I wouldn't be surprised if that's the last we hear of this story; very unlikely Arrington will name drop in the future. However, if this story is true, hopefully it scares off these Angels from forming an investment 'mafia.'
So A Blogger Walks Into A Bar…
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#42In what sense do antitrust laws apply to investors? Why is it unlawful for investors to band together to get better terms for themselves? Wouldn't it be perfectly legal for these people to sit around a table an agree to merge and start a fund? If that's the case, how could it be unlawful for them to work on a joint venture? Just because I don't like the JV doesn't make it unlawful!
It sounds like price fixing, even though they are buying and not selling. Check out Wikipedia for a good write-up: "Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand. The group of market makers involved…
Would it still be price fixing if all of them got up from the table and announced the formation of Super Angel Capital Partners? I can't see how; there's tons of VC firms already. If that's not unlawful, how is a joint venture among them unlawful?
Are we just stuck on the fact that they're "angel investors"? The law doesn't recognize any such sector of the venture capital business.
Re: So A Blogger Walks Into A Bar…
#43There's only half the story here because Arrington isn't naming names. It was a meeting of a group of people in a semi-public place, I don't see why he hasn't named who was there: "So, I went into the restaurant to find Dave, Ron, Jeff, Mike, Josh, Chris, ..." (I'm just naming, um, random first names here folks for the purpose of illustration!) He's clearly running a power play around the identities...
Because Dave, Ron, Jeff, Mike, Josh and Chris would have a defamation suit filed by end-of-day. Clearly MA reached out to the attendees.. I wonder what the other 8 or 9 had to say. That's the other half of the story.
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#44[deleted]
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#45Earlier quoted context omitted.
How? What market power are they exploiting? There's no conceivable monopsony for "shares of all startups".
They are a group of people supposedly conspiring to generate the worst possible terms for the people they are providing money to, while trying to force out or marginalize competition. IANAL though - even if not illegal, it's still pretty stinky, and a big part of me hopes it's not illegal. If it's not illegal, I hope they're outed and shamed if this is true. If it is illegal, it give the government reason to step in…
Or, this is a group of people collaborating to generate the best possible outcome for their own business. Every joint venture can be framed in anticompetitive terms. But in this case, what possible undue market influence can they have? The market will find other people to take these deals.
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#46In what sense do antitrust laws apply to investors? Why is it unlawful for investors to band together to get better terms for themselves? Wouldn't it be perfectly legal for these people to sit around a table an agree to merge and start a fund? If that's the case, how could it be unlawful for them to work on a joint venture? Just because I don't like the JV doesn't make it unlawful!
Buying stock is also just investing. So is providing a loan. That doesn't mean those activities aren't subject to laws and regulations.
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#47In what sense do antitrust laws apply to investors? Why is it unlawful for investors to band together to get better terms for themselves? Wouldn't it be perfectly legal for these people to sit around a table an agree to merge and start a fund? If that's the case, how could it be unlawful for them to work on a joint venture? Just because I don't like the JV doesn't make it unlawful!
IANAL, but as I understand it...
Any time individuals or businesses get together to collaborate on a strategy that restrains trade or supply, thus artificially skewing prices, this runs afoul of antitrust law.
Collusion between angels to keep valuations low and prevent newcomers from participating sounds like a textbook case. In this case, they're artificially inflating their cost of capital by reducing the overall valuations of the businesses they fund. They artificially reduce the supply of capital by conspiring to keep out new participants.
Similarly, the Department of Justice is looking into Valley hiring, since companies have a gentlemen's agreement not to poach from one another:
http://www.forbes.com/feeds/ap/2010/09/17/technology-special...
In this case, the argument would go that the companies are artificially constraining the supply of paying work for qualified applicants, while reducing the competitive landscape that would drive up their salaries.
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#48Well, at least one investor seems to have accidentally included himself in the mess (from TC's comments) http://twitter.com/speechu/status/25083299594
I just put "forming a cartel" on my list of things not to tweet.
Re: So A Blogger Walks Into A Bar…
#49In what sense do antitrust laws apply to investors? Why is it unlawful for investors to band together to get better terms for themselves? Wouldn't it be perfectly legal for these people to sit around a table an agree to merge and start a fund? If that's the case, how could it be unlawful for them to work on a joint venture? Just because I don't like the JV doesn't make it unlawful!
A joint venture (or a legal entity aka as a company) operates under very different rules than parties working together, probably without a contract. I don't know how the antitrust laws apply, not even if what they are doing collude with any law at all, despite preventing healthy competition, but your questions come from the wrong premises.
As we just saw with TechCrunch v FusionGarage, the paper contract has little to do with whether something is or isn't a joint venture.
Broaden the word "antitrust" to "laws against all contracts in restraint of trade", and re-ask the question to yourself. These people are investors. Investors are allowed to work together, aren't they?
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#50There's a quote I can't quite remember. Goes something like: "When merchants meet to discuss business, the public is rarely the beneficiary".
Was it the Adam Smith quote "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public."
Why do I know that off the top of my head? Civ IV... who says games can't be educational?