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.
This is not true at all. Looking at actual competitive commodity markets for things like lumber, oil, copper, etc, we see a lot of players in the market. I can't think of a single commodity market where there is a monopoly.
Those times in history where a monopoly has occurred in commodities markets it has been grossly abused. IAR, from the trusts of the early 1900s to the cornering of the silver market one player controlling a commodity market has not turned out well.
Because it has the best product. That doesn't make anything dysfunctional.
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.
That's why, to actually talk about a monopoly, you need to very precisely define the market.
Take Facebook: Facebook has a monopoly in online, blue-themed social networks owned by Harvard dropouts.
It doesn't have a monopoly on social networks, on communication, on online networks, on online ads, on online ads in social networks, on blue-themed online social networks, and even on blue-themed online social networks with a timeline feature.
Except for that anyone can spend 30 seconds looking up how Coca Cola abuses their monopoly position to prevent competition; Richard Branson is perpetual the case study.
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.
You can read here how it is defined and identified in practice.
https://www.justice.gov/atr/competition-and-monopoly-single-...
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.
Or rather, lets say it like this: This history of strong economically powerful companies points to them being problematic for democratic societies.
Why? Because the stickier the product, the more "powerful" the company, and the more likely they are to do things like regulatory capture and exert significant control of democratic levers.
Make no mistake that corporations are political entities and are not-neutral in that respect. So the bigger the company, the more they can exert influence well beyond their ability to provide goods/services.
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.
I think this is an ungenerous reading of the parent. The fact there are disinformation campaigns running all the time is known beyond a shadow of a doubt. Are Russia and China _solely_ behind the bad press that tech is getting? Decidedly not. But do they also benefit, as in, Chinese and Russian tech companies benefit if American and European ones are damaged? Yes. IMO they are busy frying bigger fish, but I have little doubt that given the chance to tip the scale of public opinion this way or that, they'd prefer tech companies catch some flack.
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
Google is able to use its lead in search to exert undue influence on other markets. Google can (and has) ocassionaly placed banners suggesting a switch to chrome, influencing the browser market. Google showcases YouTube videos above other video results, regardless of the relative merits of the videos. Similar things in other verticals.
Additionally, search dominance leads to dominance in the related search ads and text ads generally space. In part, because of market size, Yahoo was unable to attract the same kind of advertising market as Google, and famously chose to contract that out to Microsoft, which also was unable to make it work well. I was at Yahoo during parts of that time, and my feeling is that market size wasn't a big part of that failure, but it could be argued that it was a part.
Is any of this compelling enough to be worth an anti-trust case? I don't think so, but maybe?
How could you break up Google if this was considered egrigious enough? Split into several actually separate companies: software, containing chrome, android, and chrome os; search, providing web search apis, but not a front end; advertising, providing advertising apis, but not hosting any sites that use then; consumer services, including a web search front end, Gmail, YouTube, etc; business services, including the Google cloud stuff and maybe g suite; I dunno about the alphabet soup bits. Make the search and ads services contracts be on FRAND and public terms.
Google search is fundamentally better than DDG (for most purposes) because it has massive advantages that make it effectively unassailable. For example, I stopped using DDG because I rely on reverse image search. FYI DDG does not have its own crawler, it gets data from other sources. And it won't get reverse image search unless it does it itself ... which I doubt will happen. Maybe. And of course Yahoo is not a search engine either, it's not really an alternative at all.
In order to compete with Google effectively, you'd have to build your own crawler etc.. It's essentially impossible. The number of engineers, data centres other components ... my gosh man.
Consider for a moment that Google is a massive cash printing machine. Do you not think that VC's would be lining up, piling billions of dollars into competitors in order to take a piece of the action?
Why is nobody - not even intelligent actors with a lot of cash to burn - investing in the most profitable business model of our era?
Because the barriers to compete are absurdly high.
It's a monopoly.
And if it is - then we have to be very concerned about their relationship to adjacent layers of the value chain because of their ability to subsidize products to put others out of business.
So you're aware that in free trade deals between nations, part of the deal includes measures to bar state actors from participating in some economies, and also, rules against 'dumping'. This is because if a nation state actor wants to, they could subsidize their own industries, wipe out competition in other nations, and then let their industry dominate.
The same applies in value chain monopolies.
Standard Oil didn't have 'better oil' or better practices than other Oil companies - they used control and ownership of the railroads to increase prices on their competitors and put them out of business. In a truly competitive landscape, there would be no Standard Oil.
When Microsoft uses their ownership of the OS to put all other 'Office' solutions out of business, is that good for consumers?
By the way - MS is still printing money hands over fist in Office Software. They are making billions. They are a de-facto standard, arguably a monopoly there. Why aren't investors lining up to create competitive solutions? (Because it's an unassailable monopoly).
If Google decides to get into your line of business, and you are small, they will absolutely wipe you out if they want to, and it has nothing to do with having 'a better product'.
Also consider for a moment how many of Google's other business parts could stand on their own as businesses?
Google Analytics? Android? Chrome? Google Docs? Maps?
They are all all money pits, strategic investments (i.e. 'moats') by Google to ensure the dominance of Google Search.
How could a mobile OS vendor compete in a market where Google is using billions from one market, to dominate a different one, like mobile OS? They can't. Maybe in China, wherein there are non-market factors to protect their own makers.
For the same reason that governments have mostly separated the transport of electricity from electricity production, for the same reason we have net neutrality, Google Search should possibly be pared off from the other businesses.
Amazon is using massive profits from AWS to put retailers out of business. Amazon is not hugely profitable, but their AWS business unit is, ergo, the retail unit is probably losing money.
How can retailers compete against Amazon, which is effectively selling at a loss? They can't.
Consumers generally don't win when a de-facto or real monopoly in one market, uses that power to wipe out competition in others.
There is essentially no real competition in search, nobody is putting money in it. Same for office software. Given how much money is being minted in those markets, it's a sure sign of monopoly.
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.
If a group of consumers can't or don't want to shop at Amazon, then they've just created a niche in the market (be it due to geography or anti-Amazon sentiment), that would create a demand for a diaper store that would serve those customers, because, by definition, they have just outcompeted Amazon by being more available or appealing to the consumers.
> 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.
I believe history shows that as long as said singular organization it keeps providing everything, it will prevail (in everything). The moment it stops, it collapses and new players come in its place. This is, of course, as long as state doesn't decide to bail it out like it historically did in several heavily regulated industries, which are hard to enter partially because of said regulations. Consumers are rarely hurt in the process, as long as you let the big company take the fall, and let the new better companies grow its place once it stops delivering. If you regulate something like Search, to Google it's just extra operational costs, but as a side effect, Google becomes too big to fall, because no one else can really step in its boots anymore and enter the market.
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...
