What the author is proposing is that regulation is no longer based on economics and economic power, but on a vague definition of monopoly, and people are absurdly trigger-happy when calling something a monopoly.
The reason why anti-trust is based on precise economic definitions is that it leaves as little room as possible for the government to favor friendly players. When you need to prove harm to consumers, the bar is high, as it should be.
Otherwise, any government in power will simply abuse their own monopoly on regulation to favor and transfer wealth from society to friends.
The classic example is: Coca-Cola has a 95% market share of the cola market in some countries. Does it mean it has a monopoly? No.
If it had 100% of the cola market, would it have a monopoly? No.
Because the cola market doesn't exist in isolation. Colas compete with all other sodas, with water, juices, etc. for a share of wallet and a share of stomach.
Yeah, I'm sure that allowing companies to merge right until the point where they make consumer's lives a living hell is great for the society and the economy.
>The classic example is: Coca-Cola has a 95% market share of the cola market in some countries. Does it mean it has a monopoly? No.
There is no such thing as "cola market". There are soft-drinks, and there are tons of them in every store. (Although, most people don't realize how many of those brands are owned by Coke or Pepsi, and what kind of shit they're doing to buy out and suppress the competition.)
But more importantly, soft drinks don't control any aspect of people's lives. Google, Facebook, and Amazon control not only what you can do as a consumer, but also how smaller companies can interact with you and how those companies run their businesses.
Here is a fun mental exercise for the reader. Imagine that you run Alphabet and want to destroy an arbitrary medium-size business that threatens you in any way. How hard would it be, considering you control pretty much all the search queries on the web and tons of other things?
???
I'm not sure this is true?
I don't feel like they are controlling me when I go to Target or Walmart??? But I'm not sure if there is something maybe with the advertising that is making me go to Target and Walmart? Either way, it's totally up to me as a consumer where I spend my money I would think.
Probably very easy, but consistently using this strategy would ruin my own business, in effect helping my competition. Now imagine you're Facebook, how easy it was to rule the social media world, and because of series of equally stupid hard-balls you've mentioned, you're 5 years away from being MySpace.
Effectively, yes. Why is the market so disfunctional that a single company has effectively swallowed all competition?
> If it had 100% of the cola market, would it have a monopoly? No.
Err, yes.
> Because the cola market doesn't exist in isolation. Colas compete with all other sodas, with water, juices, etc. for a share of wallet and a share of stomach.
And AT&T wasn't a monopoly, since you could just walk to the person you want to talk to. Oh, wait..
This is actually pretty common in hypercompetitive commodity markets. The largest player has a slight cost advantage due to economies of scale, so they have the best price and everyone buys from them. But they still have no market power because their market share doesn't come from barriers to entry.
> Err, yes.
It's not necessarily a monopoly even at 100% when there are competitors who could immediately enter the market if the incumbent were to be so audacious as to raise prices by 4%, or do anything else the customer even mildly dislikes -- because that fact keeps them from ever doing it.
Notice that this is not how it works for Comcast, because it's not cheap or quick to wire a city with fiber, so they can get away with a great deal of abuse before anyone else would show up to compete -- even if they only had 50% market share, as long as the other 50% is another company doing all the same abusive stuff.
> And AT&T wasn't a monopoly, since you could just walk to the person you want to talk to. Oh, wait..
To be a substitute it has to be a practical alternative that can be used for the same purpose at approximately the same cost. Having to spend an hour walking is not the same cost as picking up the phone.
If people just like their product more, what's the problem? There's no point in punishing them for being cheaper or more liked than the competition.
No. You can always create a market where a company has a "monopoly" (in the market share sense of the word).
> Why is the market so disfunctional that a single company has effectively swallowed all competition?
Where did you get that from? This is a sign that you don't understand the market you're talking about.
> And AT&T wasn't a monopoly, since you could just walk to the person you want to talk to. Oh, wait..
That doesn't make any sense, you're not even wrong.
It isn't just because you can create a mental analogy about a subject you don't understand, that the analogy is actually valid.
In most places there just isn't any competition really. It's a brand war.
Coke taught the locals to love Coke. And so they do.
It's more of a mind share / branding monopoly - although there are some issues with distribution as well.
Part of the reason might be that Coca-Cola depends on decocainized coca leaf for its characteristic flavor, but regulations make it (effectively) impossible for upstarts to access this particular herb. Coca-Cola was grandfathered in from a time when coca leaves were legal.
I don't want to get all political, but the people pushing for this definition change are (usually) economic leftists that are naturally worried about the size and power of corporations. It's their default state. There's nothing wrong with that, but be upfront with your motives and don't mask empirical concern with political ideology.
