It’s 2007, and MySpace dominates the market. There are even some articles claiming that it’s a “natural monopoly.” You then ask yourself, “is it time to shake the dust off the ‘ole trustbusting laws?”
Fast forward a couple of years later, and Myspace is struggling to survive with the rise of Facebook being the undisputed king of social media. Myspace, worth around 12 billion dollars in its prime, is sold for a measly 35 million. The year is only 2011.
In fewer than 10 years, Myspace went from being compared to a monopoly to losing almost all of its value. The ex-social media giant was reduced to a mere shadow of its former glory — a truly spectacular fall. More importantly, no government intervention needed. Today, the same charges of monopoly are being leveled at Myspaces’ successor, Facebook.
Last December, the Federal Trade Commission filed an antitrust complaint against Facebook. The suit alleged that Facebook had maintained its dominance by “illegally maintaining its personal social networking monopoly through a years-long course of anticompetitive conduct.” A parallel lawsuit brought by 48 state attorney generals was also filed against the social media giant.
However, the Facebook critics hit a significant roadblock when a federal judge dismissed both cases, essentially stating that the plaintiff’s claim that Facebook was a monopoly was baseless.
Despite the temporary setback, the trustbusting train is only getting started. From Republican Josh Hawley’s “Trustbusting for the Twenty-First Century Act” to the numerous bi-partisan bills making their way through the House of Representatives. The oncoming wave of anti-big-tech sentiment is only gaining strength. However, there are reasons you should be skeptical before jumping on to the trustbusting bandwagon.
Ignores Basic Economic Principles.
When considering the role of government in regulating the economy, it’s crucial to remember Friedrich Hayek’s famous words, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” Simply put, markets are one of the most complex organic systems on earth, and the idea that politicians in Washington are wise enough to mess with them without creating a whole host of other problems is foolhardy.
Time and time again, the market, not the government, has proven itself to be best at regulating its own enterprises. In 2019, Ryan Bourne of the CATO institute released a paper documenting the multiple instances where seemingly unstoppable companies were brought down by innovative new businesses and products. Companies such as Kodak, Myspace, IBM, Nokia, iTunes, and even AOL were all referred to as being monopolies until they were usurped by new innovative companies.
Today’s tech firms occupy what Bourne calls “psychological monopoly” in the minds of most Americans. He argues that “Commentators seem unable to perceive the possibility of viable substitutes or competitors to the firms at a similar scale either now or in the future.” This “psychological monopoly” makes it incredibly difficult for people to imagine a world where big companies such as Facebook don’t dominate the market or where Amazon isn’t the go-to place for online ordering.
The solution to breaking the “psychological monopoly” is to remind people that throughout history, massive and influential companies have quickly lost power without the government forcibly shrinking it. After all, I’m sure that people living in the 1980s couldn’t imagine a world where IBM didn’t dominate the office typewriter industry, but here we are.
Will Not Benefit Consumers
The central claim of trustbusters is that industries dominated by supposed monopolies harm consumers by gouging prices and stifling innovation. However, is this true today? Of course, it isn’t. Today all types of consumer products such as cell phones and television sets are much cheaper and significantly more efficient than their 1980’s counterparts. Furthermore, more affordable and innovative goods have helped bring billions of people out of poverty over the last two centuries. How exactly are companies “gouging consumers” again?
Even the contention that “Big Tech” swallows smaller businesses and stifles innovation falls flat after examining the data. The fact is that America leads in international innovation and is a beacon to the rest of the world, signifying what can happen when free markets are protected from arrogant politicians who believe all things can be better managed underneath vast government bureaucracies.
Let the Markets Remain Free
The next time a Democrat or Republican tells you that, the time for the government to cut businesses down to size has come. Just try and remember the last time you saw a Toys R Us or a Blockbuster store around town.
In conclusion, consumers are perfectly capable of determining which businesses deserve their patronage without senators Josh Hawley and Elizabeth Warren breathing down their necks. If there is anything so well proven by history, it’s that the government almost always makes problems much worse. (I’m looking at you War on Drugs, but that’s a topic for another day.)