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competition

The FTC’s cheering of a failed merger shows its disdain for consumers

Since when do government agencies applaud business deals that fall apart, resulting in hundreds of layoffs and loss opportunities for consumers who depend on those products?

That’s what happened earlier this month, when the Federal Trade Commission issued a press release applauding the failed $1.7 billion acquisition of the technology firm iRobot by the ecommerce giant Amazon.

The FTC, as well as Democratic Senators and competition regulators in the European Union, were hostile to the deal as they claimed it would “harm” competition for robot vacuum cleaners, one of the main consumer products made by iRobot, including its signature Roomba, one of the first products of its type. UK regulators disagreed and green-lit the deal back in June 2023.

Once the termination of the deal was announced, iRobot said it would be forced to lay off 31% of its employees – over 350 of them – and likely pause new projects. Their CEO also stepped down amid a falling stock price.

In response to the news, the FTC gloated that the transaction fell apart:

“We are pleased that Amazon and iRobot have abandoned their proposed transaction. The Commission’s probe focused on Amazon’s ability and incentive to favor its own products and disfavor rivals’, and associated effects on innovation, entry barriers, and consumer privacy. The Commission’s investigation revealed significant concerns about the transaction’s potential competitive effects. The FTC will not hesitate to take action in enforcing the antitrust laws to ensure that competition remains robust.”

–Federal Trade Commission Associate Director for Merger Analysis Nathan Soderstrom

The failure of business mergers and acquisitions aren’t uncommon. Whether it be because of stockholder pressure, regulatory concerns, or mismatch of company cultures, deals like this fall apart all the time as often as they succeed. This cycle, caused by market forces, is healthy for innovation, better allocation of capital, and more options available for consumers in the market.

However, if the failure of a business deal and then a company comes at the hands of a regulator, that’s an entirely different matter. One that should leave us asking hard questions of the officials at these agencies, and whether they’re really looking out for consumers’ best interest.

The impact of such failures on consumers should not be lost.

With the failure of this acquisition, and without new innovative products or injections of capital, the maker of one of the first robotic vacuums purchased by millions of Americans and global consumers will likely end up a shadow of its former self. One more product will disappear from physical and online retail shelves, giving consumers less choice than they had previously.

There will still be plenty of options for consumers who want a robotic vacuum in their home, but the significant blow to iRobot means fewer consumers will be able to benefit from the new products and services that could have spawned as a result of this merger.

Armed with Amazon’s vast inventory, its capital, and its supply chain, as well as the current demand for artificial intelligence products consumers can use in their homes, we can only imagine what this partnership could have produced.

This leaves us asking an important question: had Amazon been allowed to purchase iRobot, would it have put other companies at a disadvantage? Would it have squelched competition in robotic vacuum cleaners? Would it have reduced choice and options for consumers? Or would it have led to significantly more innovations and products that we could have benefited from?

Put simply, we just don’t know. But neither does the FTC nor the EU regulators who also shot this deal down. Rather than increasing competition or denying an advantage, the FTC has managed to kill off the opportunities for an American company to grow and succeed, as well as the consumers who benefit from these products.

This has been a key mantra of the FTC during this administration, seeking to put halts on mergers and acquisitions for grocery stores, technology companies, and even healthcare firms, as my colleague Kimberlee Josephson eloquently puts here. These are robust and competitive sectors that are continuing to deliver innovation to consumers, and would benefit from having more not fewer companies.

Instead of a win for consumers as the FTC claims, all we have now is a failed business deal, a company in shambles, and an uncertain path for the open market of robotic vacuums. All in the name of “protecting the consumer”.

Since when should our regulatory agencies, which act in our name, cheer and applaud when deals like this lead to layoffs, declining revenues, and fewer options for consumers? That seems like not only poor in taste, but harmful to our own economic prospects and choices as customers.

If consumers aren’t scratching their heads yet, they definitely should be.

Comments on India’s Competition (Amendment) Act, 2023

Dear Competition Commission of India,

In order to follow through on your call for stakeholder groups to provide regulatory comments on the updates to the Competition Act, we want to offer thoughts from a consumer perspective. For reference, the Consumer Choice Center is a globally consumer advocacy group championing policies that are fit for growth, promote tech innovation, and enshrine lifestyle freedom, all the while promoting consumer choice.

In reviewing The Competition (Amendment) Act of 2023, we add the following:

Proposed Section 29A

With the proposed amendment in Section 29A, we would insert the phrase “and on consumer choice” after the phrase “an appreciable adverse effect on competition,” in order to more precisely adhere to a limited competition and antitrust definition that elevates the effect to consumers and prices, rather than “competition”.

