Bans on Direct Manufacturer Sales to Car Buyers.” U.S. Department of Justice, Economic Analysis Group, Competition Advocacy Paper # EAG 09-1 CA. May 2009.

Tesla Fights Car Dealership Monopoly

(p. B4) Tesla Motors Inc. filed an application for a dealership license in Michigan, setting up a potential legal fight over the state’s ban on selling cars directly to consumers.
. . .
About a year ago, Michigan passed a law prohibiting car makers from selling directly to customers in the state without an independent dealer as an intermediary. Tesla has opposed such dealer-franchise laws, calling them anticompetitive. Tesla allows customers to order vehicles directly from the company, something that other manufacturers are prohibited from doing.
A formal denial of its application by Michigan could prompt Tesla to pursue additional legal avenues to fight a law it calls “very harmful.”
“Tesla is committed to being able to serve its customers in Michigan, and is working with the legislature to accomplish that. The existing law in Michigan is very harmful to consumers,” a Tesla spokeswoman said. “Tesla will take all appropriate steps to fix this broken situation.”
. . .
Michigan and Texas are among a small group of states that have a flat prohibition on any direct sales. The laws were created to prevent car makers from building their own stores that would ​then ​compete with independent​dealerships. Michigan Automotive Dealers Association couldn’t immediately be reached for comment.
Such competition could potentially undercut independent dealerships’ prices and undermine investments made in their stores, according to lawyers and economists who have scrutinized dealer-franchise laws.

For the full story, see:
Ramsey, Mike. “Tesla Seeks License to Sell Cars in Michigan.” The Wall Street Journal (Tues., Feb. 2, 2016): B4.
(Note: ellipses added.)
(Note: the online version of the article has the date Feb. 1, 2016, and has the title “Tesla Motors Files for a Dealership License in Michigan.” The online version is slightly different from the print version. The passage quoted above is from the online version.)

Fracking Entrepreneur Aubrey McClendon Was Pressured by Antitrust Indictment on the Day Before Fatal Car Crash

(p. C2) Mr. McClendon, who co-founded Chesapeake Energy Corp. in 1989 and was a key figure in the shale boom that has upended global energy markets, was ousted from the energy company in 2013 over corporate-governance issues. He spent the three years after leaving Chesapeake building a new energy empire, raising more than $15 billion from investors, including major financial firms, to finance his comeback. But in 2014, oil prices plunged and natural-gas prices languished in a glut partly of his making, pressuring several of his new energy companies and making it more difficult for him to raise cash.
. . .
Exacerbating the pressure on Mr. McClendon was a federal antitrust investigation that culminated in his indictment the day before he died, on a single count of conspiring to rig oil-and-gas leases. Mr. McClendon vowed to fight the felony charge; local authorities later ruled they found no evidence of suicide.

For the full story, see:
RYAN DEZEMBER and KEVIN HELLIKER. “Oil Man Delivers for Heirs.” The Wall Street Journal (Weds., Aug. 31, 2016): C1-C2.
(Note: ellipsis added.)
(Note: the online version of the story has the date Aug. 30, 2016, and has the title “Oil-Deal Score Helps Aubrey McClendon’s Heirs Hang on to NBA’s Thunder, for Now.”)

Monopolist Ede & Ravenscroft Had 98% of Legal Wigs Market

(p. A1) British barristers and judges have worn wigs since Charles II Imported the idea from France in the 1670s. A London company, Ede & Ravenscroft Ltd., today claims 98% of the market for legal wigs in the United Kingdom. The wigs distinguish barristers from solicitors, lawyers who ordinarily don’t appear In court.
Ede & Ravenscroft, 300 years old, pursues its monopoly from a narrow London shop whose carved mahogany paneling, brass rails and chest-high counters hark back to the Victorian era.
. . .
(p. A7) In a stuffy loft two floors above, six women fabricate about 1,000 wigs a year on pockmarked wooden blocks resembling shrunken skulls. The wigmakers attach rows
of tightly rolled curls and a pair of ponytails with painful hand stitching, using 12-yard lengths of bleached curls made from horses’ tails and manes.
They strictly follow a pattern conceived by Humphrey Ravenscroft in 1822 when he invented the “modern” horsehair wig with fixed curls. It replaced ones made of goat hair, which had to be powdered and dressed with scented ointment every day to conceal the filth.

