Economics: Antitrust - The Power Of Competition

 (Drivebycuriosity) - Liberals see a monopoly under every bed. President Biden, Bernie Sanders, Elizabeth Warren & others complain that the US economy is controlled by monopolies. Two powerful agencies, the Federal Trade Commission (FTC) and the antitrust division of the department Justice (Justice ATR), are fighting against them. And Senator Amy Klobuchar & other US Senators initiated 5 bills to constrain the alleged power of the monopolies.

Are the Liberal claims right? Let´s take a look on the evidence. 

In the year 1995, when Jeff Bezos started Amazon, for some months he was the only one who sells online. Amazon was a monopoly. Soon others followed. Over the years the number of other online sellers, the competitors, has been swiftly climbing all the time. Amazon`s success story inspired myriads of copycats to offer similar services. Today Amazon is competing against hundreds of companies selling online, including giants like Walmart, Target, Best Buy & Costco, who all developed large online departments, and there are also a lot online platforms like Overstock, Shopify, Wayfair, Etsy & Ebay, who all are copying Amazon`s success. A former Amazon employee used his knowledge to start in 2012 Instacart, an online grocery with annual revenues around $1.5 billion. The online giants Facebook & Google also want a piece from Amazon´s pie and provide online shopping on their websites. And globally Amazon competes against Alibaba, Tencent (both China), Rakuten (Japan), MercadoLibre (Latin America) and others. Amazon is far away from being a monopoly.

When Steve Jobs sold the first iPhone on January 9, 2007, Apple was the only seller of smart phones, it had a monopoly. Soon others followed. Today Apple gets a lot competition for their iPhones, iPads, iMacs, MacBooks and services. Customers can purchase similar products & services from Microsoft, Google, Samsung, Huawei and a lot of other technology companies. And customers can choose between Apple´s iOS, Google`s Android, Windows other mobile operating systems.

 

 (active users, billions source )

Elizabeth Warren & Co. call Meta (mother of Facebook & Instagram) a monopoly. But the media company competes against media services like Tiktok, Snap and many others. The recent quarterly numbers from Meta show that the competitors of Facebook & Instagram are catching up (chart above). Years ago I give up Facebook and I am using Twitter instead. Did I go to prison for that? Nope, Facebook does have no power over me. Data privacy? Try that with the IRS. Government authorities can force you & me to give them your data, Big Tech can not!

Google may look like a monopoly, by the company`s search engines are competing against similar services like Microsoft`s Bing, DuckDuck Go, Yandex & WolframAlpha. Google Maps are competing against Apple Maps, MapQuest & TomTom. And YouTube competes with Rumble and other video platforms.

And Google & Facebook offer most of their services for free. Their business models are based on advertisement. Both are fiercely competing against each against other and against myriads other ad-based companies for user numbers & advertiser billions. 

Today´s Big Tech giants are survivors, many other tech companies already disappeared because they became victims of competition. Where is "Altavista" now? The first internet search engine was once a monopoly. What happened with the social network monopoly of MySpace? 

The Liberals ignore, maybe even don`t understand, that the power of companies is always constrained by potential competition (except competition is forbidden by patents or other laws. Don´t print US Dollars!). When a corporation has success, her rising profits attract automatically others (copycats) who want a share from the pie. There are myriads of investors, including big funds, who are happy to put their money on the next Amazon, Google, Facebook etc. It is very easy to finance to new ideas. 

 

 

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The online deliverers for food are another example. Grubhub, which once dominated the market, is loosing ground to DoorDash & Uber Eats.

Big Tech doesn`t need to be our friend, but the tech giants have to behave friendly otherwise they would go out of business. Adam Smith declared “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”. That is also true for Big Tech. If Amazon would treat their customers unfriendly, if they would sell too expensive, deliver too slow & too unreliable, then customers would buy at Walmart, Ebay or elsewhere. That is the power of competition. Because Big Tech has to compete against others they have to behave like friends. 

The Internet makes it very easy to compare prices & services and to switch to other shops, news providers & entertainers, sharpening the competition. Customers can choose the company which has the best quality, the best service and/or the lowest prices which gives the consumers a lot power. As a result, customers have more power than the corporations.