Comment by gnicholas
2 years ago
You don’t need to be a lawyer to see that there’s a duopoly, but duopolies aren’t illegal. The DOJ has to prove illegal conduct, which is harder than just showing a lack of widespread competition.
2 years ago
You don’t need to be a lawyer to see that there’s a duopoly, but duopolies aren’t illegal. The DOJ has to prove illegal conduct, which is harder than just showing a lack of widespread competition.
> but duopolies aren’t illegal
They should be.
So if there are 3 competitors and one drops out, the other two are now guilty of something? In all my years studying economics and law, I never heard anyone suggest anything remotely this draconian.
Considering in the Google antitrust case it came out that the companies were working hand in glove for years, what were have is a duopoly where the participants collude. This is also the case in broadband where ISPs carved up neighborhoods between themselves to reduce competition.
So sure, duopoly of real competitors is one thing, but that’s rarely the case once players realize they can set prices and divide the spoils.
3 replies →
> So if there are 3 competitors and one drops out, the other two are now guilty of something?
Well, Microsoft eventually got all but forced to port Office and, for a time, Internet Explorer to macOS to evade getting sanctioned by the EU.
In a similar vein, if the market is not healthy any more, the duopolists may be forced by regulatory authorities to make life easier for potential startup competitors: open up file format specifications, port popular applications with network effects (iMessage, Facetime, Find My in the case of Apple) to other platforms or open up specifications to allow others access/federation.
3 replies →
So if there are 2 competitors and one drops out, then it's hardcore illegal, but otherwise it's a-okay?
6 replies →
https://www.justice.gov/atr/herfindahl-hirschman-index
Herfindahl-Hirschman Index
The term “HHI” means the Herfindahl–Hirschman Index, a commonly accepted measure of market concentration. The HHI is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For example, for a market consisting of four firms with shares of 30, 30, 20, and 20 percent, the HHI is 2,600 (302 + 302 + 202 + 202 = 2,600).
The HHI takes into account the relative size distribution of the firms in a market. It approaches zero when a market is occupied by a large number of firms of relatively equal size and reaches its maximum of 10,000 points when a market is controlled by a single firm. The HHI increases both as the number of firms in the market decreases and as the disparity in size between those firms increases.
The agencies generally consider markets in which the HHI is between 1,000 and 1,800 points to be moderately concentrated, and consider markets in which the HHI is in excess of 1,800 points to be highly concentrated. See U.S. Department of Justice & FTC, Merger Guidelines § 2.1 (2023). Transactions that increase the HHI by more than 100 points in highly concentrated markets are presumed likely to enhance market power under the Horizontal Merger Guidelines issued by the Department of Justice and the Federal Trade Commission. See id.