These people would have broken up Walmart in the 90s and Sears in the 70s if they could, and look where both of those companies are now.
No, it doesn't. At least not by the economic definition of monopoly, which, when talking about regulation, is the one that matters.
And even then, it is irrelevant, because the cola market doesn't exist in isolation.
For a company to have a 'monopoly power' it does not have full monopoly. Antitrust laws start to apply to corporations long before they have full monopoly.
No, it is used as shorthand for "market share in a market I define arbitrarily".
Proving monopoly power is a much more complex and academic process.
No, they're saying a company can have too much economic power without being a full monopoly.
But that's not a problem.
Monopolies are problems, not strong economically powerful companies. I mean, up in my neck of the woods, ADM and Cargill are unimaginably powerful economically speaking. But it just makes no sense to say that they are as dangerous as having one company that IS the entire food market.
Please reconsider the easy targets of tech companies and have the courage to face true evil in these dictatorships
Facebook had lobbyists targeting every member of Congress. Apple works tirelessly to put their profits in tax shelters. Amazon has well-documented stories of pushing its warehouse workers past their limits. Google’s chairman spent years openly laughing at the idea of “privacy.” You think these companies need help from foreign actors to look bad?
If this line of thinking is common in SV, the echo chamber effect is worse than I suspected.
It's odd that you would be fine with a corporate monopoly exerting dominant power over its market (to extract more profit) but are distrustful of government exerting power to limit that from happening.
Monopoly definition is political -- the idea that governments cannot and should not step in to police markets is a novel idea.
Where did you get that idea from? I'm not.
> Monopoly definition is political
Nope, it is economics.
You don't understand how much Coke owns or creates do you? They own brands that do bottled water, tea, coffee, juice, milk, sports drinks, energy drinks, alcohol and more [1][2]. Hell, if its a beverage, Coke probably owns a brand that makes it. [3]
[1] https://www.coca-colajourney.com.au/brands/ [2] https://www.coca-colacompany.com/packages/brands [3] https://en.wikipedia.org/wiki/List_of_Coca-Cola_brands
Oh please...
For this reason, antitrust law does not regard as illegal the mere possession of monopoly power where it is the product of superior skill, foresight, or industry. Where monopoly power is acquired or maintained through anticompetitive conduct, however, antitrust law properly objects.
A monopoly that doesn't abuse its market power to prevent competition is either a natural monopoly or a temporary situation.
Neither of those are anti-trust issues.
This is a big deal because they can abuse their advertising clout for evil purposes. (E.g., advertise Chrome but put out a prohibitive pricing scheme for Firefox.)
But it's not a monopoly yet because Facebook and Amazon are competing actors in this space in the USA, and other nations have their own local actors.
In theory, though, if Google went on a really aggressive attack via their Chrome, Android and Analytics properties then they could kill off the competition.
That's not true. Not even from a particular viewpoint. You might want to rephrase that.
Google's primary revenue stream is from online advertising. They have a myriad of products, without which, the revenue stream would dry up. Youtube is a platform and a product and a brand. Google Search. GMail. Etc.
However I believe the reason nothing changes despite these obvious market distortions is that super profits are self perpetuating: companies invest in politicians to keep the distortions in place. The technical definition of monopoly is just a smoke screen.
No, it doesn't. Making up your own definition of monopoly (or the meaningless "effective monopoly") doesn't make it true, valid, or useful.
The Supreme Court has defined market power as "the ability to raise prices above those that would be charged in a competitive market,"(8) and monopoly power as "the power to control prices or exclude competition."(9) The Supreme Court has held that "[m]onopoly power under § 2 requires, of course, something greater than market power under § 1."
Nope. Because monopoly isn't just about market share. That's what people here don't seem to understand.
Power that can be abused will be abused.
b) "a monopoly is perfectly fine, AS LONG AS the economic power isn't abused to prevent competition which harms consumers."
This is kind of a non sequitur ... Of course they will prevent competition, that's the essential name of the game. Every company does this - this is not 'abuse' it's just how it works. Ergo, by your definition monopolies are all bad.
I actually think some monopolies are good - when you have well run actor that has some external controls on prices etc. it provides stability among other things.
c) To the extent that colas can be defined as a market, then they have a monopoly. 'Search' does exist aside an adjacent market in which content can be replaced, so it's not helpful.
Google needs to be broken up.
Search is so fundamentally essential ... it's like 'information neutrality'.
The FANGS are total hyprocrits pushing for 'Net Neutrality'.
