Thread by @corbinkbarthold

1/ Discussing the House #antitrust report, @randypicker notes a striking omission -- where is IBM?!

No, not IBM the dominant modern firm . . .

promarket.org/2020/10/08/str…

2/ . . . IBM the history lesson!

The report wants rules on structural separation and self-preferencing. Had such rules been in place in the 1980s, Prof. Picker notes, they likely would have blocked IBM's entry into the personal computer market.

3/ "Had we blocked IBM from entering the personal computer market," writes Picker, "we would have lost a firm with enormous capabilities, and also the firm that seems to have been able to turn the personal computer market into a serious market."

4/ Barring IBM from selling PCs would not have benefited consumers. It might, however, have benefited rivals -- firms that "are focused on their own ability to make money" and "don’t care if new markets" are "stunted because we have blocked the best firms from competing."

5/ Here's another little story about IBM. It was the subject of a government antitrust suit that ran for more than dozen years (1969-82).

There were 860 depositions and 700 days of trial. The trial transcript was 104,400 pages. Around 17,000 exhibits entered the record.

6/ The government spent $16.8 million on the investigation alone (not the litigation). The defendants spent an estimated $50 million *per year* on the case. At one point IBM had 200 attorneys retained.

What was the upshot? . . .

7/ In 1982 the government dropped the case.

The gov's central claim was that IBM's mainframe computers were a bottleneck, and that IBM was trying to leverage that bottleneck to abuse the market for peripherals like disk drives and printers . . .

8/ The theory was that IBM was regularly changing its interface specs to shut out third-party vendors.

The government wanted a court to central plan the interfaces, forcing IBM to maintain a "stable" (i.e., stagnant) set up, so that the outside vendors could keep up.

9/ But while the litigation raged and raged, the market moved on. As Frank Easterbrook writes, the suits "lasted until it became clear that IBM mainframes were no longer a large share of any interesting market."

10/ "Of course," Easterbrook adds, "IBM's share was eroded by technological developments, not legal rules." The PC market -- with some help from IBM itself! -- overtook the mainframe market.

11/ So the lawsuit was a gargantuan waste -- unless the point was to undermine IBM's capacity to innovate.

As prof. Stephen Margolis points out, the case cost IBM a lot more than $$$. "A lot of its attention, and entrepreneurial energy, went toward fighting the case."

12/ What's more, "the company, still fearful of the watchful eye of the Justice Department, took pains to avoid the appearance of a monopoly long after it relinquished its hold on the market."

cnet.com/news/ibm-and-m…

/13 "People who worked for IBM in the '80s and early '90s said the company routinely fell victim to 'pricing death strategy' -- a reluctance to lower prices below cost, even on products that weren't selling -- to avoid what the government would call predatory pricing."

/14 "The company began a nearly decade-long financial slide. In retrospect, the antitrust case against IBM seemed laughable."

/15 Prof. Picker closes with something else that's missing from the House #antitrust report: understatement.

"I am not at all sure," he writes, "that the committee has learned the right lessons of history here."