Listener Feedback On Our Antitrust Episode

Editor's note: This is a submission from our listener Louis Rovegno

I love that you did an episode on anti-trust. It's such an important issue and dangerously under-enforced. I did want to share my perspective on some of the things you said about the tech sector.

You mentioned that Google is a free service, so therefore examining it through the lens of price fixing doesn't make sense. In fact, you are not Google's customer. You are its product, which it delivers to its true customers: advertisers. There is a whole world of fee structures, pay-per-clicks, ad placement, analytics to measure your website's performance, and other tools which are enhanced by Google's ability to get people to use its services so eyeballs will see advertisements. The prices we should care about are the ones charged to advertisers, because we all pay for advertising when we buy advertised products. 

I also want to make the case that Google earned its spot and not because of first mover advantage like Facebook had. There were plenty of search engines in the 90s - Yahoo, AltaVista, Lycos, aggregators like Metacrawler, and so on. Google beat them all by having the most streamlined search page, the best algorithm, the best integrated services like email and mapping, and marrying all this to a fast and efficient browser. It cornered the market on advertising too, allowing it to emerge as by far the dominant search engine. Google's only competitor is Bing, and Bing only exists because it had the massive financial backing of Microsoft. 

A few words on startups being bought out: I wouldn't shed any tears for these people! It's a huge payday, and the developers just leverage the accolade into another startup or great job. Maybe they could have gone on to be billionaires, but they more likely would have plodded along or run out of money. This is the red flag: that companies like Google and Facebook are so big, they can afford to buy every startup that seems even remotely promising, just to avoid competition. And worse, we let them.

Ultimately, though, Google is a monopoly. So what do we do? As you said, we want to maintain incentives for companies to be the best. Companies shouldn't be punished for bettering their competitors. But they also shouldn't be allowed to use their success to prevent any future competition or gouge consumers. Fortunately we already have the laws in place to deal with this, we just need to enforce them. We can more aggressively enforce antitrust laws against mergers and acquisitions. It's ridiculous that so many big companies are allowed to keep consolidating, regardless of whether it's tech, pharmaceuticals, telecommunications, resource extraction, or what have you.

We can also sue them. Clever economists can estimate the prices that would be charged in a fair market and compare to the presumably higher prices of the monopoly. The difference is called monopoly rent, and it's illegal under the Sherman Anti-trust Act as an exercise of monopoly power. If the monopoly rent is sufficiently high to demonstrate purposeful rent-seeking, there should be a lawsuit and it should be huge. Compliance needs to be cheaper than non-compliance or the laws are meaningless. 

There are solutions. We just need our elected officials to carry them out! That they have been so woefully inadequate in doing so, and the reasons behind that, are fodder for a lengthy and sprawling discussion that touches on regulatory capture, campaign finance, and our societal mores on how we treat white vs blue collar crime.