In a prior post, I explored the question whether private monopolists, such as Facebook, Twitter, and Google should be subject to a nondiscrimination requirement. I argued that a strong case could be made (assuming they were monopolists) for the legitimacy of subjecting them to such a requirement on the ground that they can exercise coercion. One objection to applying such a nondiscrimination to Facebook, Twitter, and Google is that many of these services do not charge the consumer. Since the traditional limitations on common carriers, such as railroads and inns, involved entities that charged, the argument concludes that the nondiscrimination requirement…
It is not surprising that Left-liberals are calling for more government power to regulate and break up information technology companies, particularly when, like Franklin Foer, they worked in industries disrupted by those companies. But it is disheartening to find that the some on the Right are joining the interventionist chorus. To be sure, Silicon Valley leans left on everything but government regulation. It is not clear that this exception is just hypocrisy driven by self-interest or reflects the general political truth that people tend to be most conservative on matters on which they are most knowledgeable. But the Right should be grateful that Silicon Valley, unlike Hollywood and the mainstream media, is an ally on one issue.
Arguments that antitrust rules should be changed to apply to dominant tech firms and not just firms engaged in “monopolization”—the term actually used in the Sherman Act—would both weaken our economy and, even worse, allow government to harass firms based on a vague and manipulable standard. Even beyond the statutory language, there are very good reasons that the law requires the government, before it can apply sanctions, to show both that a firm exercises monopoly power and engages in exclusionary conduct unjustified by a substantial business practice.
First, the desire for a monopoly is not itself a bad thing.
Corporations have been criticized for promoting uniformity and groupthink among their managers and executives at least since the 1950s, and probably well before. According to the cliché, executives at Ford or U.S. Steel or Westinghouse golfed, barbequed, and dressed alike. But back then their impact on the broader culture would have been indirect. Their products were a result of their various corporate cultures, and to that extent they molded the larger society. Yet the products were also molded by the larger society by having to face a certain market discipline. We are told that it’s different today—that we live now in…
The New York Times publishes many silly opinion pieces on law and economics but a recent article by Jonathan Taplin, Isn’t it Time to Break Up Google, plumbs new depths of folly. The title understates the breadth of its ambition: the author wants to break up or regulate as public utilities Facebook and Amazon as well as Google.
His unproven premise for acting against these successful companies is that they are monopolies. For instance, he contends that Amazon has a monopoly in e-books. But it is not at all clear that Amazon has market power once the market is correctly defined: hardcovers and paperbacks provide substitutes that discipline prices for e-books. Google has a large market share in online search but its competitors are only a click away.
But, more importantly, it is great mistake to break up or bring under comprehensive regulation companies simply because they are monopolies. There is a reason that our antitrust laws attack only monopolization, not the mere possession of monopoly power. As Justice Antonin Scalia observed in Verizon Communications v. Trinko, one of his great but less well-known opinions: “monopoly is what attracts ‘business acumen’ in the first place; it induces risk taking that produces innovation and economic growth. To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct.”
The desire for monopoly gives life to the economy no less than the desire to procreate gives life to the natural world.