There's news today that the Department of Justice (DOJ) is imposing fines on three leading electronics manufacturers -- LG Display Co. Ltd., Sharp Corp. and Chunghwa Picture Tubes Ltd. -- "for their roles in conspiracies to fix prices in the sale of liquid crystal display (LCD) panels." According to the DOJ's press release, of the $585 million in fines, LG will pay $400 million, the second highest criminal fine ever imposed by the DOJ's Antitrust Division.

Regardless of the merits of the DOJ's case, I have to ask: Has there ever been a worse attempt at fixing prices in the entire history of price fixing? After all, have you looked at flat-screen prices lately? They do nothing but fall, fall, fall -- fast! Here are some numbers from Steve Lohr's New York Times article about the DOJ case:

The LCD business is a $100-billion-a-year market and growing, but prices are falling relentlessly. Recently, panel prices have often been cut in half each year, a downward trajectory even steeper than in other technology markets known for steady price pressure, like those for computer chips and hard drives. In the last six months alone, the price of a 15.4-inch panel for a notebook PC has dropped to $63, from $97, and a 32-inch LCD for a television has gone to $223, from $321, according to iSuppli, a market research firm. The price-fixing conspiracy, industry analysts said, was an effort to slow the speed of price declines. "These companies were trying to get a toehold to protect profits in a very difficult market," said Richard Doherty, director of research at Envisioneering, a technology consulting firm.

But hey, I'm sure the DOJ's effort was worth it at some level. Some lucky handful of consumers will probably get a check for 65 cents once the class action dust settles on this one. In the meantime, if there is some sort of Antitrust Hall of Fame out there, I hearby nominate LG, Sharp, and Chunghwa for the "Worst Price Fixers in History" award.

Dean Takahashi wrote an exposé on the "red ring of death" problem exhibited by a large number of Microsoft's X-Box 360 game consoles. The problem was so big, Microsoft implemented a free replacement program which will cost up to $1.15 billion dollars.

Takahashi suggests the lesson to be learned is this:

the video game industry has never seen a consumer problem as bad as the "red rings of death" and the size of the $1.15 billion charge stands as one of the biggest liability glitches in consumer electronics history. How Microsoft handled the flaw may provide a lesson for all modern electronics companies; that is, if you are going to promote the hell out of something, it better work the way you say it does and you better have a strong customer support and engineering debugging team to back it up.

Amazon and eBay have their periodic outages. Sony had its problems with batteries, Intel had flawed Pentium chips that were bad at math, Nvidia took a $200 million charge to deal with graphics failures on laptops, and Apple has had its share of glitches on the iPhone. As electronics become and more complicated, it becomes a practical impossibility to test for every single flaw. But with the force of the Internet behind them, angry customers can exact a revenge that can be extremely damaging to a company's brand image.

This just shows how the market can correct itself, even when the conflict is between mere end-users and one of the biggest market players.

Good piece in FT.com today by Tom Hazlett of George Mason University. In the essay, Tom takes stock of what the Microsoft antitrust case did and did not accomplish over the past decade. After pointing out that the case fell short of the mark in terms of injecting Java-based competition into the marketplace as some had hoped, Tom notes:

But the decade has hardly been a bust for competition. It flourishes on margins unimagined by those who were professing to protect its path. Rivalry has come not from Java, but from a resurgent Apple and the open-source Linux. One is a vertically integrated firm with proprietary innovation; the other a geekdom of code-sharers seeking karma and human capital. Meanwhile, Microsoft’s Internet Explorer is coughing up market share to Mozilla, Netscape and Opera, browsers that ride comfortably on Windows.

But operating systems and browsers turned out to be a side show. The profits of the decade have been stolen by entrepreneurs who saw what was unfolding over a distant horizon. And then traversed that distance in a flash.While the DoJ was filing against Microsoft, two youngsters at Stanford were crawling the web. With a search engine that could catalogue and rank the world’s web sites, matching key words while filtering out mish mash, their start-up quickly entered the language as a verb -- a really popular verb. You can Google it.

Meanwhile, Apple has been making its own fortune under the shadow of the beast. It is crushing Microsoft in media players, finding its salvation in the holy i-trinity of Pod, Tunes and Phone. Domination of this digital consumer space was right there for the dreaming.

See BusinessWeek's take on "EU-Microsoft II: The Rematch."

This time, the [EU's] allegations concern Microsoft's core operations and, if they stick, could disrupt the company's Internet strategy and weaken its dominance of desktop software.

Is yet another round of antitrust investigations targeting Microsoft really necessary?

Think about it. Big technology and business forces are already severely squeezing Microsoft on at least three sides.

(1) Linux and open source software in general continue to gain traction, especially out on the Web, where IT experts administer the infrastructure.

(2) After decades as a 5% market-share alsoran, Apple is surging. Its iPods, iPhones, and new iMacs and MacBooks sporting Intel dual-core processors have catapulted Apple into the big leagues. No longer just for graphic designers and artists, businesspeople and average consumers are now widely adopting Macs. Apple just sold four million iPhones in 200 days, and even with the latest market plunge, the stock is up over 200% in the last 18 months.

(3) Perhaps the biggest threat to Microsoft is the transformative new paradigm of cloud computing, most conspicuously manifest in Google. When network bandwidth meets or exceeds backplane bandwidth, the computer -- the PC and its hardware and software -- gets distributed across the Net. Two decades ago Sun Microsystems said "The Network is the Computer." Many thought Sun, Java, and thin-clients would disrupt and even do-in Microsoft. It didn't happen. There wasn't enough bandwidth. But today Google and thousands of other Web companies are taking advantage of growing wired and wireless bandwidth and making Sun's mantra a reality.

