Tuesday, January 17, 2012
G. D. Rockefeller
Some brief history: Near the end of the nineteenth century some of the various companies that had formed in the wake of the Industrial Revolution began controlling major parts of the market. A few examples: Cornelius Vanderbilt and his several railway companies, J. D. Rockefeller and Standard Oil, Andrew Carnegie and Carnegie Steel. There were others as well, but the specific people and groups are not important at the moment. The important thing is that these companies found very effective and often unethical ways to expand their share of the market, to the point at which they had a frightening control over prices. The first monopolies arose. The new large corporations and trusts, or organizations of multiple corporations with common interests, developed astonishing control not just over the market but over the government, bending the rules to fit their agendas. Shortly thereafter, along came President Roosevelt, the trustbuster. Roosevelt championed the regulation of these companies by enforcing for the first time the Sherman Antitrust Act, which outlawed business practices that restricted free trade. His efforts were effective, and trusts were forced to play fair to keep the market free and prices down. The day was saved!
Okay, the history lesson is over (mostly). Interestingly enough, much of the way I described the Industrial Revolution may be reasonably applied to the digital revolution of the twentieth century. In particular, the new world of economic opportunities is unprecedented; just as in the past, we ought to expect a few stumbling stones. And here we arrive at the question at hand: should I or you or anyone be worried about the new apparent internet "monopolies"? Any somewhat internet-literate person will notice that everywhere you look online you'll see Google and Facebook, not to mention a few other big web names. I'm going to take Google as an example company for this dissection (Hence old Google D. Rockefeller in the doodle above).
It took surprisingly little research before I discovered that Google has already been under investigation for antitrust law violations. Here is a link to an article on a Senate hearing over the issue. One conspicuous item you'll notice therein is that Google really hasn't done anything wrong. The antitrust laws on the books today bar predatory business conduct, the sort that leads to consumers paying more and small businesses going bankrupt. But here's the thing: customers really don't pay for almost anything with Google. How could Google make you pay more for a service they offer for free? The issue is more complicated than that, but only slightly. As for preventing success of small competitors, that is a more subtle case, but Google claims to be clean in that respect as well. Competitors may indeed encounter setbacks in going up against Google, but those setbacks are due to Google's continuing efforts to improve their product, not due to anything unfair or unreasonable by antitrust standards; read here and here for more on this. I even found one article that claims that Google is in a financially precarious position despite their considerable market share, due to a shift in web focus from search to social networking. The take-home point here is this: customers will not suffer financially from Google's business practices anytime soon.
Considering the similar business models of many internet companies, we probably don't need to worry about monopolies affecting us the way those from a hundred years ago may have. And if Facebook somehow starts jacking up their currently nonexistent prices? People will stop paying for the services they offer. If they somehow do stick you with an unavoidable price increase? The Sherman Antitrust Act is still in full-swing; it wasn't long ago that Microsoft was forced to change their policies due to the exact same legislation that Roosevelt invoked so many years ago. It will likely happen again if necessity dictates. One Wall Street Journal reporter offers a different opinion on the issue, but I don't see the internet monopolies getting away with too much.
On one hand, as mentioned in the Wall Street Journal article linked above, it may be that monopolies are part of the natural evolution in internet business; for example, Facebook would not be a very appealing service if not for their ubiquity. It seems logical that the internet companies most capable of satisfying customers would be those most capable of reaching anyone and everyone. Maybe we should be grateful for monopolies for providing us with such abundant information access.
On the other hand, there may be something more sinister at work. To take a paranoid turn for a moment, perhaps the cause of concern should not be the monetary effects of internet monopolies, but the effects on information access. In principle, Facebook has massive amounts of information stored away, as well as access to intellectual property of anyone who posts anything. Google, Amazon, and plenty of other groups have similar information on hand. We know that Google keeps track of search terms every time someone uses their search utility. It's more difficult to predict what sorts of unethical acts we might see resulting from an information monopoly.
Should we worry about that then? Maybe. I am actually fairly confident that any nasty thing these guys try to pull will be stopped soon enough. The internet monopolies do not have the threatening political influence wielded by those of the original monopolies. If I'm wrong, then I suppose I'll just log off of Facebook and go get some fresh air in the real world.