Just as Comcast should not be able to offer anything but QoS and not read the content of my bites ... Google should not be able to offer anything but quality search. All their other products depend on their search monopoly. Much like Comcast would leverage looking at your packets. Much like Microsoft leverages their OS power to control office software etc..
Search, OS, maybe even Browsers - should be independent, just as Carriers can't use their power to get into other lines of business.
The AT&T merger is bad news, they shouldn't be in the content business.
Moreover, it is pretty easy to not use google search? Why couldn't someone use DDG, Yahoo, Bing, etc.? despite it being defaulted to in browsers (you can change this), most people elect to use Google. If a company dominates a single sector through consumer choice, should they be broken up (esoecially when consumer could walk away)?
I'm not try to be facetious, I would just like counter arguments
Diapers.com was the ultimate example of this [1]
Soon after, Quidsi noticed Amazon dropping prices up to 30 percent on diapers and other baby products. As an experiment, Quidsi executives manipulated their prices and then watched as Amazon’s website changed its prices accordingly. Amazon’s pricing bots—software that carefully monitors other companies’ prices and adjusts Amazon’s to match—were tracking Diapers.com.
This is unambiguously Amazon using their Market power to stifle competition.
Now, you might say something like - yea that's just competition, or to the victor go the spoils. However that's the whole point of this kind of advocacy - to prevent companies from taking significant market power and spreading out the competitive landscape. The language may not perfectly fit between "monopoly" or otherwise, but the end result is the same: Small players can't compete. Best thing you can hope for is an acquisition.
This is especially bad in technology, where information advantages grow with the scope of the company.
[1] https://slate.com/technology/2013/10/amazon-book-how-jeff-be...
Amazon lowers the price, so the consumers will get to buy cheaper diapers (sounds good). Apparently Amazon can sell them at a very low margin, it's just choosing one that's just below what competition can offer. Then of course you have an issue with dumping (selling diapers with profit < $0), but I guess Amazon can afford to sell them at $0+eps profit, so its end game is to sell diapers at a lowest price to outcompete diaper stores on a crazy low margin. Well, maybe there won't be online diapers stores anymore. Most likely Amazon will then bump up the price back.. Well, so the diaper stores will appear again (if the new bumped-up price is above a margin at which an individual store can again operate). What will Amazon do then? Go back to step 1? Great, more cheap diapers at "eps" margin. This, of course, requires the third party stores to have low "startup" costs.
And maybe the bottom-line here is, that there is not going to be diapers.com and alike anymore. Well, maybe online diapers store is not a branch of industry one can enter in 2018 and expect to win big just by having a nicer website, without proposing something truly innovative that a giant like Amazon cannot offer (see how dollar shave club competed with Gilette/Wilkinson etc.)
Amazon, because they have information and economic advantage, can effectively manipulate the price of any good they want to make it uneconomical for any other company to play.
That's a single company having outsized power to determine the state of the market.
Using your example let's say that no other company can sell diapers online. That means for consumers that either don't want to or can't buy from Amazon, they are materially hurt from the lack of competition. Not only that, if they tried to start their own, they would be crushed just like the others. So in the end it's anti competition and increases friction for new business creation. A fundamental tenet of markets is that diverse competition is the primary forcing mechanism to ensure accessibility and quality.
The only possible argument here is that it's possible to have a singular organization that provides everything better than a diverse competitive market could. Neither history nor theory supports this thesis and the secondary effect on economies and political power compounds the downsides.
changes to the economic definition and legal enforcement of anti-monopoly are one issue, but a general slowdown in the pace of technological innovation combined with globalization/spread of technology is the primary force driving consolidation/horizontal/vertical integration in many industries
It's my understanding that the Chicago School types were not impressed, but that was probably to be expected.
but us the searchers and friends are not the customer. FB and google are selling ads, and they are in direct competition with each other. If I want to buy advertising space online, I have plenty of options and the innovation for me to reach my target customers is astounding. The system is working exactly as it should. Or so it goes from a monetary point of view.
cached because current link is unavailable
Apple - own device demand, not the apps (or the default search).
Google - own search demand, not the content.
Facebook - own social demand, but not the content.
Airbnb - own lodging demand, but not the real estate.
Uber - own transportation demand, but not any vehicles.
Uber eats - own hunger, but not any food or restaurants
In many cases the economic concept of choice is idealized and doesn't work in the real world. For instance what choice does a consumer concerned about privacy have beyond Android and IOS, or in telecom, oil and other polluting industries and other dysfunctional markets? The network effects of social media cannot be ignored and one may often be forced to participate in a damaging environment that does not respect consumers privacy and basic rights.
Consumers may want a privacy respecting Internet and products but there is no way for them to affect that outcome only through choice, so choice on its own is not empowering. You can only choose what is available. And this is where in democratic societies democratic institutions are expected to step in to limit harm.