These new options -- in software, hardware, and "netware" -- have mixed and muddled this fast growing market, yielding a wild array of new innovaitons, and nearly too many choices for consumers to fathom. No one knows just which computes, bits, applications, and transmits will be shuffled and stored locally on your device, on the edge by a network service provider, or by a cloudsource platform in the core. In many cases, it will be a multilayered combination of all three.

Microsoft still retains a host of advantages -- people, profits, cash, a foothold in gaming with Xbox, and an apparently terrific new Office product, which could ward off online app challengers like Google Docs.

But with Microsoft facing a serious and fascinating three-dimensional technology squeeze, do we really need to add an arbitrary fourth layer of Eurocracy?

UPDATE: The Wall Street Journal comments on "Europe v. U.S. Business."

According to this AP story, Rep. John Conyers, D-Mich., chairman of the House Judiciary Committee...

has expressed concern in a letter to Attorney General Michael B. Mukasey that the Justice Department may "rush through" an approval of Sirius Satellite Radio Inc.'s $5 billion purchase of its rival XM Satellite Radio Holdings Inc. [Conyers] also said he was "dismayed to learn" that Thomas O. Barnett, the head of the department's antitrust division, may approve the deal "over the objections of department staff." The Judiciary Committee oversees antitrust issues. Rep. Steve Cabot, an Ohio Republican, also signed the letter. The two members said they haven't yet taken a position on the transaction, but urged Mukasey to "preserve your ability to personally participate in the department's deliberations."

Only in Washington would it be considered "rushed" to take a year to review a proposal. Absurd.

Steven Pearlstein, a business columnist for The Washington Post, has an interesting editorial up today wondering whether Google is the next AT&T, IBM, Intel or Microsoft in the sense that, like those companies, Google might be headed for increased antitrust or regulatory scrutiny based on its marketplace success:

With its proposed purchase of DoubleClick, Google has followed suit in drawing the scrutiny of the competition police, both at home and in Europe. The reason is simple: Like its predecessors, Google shows every sign of pulling away from the pack in a market that naturally tends toward a single, dominant firm.

Pearlstein goes on to explain how Google's business model works in layman's terms and then points out why there is little to fear from Google's proposed acquisition of DoubleClick:

The proposed XM-Sirius merger continues to generate intense debate here in Washington. Broadcasters are aggressively pushing regulators to spike the deal, calling the proposed merger a "monopoly." As I pointed out in my earlier essay on this, I just can't buy that argument. I just don't understand how anyone can honestly believe that satellite radio, terrestrial radio and digital music are not in fierce competition for our ears.

I recently stumbled upon two good essays that make the same point. One is by my former PFF colleague Randy May, who is now the president of the Free State Foundation. In his article, "Thinking 'Siriusly' About Satellite Radio Competition," Randy argues that "the notion that satellite radio constitutes a discrete market for purposes of assessing the merger’s competitive impact seems problematical--and to defy common sense."

Tim Farrar of TMK Associates agrees. In a new paper entitled "The Competitive Landscape for Satellite Radio," Farrar argues that "the potential alternatives to satellite radio are, in essence, those technologies which provide (either live or recorded) in-vehicle audio content (i.e. talk, music, sports and information services such as news, traffic and weather)." He continues:

Telecom mergers must pass review by both the U.S. Department of Justice and the Federal Communications Commission. Several people have written about this issue of double-jeopardy (links to recent op-eds at the bottom of this entry). One part of this approach to telecom mergers, however, has received much less attention: the DOJ's analysis cannot typically provide much input into the FCC's decision.

When the DOJ challenges a merger it releases vast amounts of information regarding its analyses. When it chooses not to challenge a merger, it simply closes the case and releases very little information. With telecom mergers, the FCC then must conduct its own investigation even though the DOJ undertook its own, very similar, investigation. It is therefore possible that additional information from the DOJ on why it closed the case could help the FCC make its decision.

The net neutrality debate is often portrayed as a battle between huge ISPs and huge tech companies, and so on some level it is. You also have free-market scholars arguing against burdensome regulation (including PFF) and commons advocates arguing for regulations to ensure a "dumb pipe" that will provide no limits on end-users. But what about innocent parties trapped in the middle of this debate? Who are they, you ask? Well, how about a small broadband ISP? The net neutrality regulation proponents say they want more competition in broadband; one of those competitors posted an intriguing post on Dave Farber's Interesting People list this week. He didn't address net neutrality, but the points he raised are central to the debate.

Brett Glass of the ISP Lariat.net (serving Laramie, Wyoming) was responding to a post involving someone being kicked off of a Verizon Wireless network for using too much broadband bandwidth. He said networks are plagued by bandwidth hogs, often the result of viruses, etc., but sometimes it's caused by the actions of a single user. "The real problem," he said, "is that many consumers are unwilling to pay for the network capacity they use."

I hate to get ahead of myself with irrational exuberance, but my primary takeaway from the Aspen Summit is that there is a possible consensus that the FTC might be the appropriate institution for addressing the net neutrality issue, and broadband competition policy more generally. FTC Chairman Majoras highlighted the conference by announcing the Internet Access task force. Dick Notebaert echoed Chairman Majoras's call for the FTC to take a leadership role in the broadband market. Even my friends at Google appear inclined to consider an FTC-centric role for the net neutrality issue.
To the extent that the Summit helped forward the FTC as the rule of law regulator for the broadband marketplace, and forward the DACA approach toward regulation of the communications marketplace, I would rather audaciously submit it was a success.