Tim Lee

Big Business vs. Regulation

Quote of the Day:

Charles Francis Adams, Jr., then director, and soon to become president of the Union Pacific… revealed to Long on March 1 why railroads were soon [in 1884] to bring all their weight behind the commission form of regulation. Indeed, he suggested the whole course of subsequent big business attitudes toward federal regulation: “If you only get an efficient Board of Commissioners, they could work out of it whatever was necessary. No matter what sort of bill you have, everything depends upon the men who, so to speak, are inside of it, and who are to make it work. In the hands of the right men, any bill would produce the desired results.”

Three years later, Congress created the Interstate Commerce Commission, which just as Adams had hoped, gradually transformed the railroad industry into a government-run cartel, reversing the rapidly-falling rates of the pre-regulation period.

February 4, 2008 | Comments |

3 comments posted

  1. Posted by: Steve R. - 02/04/2008

    A lot of our government “regulations” are sponsored by corporations seeking to protect their business models. The Sonny Bono Copyright Term Extension Act being one of the poster-children for this aggrandizing regulatory process.

    What may be a more interesting topic to pursue (as a natural evolutionary outgrow of the railroad industry as a government-run cartel) is how corporations today seem to be acquiring (claiming) police powers normally reserved for the government.

    I have not had the opportunity undertake follow-up research on this, but the East India Company was a “Company transformed from a commercial trading venture to one that virtually ruled India as it acquired auxiliary governmental and military functions” (Wikipedia citation) (As a humorous note, many years ago on either Saturday Night Live or the Daily Report a spoof news story stated that Microsoft bought Canada.)

    Clearly, the business environment today is substantially different from that of the early 1800s. Nevertheless, we have proposals for internet filtering that would require private companies to act as “traffic cops”. We even had the unilateral claim by the NFL that it has the legal authority to “ban” the use of TVs larger than 55″ in certain places to limit public viewing. Each of these incremental power grabs by corporations creates a form of regulation that diminishes the rights of citizens. These unilateral impositions also deprive citizens of due process.

    I hope that you will have an opportunity to follow-up on the concept that use of DRM technologies and laws such as the Digital Millennium Copyright Act are surrendering government regulatory authority to corporations.

  2. Posted by: Braden - 02/05/2008

    Steve, you seem to miss Tim’s point. Companies will use regulation to increase their power (and therefore profits) vis a vis competitors and potential competitors, not to increase legal authority in the abstract governmental sense. So I don’t know what you mean by “surrender?” Thanks to our Constitution, state and federal governments have limited authority, and those not enumerated are reserved to the people (individually or collectively through corporate entities). Surely you can’t be asserting that DRM is a power traditionally reserved to governments, such that it would qualify as a police power? Or network traffic management? Or enforcing IP rights?

  3. Posted by: Steve R. - 02/05/2008

    Points well taken. I am “floating” a hypothesis that may not have much validity. So I welcome any comments.

    I don’t think I missed Tim’s point, what I was attempting to accomplish in my post was to suggest to Tim to explore the concept that the business/government “cartel” interaction may have evolved into something new. That something new being the ability of corporations to assume ersatz governmental powers. It’s really not much of a stretch, why have government regulators if you can create your own self-serving regulations.

    Tim wrote in his paper “Circumventing Competition, The Perverse Consequences Digital Millennium Copyright Act” “The DMCA is anti-competitive. It gives copyright
    holders—and the technology companies
    that distribute their content—the legal power to
    create closed technology platforms and exclude
    competitors from interoperating with them.”     (emphasis added). Tim also wrote “The DMCA also gives Apple a club that is
    never available to parties in ordinary contract
    disputes: criminal penalties. If Apple reneges
    on the terms of a contract with its customers,
    they may sue the company for monetary damages.
    But no matter how egregious Apple’s
    breach of contract may be, customers cannot
    have Apple CEO Steve Jobs thrown in jail. Yet
    Apple can ask the federal government to throw
    those who circumvent its DRM system in jail—
    even if they never engaged in piracy.”

    On the issue of “surrendering” and DRM, you are absolutely correct that I am NOT asserting that DRM is a power granted to government. What I am saying is that government has police powers. Corporations, through the use of DRM technologies, are now assuming ersatz police powers that they are not entitled to. Hence, government is “surrendering” to the corporation by failing to keep the corporations out of government.

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