Fears of a Big Tech Monopoly Are Overblown — Here’s Why

June 5, 2019

by Jonathan Decker


In a disappointing setback for an administration that has promoted greater economic freedom, reports indicate that Trump’s Department of Justice and Federal Trade Commission are investigating four of America’s most successful businesses for anti-trust violations.

The Hill reports:

The federal government’s top antitrust enforcers, the Department of Justice and Federal Trade Commission (FTC), have reportedly reached an agreement on how to divide up their responsibilities for investigating Silicon Valley’s biggest companies, with the Justice Department setting its sights on Apple and Google and the FTC taking the lead on Facebook and Amazon. The agencies are said to be weighing whether to open formal investigations.

As is so often true when the government enforces anti-trust laws to harm so-called “monopolies,” the government may well find itself fighting yesterday’s battles in their heavy handed enforcement of these laws. None other than the great George Gilder — President Reagan’s most quoted living author — recently dedicated an entire book to showcasing how the power of companies such as Google and Facebook is waning.

At risk of oversimplifying the argument he lays out in his popular book “Life After Google” (you may purchase his book to read his full case here), Gilder believes the Internet architecture is going through an evolution of sorts — one that will ultimately promote greater user privacy and give the individual more control over their own personal data.

If Gilder’s prediction comes into fruition (as so many of his previous insights have, including the rise of the smart phone), pragmatically it will mean that Google’s and Facebook’s business models will collapse.

Google and Facebook profit by mining user data, and in return, the user gets “free” services including email, messaging, storage etc. Of course, these services are not really “free” as our data is our form of payment — but because our data is vastly more valuable than the services we receive, under a new Internet architecture, we could potentially control our own data or even sell it for a profit.

If Gilder is correct, the government’s crackdown on Big Tech is occurring in the midst of their business model facing new challenges from previously unthinkable innovation.

Trust-busting Big Tech would hardly be the first example of the government fighting yesterday’s battles. RealClearMarkets editor John Tamny details in his book “Popular Economics” how the FTC blocked a merger between Blockbuster and Movie Gallery just as Netflix was emerging — and would soon make both companies obsolete.

Back in 2006, Tamny gave other examples of monopoly fears failing to materialize, noting:

The history of General Motors is arguably the best example of the failure of monopolistic assumptions to materialize. … In 1976, two American Motors executives said if GM’s growth weren’t halted, “they might find themselves selling the whole market,” and that if “they wanted to wipe out everybody by 1980, the only one who could stop them is the government.” Nearly thirty years later GM chief executive Rick Wagoner was reduced to explaining away his company’s failures in a Wall Street Journal editorial, all while making a veiled plea for a taxpayer bailout.

In 1969 the Justice Department began the longest anti-trust investigation in its history when it took on IBM for its supposed monopolistic practices. But by 1982, when the suit was finally dropped, IBM’s descent had already been established — the company had nearsightedly ignored the potential of the personal computer.

What seemingly is missed every time the anti-trust crowd gets in a froth over a proposed merger is the nature of profits … Large profits by definition speak to an unmet market need that is being met. More importantly, large profits attract competition. It can even be argued that if companies do not achieve monopoly gains, they’re engaging in activity that is not important to consumers and that will not attract competition.” [Emphasis added]

As the examples above note, anti-trust regulations have a long history of revealing government’s short sighted and uncreative nature to problem solving. Innovation brings forward new goods, services, and technologies that were previously unthinkable, and the large profits garnered by so-called “monopolies” provide strong incentives for producers to challenge their money-making. A Big Tech bust-up would not foster competition in the markets of the future; it will merely kneecap the success of American businesses in the present.

The Big Tech firms of today may prove to be a paper tiger. Let’s give the market a chance to work.


Jonathan Decker is the Chief Economic Correspondent for TheNationalPulse.com.

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