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Writing in the Financial Times, economist Thomas Hazlett observes:
When Apple’s iTunes rocked our planet with its 2003 blast-off, it triggered near-instantaneous iPod adoption by a generation of audio thrill-seekers and revived the company that delivered us into the age of the personal computer.
The innovation has achieved the ultimate imprimatur of success: antitrust regulators are descending. He goes on:
The competition policy bureaucrats squeeze Apple’s achievement into this box: they sell a product that is so popular it is dominant; this market power is then exploited by excluding rivals from using its software (iTunes) to build competitive mousetraps (iPods). By untying the two products, via regulation, market rivalry will be unleashed and consumers will be better off.
The theory disregards how this smash hit was created. Bundling pods and tunes was the business model that Apple chose to execute its innovation. The consumer’s reward has been musical, lyrical and sensational. The producer’s reward is antitrust enforcement. Worse, regulators ignore what is efficient, as testified to by the most ruthless of Apple’s rivals. Microsoft has been flailing at the iTunes market since it launched, providing software for iPod competitors such as Sony and Samsung. The platform is open to independent device makers near and far – just the type of market structure that makes regulators feel warm and fuzzy. Of course, the same perverse logic is applied to Microsoft when it does something consumers like. Europe has become a real life Ayn Rand novel, in which the Anti-Dog-Eat-Dog bill is real law.
posted by James DeLong @ 9:22 AM | Antitrust, International
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