Project Treble [LWN.net]

Project Treble

Posted Oct 7, 2018 23:21 UTC (Sun) by ras (subscriber, #33059)
In reply to: Project Treble by giraffedata
Parent article: Project Treble

There are some well known counter examples:

https://en.wikipedia.org/wiki/Phoebus_cartel

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Project Treble - planned obsolescence

Posted Oct 12, 2018 15:40 UTC (Fri) by giraffedata (guest, #1954) [Link] (1 responses)

Thanks for pointing out the Phoebus cartel. This is a cartel whose members, from 1925 to as late as 1939 , deliberately limited the lifetime of light bulbs, to increase member profits.

This is not a counterexample to my claim that deliberately limiting lifetime does not increase profits because I qualified it with "in a competitive market," which was specifically meant to exclude cartels. (A cartel is an organization whose members agree not to compete with each other).

That leaves open the question of whether my claim is relevant, if cartels exist. I read the Wikipedia article on Phoebus and it doesn't make it clear how US antitrust laws didn't stop Phoebus. Those laws are at least one reason there is no cartel of phone manufacturers, thus this example cannot be extended to phone manufacturers deliberately limiting the lifetime of phones.

Interesting side note about free market economics: I had an econ instructor once who was one of the fiercest supporters of free markets I've ever known, and he claimed even antitrust laws are not necessary because as long as the government doesn't actually enforce anticompetition agreements, they'll fall apart on their own because of the power of greed. The incentive to break a cartel, not to mention of its own members to cheat, is simply too great. Well, Phoebus seems to be an example. In 1929, a competitor to the cartel had already formed and was grabbing business and profits from it.

Project Treble - planned obsolescence

Posted Oct 12, 2018 22:42 UTC (Fri) by ras (subscriber, #33059) [Link]

> I had an econ instructor once who was one of the fiercest supporters of free markets I've ever known, and he claimed even antitrust laws are not necessary because as long as the government doesn't actually enforce anticompetition agreements, they'll fall apart on their own because of the power of greed.

I hope for his sake he is now wiser. Cartels and monopolies aren't a problem where the market naturally favours multiple suppliers. For example in Australia we've had an effective duopoly in supermarkets for literally decades. It's never been a huge problem because in that instance your econ instructor is right - they have always been highly competitive. That's because it is really easy to start a new corner store, or for that matter it's not too expensive for international entrants to start a new supermarket chain, so there are always new competitors entering the market.

But when the markets tends toward natural monopoly you will get one unless the government intervenes. That happened in both the US and Australia with the telephone systems. Once there is a telephone line in the ground you didn't need a second one. So once a random event gives some firm access to slightly cheaper capital they can purchase existing network without fear of competition. This makes them financially stronger so then they get access to more capital, and the thing snow balls into a full blown monopoly. Any time there is a fixed resource that can be captured to prevent new competitors from entering, the drive to monopoly is very strong because it allows rent collection.

One tactic to prevent government regulation of a monopoly is to hide in plain sight. In computer security we call the a similar tactic social engineering. In the case of a monopoly, the social engineering trick is don't do the final round of amalgamations - instead you replace it with a gentleman's agreement behind closed doors that allows the extraction of rent. In other words, you form a cartel and insist because there are multiple firms there must be competition.

This won't work in the long term if the market doesn't tend towards monopoly. The Phoebus cartel started when the market was tending towards monopoly patents over light bulbs where a fixed resource that could be captured. When the patents ended the cartel collapsed naturally.