Proposed Section 18

With the proposed amendments in Section 18, we would insert “consumer choice” to come before “competition,” again demonstrating the usefulness of consumer choice and pricing comparisons as a more accurate rubric for determining competition.

Overall, we remain positive to the Competition Commission’s updated guidelines on mergers and general antitrust law. As India’s digital economy grows and continues to offer unique goods and services to Indian consumers, we believe all Central Government agencies should also adhere to a competition policy that upholds consumer choice and regulatory barriers that may be impeding that, and perhaps leading to higher prices or reduced competition. Impact to consumers is key.

Defining the adequate level of competition is an impossible task for any government agency or department, and should best be left to consumers who will better determine market size and performance. Where regulatory barriers exist, or where fraud and deception exist, should be a more targeted focus for competition regulators than only concerns for competition — domestic or otherwise.

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Some Bright Spots In President Biden’s Executive Order on Competition

Earlier this month, as Americans finished up the 4-day work week to enjoy midsummer weather, President Biden unveiled an executive order on promoting competition in our economy.

While it contains several aspects that could negatively impact consumers, there are also some bright spots that could help spark new innovations, remove red tape, and help reduce prices.

For one, Biden’s executive order creates a new White House Competition Council, made up of various department and agency heads. The council will address “overconcentration, monopolization, and unfair competition,” hoping to empower consumers and better police powerful industries.

It aims to reduce barriers to entry for new market competitors. This will be a key forum for changing laws, regulations, and taxes that all too often restrict competition and consumer choice. That is a positive step.

Also laudable are rules on hospital price transparency, easing occupational licensing, and the prospect of open banking. But removing harmful subsidies that raise prices for consumers, including for farmers, airlines, and Amtrak, would help bolster competition even more.

Unfortunately, too much of Biden’s focus is on regulating business rather than freeing up outdated rules.

One example is the focus on antitrust provisions that seek to break up monopolies and redefine 21st-century antitrust actions. 

This is commendable, but only if agencies uphold the legal principle of the consumer welfare standard, ensuring that antitrust focuses on how consumers, not markets, are impacted. Ideological trustbusting could end up harming consumers and small businesses that rely on those companies.

Lately, lawsuits against various tech giants have been rejected because states and agencies have not been able to prove that certain mergers and acquisitions — such as Facebook’s 2011 purchase of Instagram, once deemed as laughable — were monopolistic.

Rather than trying to break up companies, the administration should focus on areas where regulations are propping up companies and bad regulations at the expense of you and me.

Large airlines like American Airlines have received bailouts for decades, while low-budget airlines without sway in Washington are essentially regulated out of contention. Allowing bankruptcies and consolidation would actually help improve services offered to passengers while saving taxpayers money.

Scrapping fossil fuel subsidies, high permit fees for electric vehicles, and repealing cabotage laws such as the Jones Act to allow foreign ships and airlines to serve American ports and airports, could also help reduce prices and improve consumer choice.

Though Biden is an Amtrak fan, his administration should welcome competition. That would mean allowing private railway firms to use existing rail lines, and scrapping the planned $80 billion in subsidies in the massive infrastructure bill currently sitting in Congress. In 50 years of service, the quasi-public Amtrak has failed to turn a profit at least once. Getting out of the way so private competitors could compete would be a huge boon to consumers and innovators.

For the alcohol market, Biden is on track. He outlines “unnecessary trade practice regulations” that artificially raise the prices of our favorite beers, wines, and spirits. But state monopolies on the sale of spirits, as well as uneven taxation between classes of alcohol, are classic cases where consumers would benefit from a more competitive market.

Promoting the interests of consumers, especially those who benefit from market innovations and smart policy, is a bold and needed change from our federal government. If they are to succeed, however, it will require wholesale retooling of outdated rules and regulations, not just increased scrutiny on big business.

Originally published here.

The Need for Competition in India’s Telecom Industry

Explaining the Indian Telecommunication industry and the complexity behind competition existence?

The Indian telecommunication industry has experienced exponential growth and development in the past two decades. Liberalization and regulatory reforms allowed the sector to accept investments from both domestic and foreign investors.

The non-restrictive policy of the government in the 1990s allowed the inflow of cash for the sector to flourish. Private players were allowed in the market after a process of establishment of norms and regulations vital for the growth of the sector.

This was done as a part of the Liberalisation-Privatisation-Globalisation policies that the government undertook to overcome the fiscal crisis and balance of payment issues in 1991. The institution of the Telecom Regulatory Authority of India was established by the government to reduce its interference in deciding the tariffs and policies.

