It increasingly appears that the economics of the Internet tend toward the monopolization of certain distinct online niches. There is one dominant search engine (Google), one dominant social networking site (Facebook), one dominant online encyclopedia (Wikipedia), and one dominant online retailer (Amazon).
Bloomberg View economics columnist Noah Smith recently wrote an article entitled “Monopolies Are Worse Than We Thought.” In it, he contends that “There’s now evidence that market concentration could . . . be hurting workers, by decreasing the share of national income that they receive. It’s probably making inequality worse.”
U.S. public policy has traditionally disapproved of monopolies. However, after the Clinton Administration’s mostly unsuccessful attempt to break up Microsoft, there have been few recent administrations that have aggressively prosecuted alleged antitrust violations within the tech sector.
Furthermore, according to Josh Barro of Business Insider, “with the possible exception of Google, these firms are so far from meeting traditional definitions of anti-trust violations that very novel enforcement definitions would have to be developed to restrict them.”
That’s the dilemma that an ambitious young law student named Lina Khan attempted to address in her article in the influential Yale Law Journal. According to Steven Pearlstein of The Washington Post, she “laid out with remarkable clarity and sophistication why American antitrust law has evolved to the point that it is no longer equipped to deal with tech giants such as Amazon.com.”
Pearlstein’s article characterizes her argument as suggesting that although Amazon does not have an massive market share in any industry except book sales, it has prevented major brick-and-mortar retailers from making “significant inroads into online retailing, while . . . many small retailers feel they have no choice but to use Amazon’s platform to reach their customers.”
“Antitrust enforcers should be . . . concerned about the fact that Amazon increasingly controls the infrastructure of online commerce and the ways it is harnessing this dominance to expand and advantage its new business ventures,” Khan wrote in her law review article.
Tim Wu’s 2010 media history “The Master Switch” describes how the Bell Corporation positioned itself as a benevolent monopoly that the U.S. government allowed to dominate America’s telephone service industry for decades, before it was finally dismantled during the 1980s for antitrust violations. The eventual Bell breakup reminds us that the government’s antitrust power has the potential to displace even long-entrenched corporate giants.
Pearlstein suggests that “the breakup of AT&T” helped make “Apple and wireless telephony possible.” Similarly, the hope of today’s antitrust advocates is that reinvigorating online competition will spawn new innovations, better services, improved privacy protections, and lower prices for consumers. It would be beneficial if future web users were able to choose which online retailer or search engine they trust the most, rather than having to face inconvenience or expense in order to avoid the online sector’s monopolies & near-monopolies.
More activists and politicians are discussing stepped-up antitrust enforcement as a possible solution to the recent national unease over the ever-growing power of the tech giants. It remains to be seen whether meaningful changes will actually be made, particularly considering the current political gridlock and dysfunction in the United States government. Nevertheless, thinkers like Khan are helping to build the intellectual scaffolding upon which a successful anti-monopolist reform movement could be built.