Information Technology Reference
In-Depth Information
their legal and regulatory environment. They do
so in three particular ways:
initiative (such as Amazon's Kindle
and the associated proprietary system
software and enhanced Digital Rights
Management, for example) neverthe-
less reduce competitiveness bar be-
yond what might be considered ben-
eficial competition. This may result
in social cost by what was prevented
from being created or what was creat-
ed suboptimally without there being
appropriate oversight or stimulating
competing activity.
•
At the most intense level, they exhibit a
rightout hostile attitude translating in so
called regulatory capture, a term first intro-
duced by Joseph Stigler (1971):
◦
As the CITI firms assure to grow
intensely and extensively so as to
become their own industry they
concomitantly refocus much of the
regulatory energy onto them. But the
novelty, velocity, and ingenuity of
their activities overwhelms even the
most imaginative regulators quick-
ly as was evidenced by the recent
Craig's List scandal and the associ-
ated belated reaction on the part of
authorities to curtail the immoral and
rightout illegal soliciting prostitution.
•
Of lesser nominal intensity, but neverthe-
less heightened level of aggression are the
CITI firms' efforts with regards to regula-
tory arbitrage. These represent a veritable
assault on established institutional legal
standards through either aggressive expan-
sion of the law (such as the intellectual
property protection mechanisms to patent
business methods, preventing many trans-
actions in e-commerce) or sheer sidestep-
ping of the law (such as in contractual dis-
putes, ignoring the rule of
due process
).
◦
◦
With their particular version of mar-
ket dominance they have distorted
the construct of monopolistic com-
petitions by taking it to an entirely
unprecedented level, even more ex-
treme than monopoly. At least in the
traditional model, the monopolist's
freedom to make discretionary de-
cisions was counterbalanced by the
demand decisions of consumers. The
monopolist's decision therefore was
still limited to Marginal Supply =
Marginal Revenue. With their con-
trolling position over the entire net-
work, however, the CITI firms are not
bound by this limitation. They can ul-
timately sidestep it by proposing their
own currency, such as in the famous
Amazon gift certificate cases. While
competition is certainly not the pana-
cea to many of the traditional lack of
capacity to innovation, so neutralized
regulatory efforts, concentration of
market power, and control of creative
We define regulatory arbitrage as the
exploit as yet unrealized opportuni-
ties resulting from some information-
technological asymmetry.
◦
One such example is the acceler-
ated enforcement of contractual ob-
ligations and the punitive character
of contractual terminations with so
called shrinkwrap or clickwrap con-
tracts in the interest of expedience
and efficiency. The age old rule of
due process
requiring court-based
proceedings for breach of contract is
rendered ineffective and firms self-
manage contract issues.
◦
Another example is the restrictions on
fair use by digital rights management
practices lobbied into law through
the Digital Copyright Millenium Act
Search WWH ::
Custom Search