Reply To: Predatory Pricing


Google and Facebook aren’t actually monopolies. There are other competing search & mail products as well as competing social media. Yes they may be dominant in those areas, but technically to be a monopoly there would have to be NO competitors at all. But even this point is not so relevant. They provide these consumer services for free (mail, search, etc)… so even if they were monopolies it is a distinction without a difference, the reason monopolies are supposed to be “bad” is they can gouge the consumer… well you can’t beat free! There is no sense in which the consumer is harmed if provided something for free (assuming it is not injurious in some latent way of course). But even this is not relevant to the monopoly question. We’re evaluating the wrong part of what they provide. The question we need to ask is: What are they selling? In other words, what service do they provide that they actually receive money for? It’s not email or search or what have you, rather it is advertising. These companies are simply selling ad space. They give stuff away in order to increase eyes on their ads… it is simply a means to an end, to enhance what they can charge for ads in the market owing to the number of eyes on their ads. So the relevant question is this: Are Google and Facebook monopolistic within the market of selling ad space? I don’t know, perhaps on the internet they are the 800 pound gorillas… but in the wider market of ads they are not monopolistic. They have to compete with other ad venues such as: magazines, newspaper, TV, radio, billboards, etc. The price they can charge still has to be constrained by what other advertisers are charging in other media. It can vary, but only to a degree, it is not unrestrained, which is what a true monopoly would be.

Also, the point has been made before that in a truly free market no monopoly can ever exist in the sense that even an apparent industry dominant company that is monopolistic within that industry, they are still competing with vendors of all the other goods in society. A monopolist gas company can’t charge $10,000/gallon of gas… at some point people just aren’t going to pay because they have to eat, they have to clothe themselves, they have to put a roof over their head. So the market still exerts restraint on prices even in these apparent monopolist situations. And of course if prices are high enough it will attract competitors who will drive prices down. It’s a process, it takes time. I think that is why people turn to government, they want a solution NOW… so with the swirl of a pen we can have a law and outlaw bad behavior X overnight… people don’t want to wait the few months or few years it might take the market to correct these sorts of things.