For example, how is it fair that a bunch of investors make a pile of money so big that it puts small bookstores out of business?
(Yes, I know, small bookstores provide a whole different experience than shopping on Amazon. The thing is, nobody cares. Or at least too few people care to make the small bookstores into viable businesses.)
How did Amazon "out-money" small bookstores in a way that wasn't simply "more efficiently providing a competing service"?
By saying that you're basically throwing the whole concept of "fairness" out of the window, so that's no argument.
In my view, Amazon does provide a more complete service than smaller bookstores, but they achieved this with external money; money obtained from outside the book-selling business.
A similar thing is happening to restaurant owners. Companies like Uber Eats (started through enormous investments) build a portal where people can order food. Suddenly, restaurant owners have to pay a sum of money to these companies to stay in business. This is totally unfair, in my view.
It’s often the case that this is harmful to the market in the long term.
How would Intel destroying AMD be good for innovation?
Once AMD was gone, they'd have no more incentive to innovate at all.
However, because MS was close to a monopoly everything they do was suspect. On the other hand modern day apple seems to profit immensely from being NOT a monopoly. By not having a monopoly in a single area they're allowed to vertically expand as much as they want. Imagine if apple weren't allowed to offer siri, or icloud, or facetime, or imessages? The vertical expansion turns out to be more profitable than horizontal domination while at the same time being as abusive as MS ever was.
Some companies are willingly selling to some other companies, so let's forcibly break some companies apart. How is former a problem, and latter, a solution?
I see a lot of people fretting that companies like Google, Facebook, and Amazon are becoming so powerful that they're crushing their competition and taking over entire industries, and they just can't be stopped unless the government steps in.
Most of the companies people are wringing their hands about today effectively didn't exist 20 years ago. Back then it was another set of companies that were unassailable monopolies who were going to take over the world and rule with an iron fist for 1000 years, ruthlessly crushing all their upstart competitors.
And in another 10-20 years, no one will be concerned about Google, Facebook, and Amazon, and they'll instead be screaming bloody murder for the government to break up the otherwise-unstoppable companies X, Y, and Z before they destroy all that is good in the world.
Yes, yes, I know..."this time it's different!"
So it goes.
so on the side note, is there economic simulator, that can simulate such scenario ?
Tech moves too fast, I dont think we will need to worry about a monopoly when FAANG stock starts falling.
http://content.time.com/time/magazine/article/0,9171,997265,...
(sadly paywalled)
[1] https://transition.fcc.gov/transaction/aol-tw/exparte/disney...
Personally I think this is only half of the story because consumer welfare is not just prices but also quality which depends on competition. The suppression of competition was primary clause used for free IE on Windows anti-trust lawsuit.
So I think article is not well researched and is spreading half-truths.
For reference, please see Pixar's WALL-E.
"‘Antitrust was defined by Robert Bork. I cannot overstate his influence.’'
https://www.washingtonpost.com/news/wonk/wp/2012/12/20/antit...
https://www.cato.org/policy-report/julyaugust-1999/cato-book...
Bork's "landmark" treatise on monopoly remains curiously unavailable at many libraries:
https://www.worldcat.org/title/antitrust-paradox-a-policy-at...
This reflects earlier treatment of monopoly within Libertarian economics texts for popular consumption, notably Harry Hazlitt's Economics in One Lesson, which addresses monopoly by ... dispensing with it virtually entirely:
https://fee.org/resources/economics-in-one-lesson/
Contrast Alfred Marshall, Principles, 8th ed, leading collegiate text at the time, with a 15 page chapter and a multitude of mentions.
https://archive.org/details/in.ernet.dli.2015.149776/page/n4...
Barak Y. Orbach, "THE ANTITRUST CONSUMER WELFARE PARADOX":
“Consumer welfare” is the only articulated goal of antitrust law in the United States. It became the governing standard following the 1978 publication of Robert Bork's The Antitrust Paradox. The consumer welfare standard has been instrumental to the implementation and enforcement of antitrust laws. Courts believe they understand this standard, although they do not bother to analyze it. Scholars hold various views about the desirable interpretations of the standard and they selectively use random judicial statements to substantiate opposite views. This article introduces the antitrust consumer welfare paradox: it shows that, under all present interpretations of the term “consumer welfare,” there are several sets of circumstances in which the application of antitrust laws may hurt consumers and reduce total social welfare. This article shows that, when Bork used the term “consumer welfare,” he obscured basic concepts in economics....
https://academic.oup.com/jcle/article-abstract/7/1/133/75097...
