Against Monopoly

defending the right to innovate

Against Monopoly

Monopoly corrupts. Absolute monopoly corrupts absolutely.

Copyright Notice: We don't think much of copyright, so you can do what you want with the content on this blog. Of course we are hungry for publicity, so we would be pleased if you avoided plagiarism and gave us credit for what we have written. We encourage you not to impose copyright restrictions on your "derivative" works, but we won't try to stop you. For the legally or statist minded, you can consider yourself subject to a Creative Commons Attribution License.

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Ambulance Chasing Lawyers Of The IP World

How else am I to describe the company called 'Continental Enterprises', which bills itself in its overview as "an intellectual property consulting firm that takes a novel and aggressive approach to brand protection and infringement issues." ?

They state that their "number one goal is to ensure that those who attempt to steal from our clients are left to wonder when, where and how we will strike next."

Look out folks - The Continental Enterprise outfit doesn't just know how to litigate in order to preserve an overly broad, maximalist IP scheme, but they are also apparently ninja-like experts in "asymmetrical warfare".

Chest-puffing from lawyers is always a sad spectacle, but let's examine their fine work in action, shall we?

Here is an example of them using subtle threats against a beverage review site for posting a picture of a product they were reviewing.

I'm sure the people at Continental Enterprises must be proud of their work. And I'm sure Monster Energy drink must feel that its money well spent.

Monstrous indeed.

[Hat-tip: Overlawyered.com/]

The crisis has been wasted...

The power of big business was once again illustrated in several stories this week. Two stood out. The first reported the ability of the three big banks to talk to the Secretary of Treasury in the midst of the financial crisis link here. Another was their ability to ignore public opinion and do little or nothing when pressed by the Congress to modify mortgages to help out beleaguered home owners avoid foreclosure or to meliorate the financial crisis. One respondent was Congresswoman Marcy Kaptur (D-OH) and the other was economist Simon Johnson link here. The bottom line of that story was that the moment to reform our financial system had past and now would not happen. The banks were making money and were happy with things as they are. To paraphrase the words of Rahm Emanuel, the good, the crisis had been wasted.

Facilities fees: "That'll be $20 for the haircut and $10 for the chair"

Sandra G. Boodman of Kaiser Health News as reported in the Washington Post describes the imposition of additional medical charges for what is vaguely described as facilities fees link here. It looks like fees on anything for which health care providers can find a justification. The examples are large and growing.

The breakthrough occurred some years back when the providers got medicare rules changed to allow it. Boodman writes, "patients increasingly are being charged the fees, the result of an obscure change in Medicare rules that occurred nearly a decade ago. Called "provider-based billing," it allows hospitals that own physician practices and outpatient clinics that meet certain federal requirements to bill separately for the facility as well as for physician services. Because hospitals that bill Medicare beneficiaries this way must do so for all other patients, facility fees affect patients of all ages. Doctors' offices owned by physicians and freestanding clinics are not permitted to charge them."

Boodman has lots of examples, but I haven't been able yet to find out how this got lobbied through the bureaucracy.

On the capture of the medical "business" by the medical "interests," you can see a short video version on Bill Moyer's Journal here Or read Maggie Mahar'S book Money-Driven Medicine: The Real Reason Health Care Costs So Much

The Logical Next Step

How did we get here:

By way of explanation, the Supremes long ago extended individual rights to corporations. Attempts to limit those rights have been rejected as unconstitutional--as now seems likely in their right to spend in elections. Is their right to vote next?

Medical Care we can't afford?

N. GREGORY MANKIW writes on health care reform, asking the question can we afford it link here. He builds his case on a hypothetical pill that costs $150,000 a year. He doesn't really answer the question because he doesn't say how many people will require that pill. But he strongly implies that clearly we can't afford it. So we ration care. A short think piece in the Sunday paper doesn't allow him to expand and he asks a valid question until you start thinking about it.

If he had, he would need to look at why we have insurance. So long as a finite proportion of the covered require the pill and other diseases don't cost comparably high amounts, we can afford it because the premiums are sufficient. That is the point of insurance.

He also kisses off the gains from removing waste in the health system. They are conjectural at this point, but there is too much evidence. Why does that pill cost $150,000 a year? One must doubt it is because it contains a rare chemical or that its marginal cost of production is so high. Rather one comes back to monopolies, like those on patents on pills and medical devices. Then we have the issues of waste that occur because of the irrational organization of medical care. Hospitals with machines that are grossly underused because the hospital has to have them in order to advertise end up creating enormous excess capacity. Doctor services are often required when nurses or practitioners could do it at much less cost. Failure of different specialists to compare notes on the particulars of a case and find the best way forward add enormous amounts to the bill.

There is a lot more. One place to see it spelled out is a book, Money Driven Medicine; The Real Reason Health Care Costs So Much by Maggie Mahar. Have a look.

Copyright and the Controversy Over the Google Book Scan Project

James Boyle, author of ‘The Public Domain: Enclosing the Commons of the Mind', weighs in on the matter at this link here.

Ending monopolies key to health care reform

The Economist asks whether health care reform in America could stop innovation in pharmaceuticals link here. The danger posited would be from price controls. It suggests no, based on a study that finds that price controls have actually promoted European drug innovation and that it has more innovation than the US and is drawing farther ahead of us.

This challenges the Phrma contention that US price controls would kill innovation link here. Its study identified the nationality of new drugs based on the head office of the developing company. But The Economist points out that companies have research facilities and markets in several countries so that the location of the head office of the innovating company should not matter.