Towards the 20th century, the government was more inclined toward reforms and liberalism. This brought more private players and foreign investors to the Indian market. Furthermore, the license fees were greatly reduced that allowed every middle-class family in India to afford a cellphone, and thereby input more surplus to the entire telecom sector. In the Indian telecom sector during the late 90s and early 20s,  the liberal policies became paramount, I would quote this as what Prof Eli. M. Noam referred to as, “the centrality of telecommunication infrastructure is a country’s economic and social life.” 

Telecom performance reports showed that about 10-14 mobile providers were existing in the country during the time and at least 5-6 providers were providing services in each of the connected areas. The competitive forces exerted by these players aided the adoption of wireless services and also helped reduce tariffs throughout. 

Despite the major policy initiatives of the past, the telecom sector is now on the verge of collapse. After years of growth, the sector is witnessing a fall due to the commercial operation of Reliance Jio. The change in tariff rates and reduction of data charges by Reliance Jio changed the economics of many telecom players. This facilitated their exit from the telecom sector.

The declining user base and increasing adjusted gross revenue made it difficult for healthy competition to equivalently exist among players. Low revenues, high taxation policies, and huge investments on spectrum and infrastructure have been causing dire trouble to the industry thereby impeding competition in the Indian telecom market.

How can one bring back competition in a scenario of restrictions and the existence of a soon-to-be-monopolized telecom sector? 

The companies are being pushed by the regulatory bodies to align the prices in line with the costs of production, and this makes it difficult for competition to exist. In a digital India, the telecom sector needs survival, and for this, we need three players who are not on the brink of a dire financial crisis. The sector needs decentralization of purchasing and decision power to regulate more efficiently. The profit margins are decreasing and telcos need to level up the information and communications information to adapt to a digital transformed way. This can be done by creating a strong cross-functional interface.

IT and connectivity should be updated and should be reliant on technological innovations and customer expectations. Establishing policies to abolish the license fee based on adjusted gross revenue needs to be looked into. The adoption of regulatory disclosures and transparent norms to address the asymmetry in the telecom industry needs to be established. One can note that effective competition can be incorporated through three concepts: “Allocative efficiency, technical efficiency, and dynamic efficiency.” 

To increase profits, the market power exercised by the company should not be restricted. This would help in efficiently allocating the resources and contributing to the economy invariance to the price adjustments to the consumer needs. There needs to be an initiation of equilibrium between promoting competition and checking anti-competitive practices. Being a capital intensive sector, competition needs to be incited by operators who would lower the costs through production efficiency and keep up with the latest economic models about digital trends.

There needs to be the symmetry of information and proper economic and policy legislations for competition impact assessment to easily get processed. Bringing in VNOs (virtual network operators) to buy bulk capacity from telcos for resale to end-users could be a vital point for expanding the market for existing services. Although there are high levies and restrictions for VNOs, easing those would prove to be highly beneficial for the sector to thrive.

Adopting the high-frequency spectrum by simplified access of the E band and V band spectrum will essentially support high-speed data transfer and thus promote competition between players and technologies. This would be done by de-regulation of the utilization of these spectrums. The foremost thing to be done is to lessen the regulatory burden for expanding consumer choices rather than focusing on the government’s revenue for vitalizing the sector’s growth.

By receiving direct support through cheap capital, land, support would essentially make India globally competitive.  Thus, there needs to be a mechanism for the competition authorities and sectoral regulators to be existing together. For competition to be easily facilitated, the market needs to be free from any sort of unsatisfactory product quality. No players in the market should be suppressing the entry of new products or stifling innovation. The competition needs to stay out of any malicious interferences, predatory activities, or fraud against the customers or suppliers.

We need to have a transparent regulation that would avoid excessive entry resulting in operators not achieving the economies of scale. Excessive price competition in revenue generation needs to be avoided for the inevitable result in the inadequacy for procuring investments and innovation otherwise.

It has been argued that for the sake of consumer benefits, every telecom industry should at least have five “reasonably comparable rivals”, the numbers can vary slightly depending on the situation, and as of now India only has two players in the lead, with the second player close to financial risk.

Moreover, no firms have to hold a dominant position (this would mean a market share of 40% or more should not likely exist). The main purpose of policies and telecom regulations need to impact the market outcomes in ways that will move the prices, output, provide better service quality, service innovation, and healthy competition. 

As Alfred Kahn once explained, “It is sometimes tempting to try to change outcomes to something more comfortable politically than the results of full competition.”

