FTC: Rules Needed for Free Tech Services, Mergers

US regulators want new rules on when companies - particularly tech firms - can merge. They say existing rules aren't designed to cover businesses that offer free services to consumers.

Traditionally one of the key questions in approving or blocking mergers is whether it reduces competition to the point that consumers no longer benefit from price competition.

The rules have only been updated once since 1984. Regulators say even that review in 2010 is now outdated as the tech world has changed so much. In particular, they point to the way many tech giants offer free services to the public and then make their money from businesses, for example by selling advertising.

Judging Monopolies Uncertain

The Federal Trade Commission (FTC) and the Department of Justice's (DoJ) antirust division are now running a public enquiry, formally called a "Request For Information." They want feedback on whether the rules need to put more emphasis on factors other than consumer prices such as whether mergers could hurt labor markets or reduce the incentives for innovation and quality. (Source: theregister.com)

Another problem claimed by the FTC and DoJ is that the models they use for assessing businesses and their share of a market simply doesn't work when applied to many modern tech firms. (Source: ftc.gov)

For example, the public doesn't pay for using most web browsers or search engines, so "sales" share isn't meaningful. That leaves a question over whether "market share" should instead be based on how many people choose to use the browser, or on associated revenue such as businesses paying to appear in sponsored results.

Market Structures Hazy

The way tech companies are involved in a wide range of products and services is also causing regulators headaches. The review announcement notes that the rules work differently depending on whether the merger is "horizontal" (such as two widget manufacturers merging) or "vertical" (such as a widget manufacturer buying a chain of widget stores).

That distinction isn't always so clear-cut in tech where, for example, the same company could be involved in manufacturing devices, licensing an operating system, distributing applications and selling advertising.

What's Your Opinion?

Are tech companies at particular risk of getting anti-competitive power? How should regulators judge the effects on consumers? Does the Internet make competition easier, meaning less need for competition laws?