A few weeks back, Realtor.com and Homestore.com revealed that they had received requests for information in a U.S. Department of Justice (DOJ) antitrust probe.
Now, the DOJ is said to be investigating “T2,” the mammoth Internet venture being formed by 30 airline companies.
In both cases, the inquiries are preliminary in nature and no wrongdoing has been alleged. What is clear, though, is that the DOJ is taking an early interest in e-commerce sites, hoping to stop unfair practices before consumers suffer — and before the remedies become unthinkable.
The Microsoft quagmire may have taught the Justice Department that it is a mistake to “wait and see.” Or, perhaps, the DOJ is stepping in earlier with respect to the online real estate and airline industries because the Internet is fundamentally changing the way businesses compete or cooperate with one another. In fact, the differences are so important that before long, they could force regulators to rethink their definitions of what is unfair.
Throughout its dogged pursuit of Microsoft, the DOJ has maintained that its main interest is to protect the rights of consumers. Never mind that the government’s proposed remedies could delay some software advances and thereby harm consumers.
Ask a hundred PC users whether Microsoft has benefited or hurt them during the past decade, and you will likely get a broad range of answers. And there are plenty of software and Internet experts supplying convincing arguments on both sides.
A New Equation
Determining exactly how a Web site run by a coalition of businesses in the same field may affect consumers could be even more daunting than unraveling the Microsoft dilemma — especially since the site is not even up and running yet.
Clearly, there is a conflict between the business model that some Internet companies need to adopt for success and the traditional concept of a competitive marketplace that has a niche for every well-run company.
Homes for Sale
In the online real estate industry, for example, the issue seems to be whether Homestore.com co-opted exclusive listings and killed fair competition. All I know is that the executives at Homestore have watched perfectly sound, well-financed e-businesses fail because they could not capture market share in the online real estate space.
Homestore has plenty of motivation for getting all the listings it can because those listings will bring customers — and eventually profits — to keep the company going.
The same goes for T2. The issue seems to be whether 30 airline carriers gathered under a single banner could muscle out online competitors such as Travelocity, Expedia and Priceline.
But in order to evaluate whether the new online ventures are unfair, the DOJ will have to determine whether becoming the dominant forces in their industries will result in the airlines or realtors increasing prices or in any other way hurting consumers.
The DOJ succeeded in the Microsoft case by convincing the court that consumers suffered, despite the best arguments by the software giant that it had actually made improvements in operating systems and browsers that would not have been possible if the company were structured differently.
Similarly, the airlines might argue that direct sales to consumers could be handled more efficiently — and cheaply — than sales handled by third-party intermediaries. In fact, their argument is even stronger than Microsoft’s claims. Airlines can use the Internet to trim processing costs and pass savings on to their customers. Why shouldn’t consumers buy tickets directly from the carriers, rather than from middlemen?
This opinion is not an argument against a vigilant Justice Department. The threat that monopolies may abuse their power is as great in cyberspace as in the real world — if not more so. But the old-economy instincts that teach regulators to assume that because competition is thin, consumers are suffering, might best be left in the old economy world.