This is important to note because telecom regulators in India have attempted to constrain many service providers. The attempts to have the competitive outcomes biased by favouring the firms induce lower efficiency and harm consumers in the end. The government needs to take strides to maintain a kind of normalcy that existed during the liberal times. 

The telecommunication industry needs to tread with caution, the government needs to imbibe liberal policies and promote competition. Failing to do so, the consumers will end up getting distressed when the thin line between crony capitalism and genuine relief ceases to exist. By doing so, the plans to achieve the $ 1 trillion economies for digital India seem a far-fetched idea for the time being knowing that each sector has been facing regulatory issues.

The decision lies with the policymakers and the regulators to know when intervention in the telecom sector is appropriate and how the intervention can benefit customers and their choices. 

Articles Referred:

Uppal, Mahesh. “In defense of free telecom markets. Or, how to make Indian telecom competitive while offering cheap services.” Times of India, 2020,

Kathuria, Rajat. Strengthening competition in telecom is key to realising India’s digital ambitions. The Indian Express. Accessed 2020.

Prasad, R.U.S. “The Impact of Policy and Regulatory Decisions on Telecom Growth in India.” Stanford University: Center for International Development, 2008.

Parsheera, Smriti. “Challenges of Competition and Regulation in the Telecom Sector.” Economic and political weekly, 2018.

Is this North Carolina Congressman hawking Bitcoin?

Sometime last week, Neeraj K. Agrawal, the communications director for the DC-based cryptocurrency think tank Coin Center, tweeted a link to an empty website: whitehouse.gov/bitcoin.pdf.

The idea he was trying to convey, in Internet speak, is that hopefully, one day we can look forward to the day when the Bitcoin whitepaper would be hosted on the White House’s website.

That would signal that the executive branch has endorsed elements of the cryptocurrency, and hosted the fundamental founding document to build confidence in the government using Bitcoin as a unit of currency.

That’s futuristic, crypto-fueled optimism that was nothing but a cheeky tweet in that moment.

Taking that to the next level, tech investor and entrepreneur Balaji Srinivasan put forward a challenge: which forward-thinking country or US state would host the Bitcoin white paper on their main domain?

Enter North Carolina Congressman Patrick McHenry.

U.S. Rep. Patrick McHenry (R-NC)

Hailing from Gastonia, a town I once worked in as a newspaper reporter, McHenry represents the 10th district in the northwestern part of the state, home to NASCAR drivers, the mighty Catawba River, and stretching to the stunning Blue Ridge Mountains.

He once represented part of Gaston County in the State House and was later elected to Congress as one of the youngest congressmen in 2004.

As the ranking member on the Financial Services Committee, McHenry has often been involved in regulatory debates and discussions on cryptocurrencies and financial projects, including Facebook’s Libra project.

At least in previous statements and letters, McHenry usually joined hands with his Democratic colleagues to oppose any competition to the US dollar, as we’ve noted in past press releases.

However, it seems McHenry is changing his tune on the future of innovation in the cryptocurrency space.

On Wednesday, he took on the challenge originally posted by Agrawal and followed by Srinivasan: he posted the Bitcoin whitepaper to his own website.

Not only that, but he stated that “policymakers should be on the side of innovation and ingenuity, which are vital to American competitiveness,” and urged his colleagues to join him.

Is this North Carolina Republican Congressman hawking Bitcoin? It seems the answer is yes.

Looking into it more, he’s grown more bullish on Bitcoin and tech-related financial services in the last two years and even clarified his position on why projects like Libra do not represent a true cryptocurrency.

Appearing on series of podcasts, including one with fellow Republican Congressman Dan Crenshaw, McHenry has been more vocal on why Bitcoin’s technology is like nothing before, and in fact, represents the future of financial and digital services.

And top it off — he posted the Bitcoin whitepaper on the congressional web server!

If McHenry’s statements are true, and if he is using his position as a Financial Services committee member to advance those ideas, I think we may have a consumer champion congressman to follow in the next two years.

As a fellow North Carolinian and advocate for consumer-friendly policies, I have been critical toward McHenry’s various positions in the past, specifically on legitimizing financial services for cannabis-related companies.

I believe the exact tagline I used was “The North Carolina Republican singlehandedly blocking progress on cannabis banking“.

Obviously, McHenry’s ideas and policies are more nuanced and deserve a closer look. I look forward to him expounding on that much more. So while we may not agree on cannabis banking, there still could be much to agree on with the congressman.

If more politicians in DC and various statehouses approached this issue like McHenry, perhaps our governments would be better vehicles for fostering innovation and helping grow consumer choice.

Kudos to you, Rep. McHenry.

Yaël Ossowski is deputy director of the Consumer Choice Center

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