For the full story, see:
Lublin, Joann S. “Who Has Means and Motive to Steal in Halls of Justice?; British Barristers, It Seems, Can’t Resist Purloining Each Other’s Ratty Wigs.” The Wall Street Journal (Weds., Oct. 4, 1989): A1 & A7.
(Note: ellipsis added.)

Certificate-of-Need Regulations Protect Incumbents and Hurt Consumers

(p. A11) An important but overlooked debate is unfolding in several states: When governments restrict market forces in health care, who benefits? Legislative majorities in 36 states believe that consumers benefit, because restrictions help control health-care costs. But new research confirms what should be common sense: Preventing qualified health-care providers from freely plying their trade results in less access to care.
Most states enforce market restrictions through certificate-of-need programs, which mandate a lengthy, expensive application process before a health-care provider can open or expand a facility. The story goes: If hospitals or physicians could choose what services to provide, competition for patients would force providers to overinvest in equipment such as MRI machines–and the cost could be passed on to patients through higher medical bills.
. . .
These restrictions have largely failed to reduce costs, but they certainly reduce services. A 2011 study in the Journal of Health Care Finance found that certificate-of-need laws resulted in 48% fewer hospitals and 12% fewer hospital beds.

For the full commentary, see:
THOMAS STRATMANN and MATTHEW BAKER. “Certifiably Needless Health-Care Meddling.” The Wall Street Journal (Tues., Jan. 12, 2016): A11.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Jan. 11, 2016.)

The “new research” mentioned by Stratman in the passage quoted above, is:
Stratmann, Thomas, and Matthew C. Baker. “Are Certificate-of-Need Laws Barriers to Entry?: How They Affect Access to MRI, CT, and Pet Scans.” Mercatus Working Paper, Jan. 2016.

Tribe Uses Autonomy to Fight American Dental Association (A.D.A.) Credentialism

(p. A10) Mr. Kennedy, 56, a soft-spoken Tlingit Native Alaskan, is a dental therapist, the rough equivalent of a physician assistant. He is trained to perform the most common procedures that dentists do, from fillings to extractions. Since January, when he started at the Swinomish Dental Clinic, over 50 miles north of Seattle, he has been the only dental therapist on tribal land anywhere in the lower 48 states. He studied in Alaska, which has the nation’s only program — patterned after one in New Zealand — aimed at training therapists specifically to work in underserved tribal areas.
Laws here in Washington and most other states bar dental therapists, who have long been opposed by the American Dental Association, so the tribe created its own licensing system. The federal Indian Health Service, which pays for medical care on Indian lands, cannot compensate therapists unless authorized by the state, so the Swinomish (pronounced SWIN-o-mish) needed private foundation support and meticulous accounting so that no law was violated.
“We had to take matters into our own hands,” said Brian Cladoosby, the chairman of the Swinomish Senate and president of the National Congress of American Indians. The breaking point came in 2015, after Washington’s Legislature — pressured by the dental lobby, Mr. Cladoosby said — declined for the fifth year in a row to pass a bill allowing a therapist program. Asserting tribal sovereignty, the tribe forged ahead anyway.
“The American Dental Association is no friend to American Indian tribes,” Mr. Cladoosby said in an interview.
. . .
(p. A11) Dr. Rachael R. Hogan, a dentist who works at the Swinomish Clinic, supervises Mr. Kennedy’s work. At first she did not think the arrangement would work. The A.D.A.’s safety concerns made sense, she said.
“I was leery,” she said. But after watching Mr. Kennedy for the past four months and visiting the training school in Alaska, she has changed her mind. By practicing procedures over and over — more than most dental school graduates, who must also study a broad range of diagnostic and disease issues — therapists can hone procedures, she said, to an art.
“Their fillings are better,” she said. “Are we providing substandard care by providing a therapist? Actually, I would say it’s the opposite.”

For the full story, see:
KIRK JOHNSON. “Asserting Tribal Sovereignty to Improve Indian’s Dental Care.” The New York Times (Mon., MAY 23, 2016): A10-A11.
(Note: ellipsis added.)
(Note: the online version of the story has the date MAY 22, 2016, and has the title “Where Dentists Are Scarce, American Indians Forge a Path to Better Care.”)