Last Wednesday’s Congressional antitrust hearing often had little to do with actual discussions of antitrust and instead, served as a platform for Congress to air their pet grievances to some of the nation’s largest tech firms.
During the more than four-hour hearing, I couldn’t help thinking of the Inigo Montoya’s often quoted line from The Princess Bride, “You keep using that word, I do not think it means what you think it means.“
The officials in the hearing were quick to assign the term “monopoly” to these companies. This raises an important question: If these companies are indeed monopolies, what exactly do they have a monopoly on?
Monopolies are economically understood as firms so powerful in a specific market that they face no competition due to the power they wield. This allows monopolies to set the price of their goods higher than they would in a competitive market to make more money or set prices low to drive any other competitors out of the market, at which point they then raise prices. The antitrust laws passed at various points in Americans history served as ways to break up or prevent companies from forming monopolies.
Traditional examples include the steel or oil industries at the turn of the 20th century, both of which controlled so much of the supply that they controlled prices. But it’s critical to understand that simply being a large company doesn’t automatically make one a monopoly.
Take Amazon for instance. As retail sales have moved increasingly to online, Amazon finds itself competing in both the retail and e-commerce spaces. While it does have a large share of the e-commerce market, it only makes up less than 10 percent of total retail sales. Given this fact, how exactly does it qualify as a monopoly?
As for Facebook, there are many alternatives to interact socially with your friends online outside of the platform or Instagram, which Facebook also owns. In addition to already established websites like Twitter and LinkedIn, video games with social components, such as Fortnite, are also proving far more popular than Facebook, particularly among the Generation Z crowd.
Many have argued that Alphabet-owned YouTube is a monopoly since it’s the “only” website for content creators to upload videos to reach large audiences and make money in the process. This argument fails to stand up to scrutiny, because it relies on defining the market in a spectacularly narrow fashion while also ignoring podcasts, websites like Twitch, or even traditional media. Simply being the best place to do a specific task is not evidence of a monopoly. What it does prove is that said company is providing great value to consumers.
These disingenuous arguments rightly raise suspicions that those assigning the monopoly label to these companies are simply using antitrust law as a tool to bully companies into their preferred policies. Indeed, the many questions asked during Wednesday’s hearing that were unrelated to antitrust suggests this is the case. Using antitrust as a cudgel for business is an incredibly dangerous precedent to return to.
For decades, both judges and politicians alike used antitrust to impose their preferred economic order on the nation. That practice changed due to a conservative legal revolution, which changed antitrust from focusing on the whims of social planners to actual consumer welfare. This means that if companies are benefiting consumers, they should be allowed to grow.
Returning to this outdated understanding of antitrust and monopoly, in which bureaucrats use it to obtain preferred political outcomes, is not only damaging to consumers but would overturn one of the most important conservative legal victories of the past 50 years.
After the House antitrust hearing, we should all be skeptical that this effort is about monopolies or antitrust at all. Rather, it seems to be a return to a previous mode of Washington politics that would give politicians what they want while leaving Americans worse off.