As much as I believe in free markets and less regulation, I believe we do need a law / regulation which disallows companies to use profits from one business to subsidize completely unrelated business while undercutting economics of the second one. For startups, they should be allowed to subsidize low prices only for a specified duration of time or until they hit a threshold of marketshare in a given market.
So Amazon should not be able to use AWS profits to subsidize retail, when other retailers don't have such cushions. Google should not be able to use Ads profits to undercut economics of browser or mobile OS. Uber/Lyft should not be allowed to capture more than 5-10% of SF/NYC taxi market unless they are profitable there.
Just to be clear - if someone can upend an entire business while being profitable, they should be allowed to flourish (eg. Netflix with rental movies, Apple with phones).
One possible exception - if there is no established business in a field and someone wants to move the technology forward there, they should be given some exception. So SpaceX can experiment with their rockets and Google can experiment with self driving cars because they won't be competing unfairly with any competitors.
Finally, I really hope EU adopts regulations along these lines. I have no hopes from US or China.
Apple uses their phone/hardware profits to upend other businesses. What Apple is doing to Spotify is the most recent example. Apple runs their iTunes/Music on a break-even basis. Apple has the dominant smartwatch market share. Apple runs adverts pushing Apple Watch+Apple Music combo. Apple privileges their Music app on the smartwatch and doesn't provide the needed APIs for Spotify to compete on that platform. Apple Music marketshare is growing and might catch up to Spotify soon.
1. Apple would be forbidden to subsidize unrelated unprofitable businesses for too long.
2. Developing a feature of an existing business is okay under my proposal (so iPhone upending P&S cameras is okay because camera is just a feature of iPhone and hence not completely unrelated business).
That would unleash a pandora's box of corruption and abuse by inviting bureaucrats to even more directly control the economy through vague notions such as "too long." If you think the system is bad now, it'd be 10x worse if what you're suggesting were implemented.
Every layer of bureaucrat control and vagueness that is applied, dramatically harms the economy and brings it down toward stagnation of zero growth. We got 30+ years of that demonstration from France, where their GDP growth and wage growth has averaged 1/4th to 1/5th that of the US over the last several decades. Similarly Japan has a hyper regulated and rigid economy, with predictably bad growth as a consequence. As the US has grown more regulated over the last 40 years, its GDP growth has dramatically slowed (while the global economy has routinely grown far faster, and the US share of the global economy has not fundamentally changed).
Instead of considering these political concepts in an idealized fantasy scenario, you have to actually apply them to things as they are. You have to apply them with politicians as they exist in the US today. It would be the worst nightmare imaginable economically, next to moving to actual Socialism (ie direct, literal corrupt control of the economy by bureaucrats).
Amazon is a creature of Wall St. Unlike any other public company, they seem to be able to somehow make investors think about the long term and not care about surprises.
If Walmart tried and failed the Amazon did with Amazon Fresh, the stock would be savaged, for example.
We’re in an era where we are slowly rebuilding the trusts of the 19th century. It’s all about personal relationships and deliberately incompetent regulatory enforcement.
Tesla. A 15 year old business, run by an enigmatic (plausibly genius) leader, worth $56 billion, that has never earned a meaningful profit in its entire history. Currently bleeding immense red ink. Trading for about four times sales. Amazon trades for a reasonably similar, if slightly lower, sales to market cap ratio.
Trying to define an industry or segment is way too difficult for this. Then trying to define all these bright lines (revenue, market size, length of time, etc).
This sounds like a terrible idea that will be used mostly by politicians to extra money from companies.
And after every election these lines would likely be redrawn. The chaos this would introduce.
I agree that it would be a chaotic process to begin with. But since it reflects real life which is itself chaotic and messy, I won't be surprised (just like, say, tax laws).
What I object to is the behavior of private entities to use their resources to subsidize their products/services and capture new markets.
> I believe we do need a law / regulation which disallows companies to use profits from one business to subsidize completely unrelated business while undercutting economics of the second one.
How would we distinguish _unrelated_ businesses? Would all media be forced to charge a subscription? It looks like an advertising business that subsidizes a journalism business.
This would be really hard to enforce. A big company could just invest in a startup, and have that startup spend money to earn market share while not being profitable.
I covered that as well - startups should be allowed to subsidize their operations only for a reasonable length of time and/or until their market share is below a certain threshold. (So Uber should be allowed to operate in a market without profits until they serve, say, less than 8% of taxi rides).
Hmmm... so under your plan would a bricks and mortar retailer be allowed to offer (say) free air conditioning or heat for customers who come in the store, or would they be required to charge for that? How about lighting? If so, how is offering free air conditioning to attract customers different from Google offering free search to attract customers?
But offering heat / AC / lights is not unrelated - it is a related feature of existing B&M businesses. As I said in a reply to your sibling comment, related businesses or legit accessories to your business should be okay (so an airline offering free luggage is fine; search engine subsidizing browser or mobile OS is not).
So Amazon should not be able to use AWS profits to subsidize retail, when other retailers don't have such cushions. Google should not be able to use Ads profits to undercut economics of browser or mobile OS. Uber/Lyft should not be allowed to capture more than 5-10% of SF/NYC taxi market unless they are profitable there.
Just to be clear - if someone can upend an entire business while being profitable, they should be allowed to flourish (eg. Netflix with rental movies, Apple with phones).
One possible exception - if there is no established business in a field and someone wants to move the technology forward there, they should be given some exception. So SpaceX can experiment with their rockets and Google can experiment with self driving cars because they won't be competing unfairly with any competitors.
Finally, I really hope EU adopts regulations along these lines. I have no hopes from US or China.