The article also notes that Britain and Germany are exploring reimbursing companies based on drugs' effectiveness but doesn't address the issue of patents as a contributor to the cost of health care, instead suggesting price controls based on effectiveness would be a strong incentive for innovation and might help control the enormous increases in the cost of health care. That assumes the government agency administering the regulation isn't captured by the industry.

It is worth asking how the contemplated reforms in health care are going to control health spending and then to consider the role of monopoly, based on patents for drugs and on other measures, many under state or local control. The certification and pay scales of medical specialties which have limited the supply of primary care doctors as contrasted with specialists and the permissions to establish hospitals and other medical facilities comes to mind. Can anyone think of other monopolies prevalent in medicine?

For example, one was noted by Dean Baker who cites NPR's Planet Money piece on A Medical Mystery: Why Health Care Is So Expensive which focuses on the cost of medical devices like stents and instruments used in cardiac and blood vessel operations link here and transcript here. Baker then adds that NPR failed to mention the role of patents in making the cost of medical devices exorbitant.

It seems to me one of the most effective criticisms of our monopolistic system of health care and intellectual property is that until that system is reformed, we will not be able to control escalating health costs. That should be part of the current debate.

Too Big to Fail

Simon Johnson has an important post up at the Baseline Scenario suggesting that Too Big To Fail financial institutions are not only too big, but counter-productive to the American economy. He supports this view by pointing to the amount of unproductive rent-seeking behavior these institutions engage in to ensure their own continued profitability. (This, of course, is precisely the problem that David and Michele have pointed up in their book.)

From Johnson's post:

Finance is rent-seeking. The sector has devoted great resources to tilting all playing fields in its direction. Consumers are taken advantage of; consumer protection is vehemently opposed. And great risks are taken, with the downside handed off to the government (and the consumers again, as taxpayers). This downside protection allows an overexpansion of debt-financed finance - reaching the preposterous levels seen in mid-2008 and now re-emerging.

Finance in its modern American form is not productive. It is not conducive to further sustained economic growth. The GDP accruing from these activities is illusory - most of finance is simply a tax on what is done by more productive members of society and a diversion of talent away from genuinely productivity-enhancing activities.

The rise of China does not necessarily imply slowdown or demise for the United States. But if they specialize in making things and we specialize in finance, they will eat our lunch.

Microsoft vs Google; Squaring off as Justice watches

Fred Vogelstein writes in Wired that Google is drawing increasing attention from anti-trusters link here. He notes that it has gotten too big to ignore and perhaps to tolerate but continues to provide excellent software and services, presenting the government with a dilemma. Break it up or regulate. Definitely worth reading.

I do not think we can reach a reasonable conclusion on a single all-or-nothing position. In many respects both Microsoft and Google are natural monopolies, given the advantages to consumers of having a dominant standard and of being first to market.

In operating systems, Windows is what most people used first when they started computing. Most of us are familiar with it and it works quite well. Apple's operating system is not really relevant, an expensive niche product without the large number of add-ons, many free. Google has now offered an alternative in the form of cloud computing and the Chrome OS. This follows up on its relationship with Mozilla and the Firefox browser and opens an alternative to computer makers, a market for cheap simple computers like the netbook whose sales have been surprisingly good. (HP announced today that its Compaq division will soon offer a basic full size laptop for $298.) Chrome will prosper or not depending on the software that becomes available. By giving the software away, Google really puts pressure on Microsoft. Whether Microsoft can come up with an equally good, fast, down-sized modification of Windows and free software will determine its position in this market. Even if it does, the home computer market will become a duopoly but the advantages of being the standard OS are very high. I tend to go with Google.

The second big competitive area is search. Google's has come to dominate, its quality having stayed consistently ahead of the competition. Microsoft is trying, as well as a number of other search services. Microsoft has worked out a 10-year partnership with Yahoo on search, but for the time being, Google effectively has a monopoly based on quality, tempered by the fact that innovative competition continues to put pressure on Google.

Book scanning is unique in that Google is all by itself for now, although others would like to enter the business. The proposed settlement with copyright holders is problematic. It looks as if others will have difficulty entering, if they have to negotiate licensing arrangements with the copyright holders or buy into a deal similar to what Google has worked out. In other words, the Google deal will be a monopoly with no visible alternative, unless the court forces a major change in terms.

A business we don't normally think of as separate is the server farms that Google has developed. They make possible much of what Google does--indeed, it becomes the cloud in cloud computing. Its technology appears to be leading-edge. When it owns the infrastructure, it is tough to compete with.

Vogelstein begins his article, alluding to the speech of Christine Varney several years ago in which she says that "For me, Microsoft is so last century.... They are not the problem. I think we are going to continually see a problem, potentially, with Google." Varney has now been appointed head of the Justice Department's antitrust division, making her the government's most powerful anti-monopoly prosecutor and in a position to do something about Google. Google will need to watch its behavior to avoid retribution. Watchful waiting may not be a bad solution in a market with two large and highly competitive players, as well as a lot of small ones. It still seems to be producing a rapid stream of innovation.

Pogue on Cellphone abuses

There's a great article in the NYT's Business section today by David Pogue on the various monopolistic practices of the cell phone industry. These range from the hidden subsidization of phone purchases, to double billing practices, to the fact that Verizon typically rakes in over $800 million each year by making customers waste 15 seconds listening to voice mail recording or retrieval instructions!

Well worth reading.

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