Bartlett Cleland

Ironically, even the market participants themselves have a hard time determining what the public wants next. Take, for example, the government’s antitrust case against Microsoft: a mere 10 years later the whole question of desktop dominance seems silly. Today desktop software has been supplanted by cloud-based innovation. As multiple companies aggressively compete to lure customers to their family of products, the notion of a “desktop” outside of the office rapidly becomes quaint. In its zeal to ensure competition, the federal government missed that trend.

With respect to Internet technology, competition changes too rapidly, as technology continues to evolve, collapse, and create whole new product categories. A clear understanding of who competes with whom is beyond anyone’s ability to predict, especially the government’s.

And, despite what regulators seem to think, that is not a problem. It’s simply the nature of the free-market that innovation happens quickly and unpredictably, with markets undergoing for rapid direction changes and speed alterations. In fact, the sheer pace of today’s online marketplace makes innovation and government nearly incompatible, which is why it is so difficult to develop a modern application of antitrust law.

Furthermore, competition is seriously harmed if companies fear that merely gaining an edge on one’s rivals will cause the government to intervene. Consider search functions on the Web. AOL and Yahoo! were once the giants of the search industry. The marketplace evolved rapidly, however, and today many other companies, like Google and Microsoft, enjoy market share even as those early search products have fallen in consumer satisfaction and market share. Consumers are still free to choose AOL or Yahoo! If they want to use those services, but the vast majority voluntarily choose other providers.

But even that may change as consumers begin to move away from “broad search” towards “specific search” services such as Yelp, which drives 40 percent of its traffic from its mobile app, or towards Kayak, which receives 72 percent of its volume from people who visit their Website directly, or even towards Facebook, which already has more than 1 billion queries a day.

So who, or what, is being protected by antitrust actions? Not consumers. If they don’t like something, they won’t use it. Innovation still holds the key for our greater economic future, so long as government doesn’t get in the way.

Bartlett Cleland

Bartlett D. Cleland is Policy Counsel for the Institute for Policy Innovation, a pro-economic growth, free market, pro-technology public policy think tank. IPI receives general support from Google.