How Amazon, Apple and Google are Stomping Out Competition in the U.S. Economy
Business + Economy

How Amazon, Apple and Google are Stomping Out Competition in the U.S. Economy


One of the great glories of capitalism, according to conventional wisdom, is that of competition. In a free market, firms will compete to provide goods and services based on price or quality, and consumers will benefit.

It isn't a bad idea, at least much of the time. But increasingly a new form of economic competition is beginning to take shape, one that is clearly of a monopolistic character. Its notable both for what it reveals about corporate power, and for what it bodes for the future.

So which firms are we talking about? Amazon, Google, and Apple are all good examples, expanding their reach and scope at the expense of competition. Amazon is probably the worst of the bunch; recently it announced it would not sell Google's Chromecast streaming device or the Apple TV, apparently because neither of them "interact well" with Amazon's Prime Video streaming service. (The Roku, Xbox, and Playstation will not be affected, since they support Prime.)

Amazon lamely justified its decision as necessary to prevent "consumer confusion," but it's stone obvious what Jeff Bezos and Co. are doing here. By excluding Chromecast and Apple TV from the world's largest online retailer, they hope to either harm their competitors' streaming services or force them to incorporate support for Prime.

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This isn't the first time Amazon has pulled this trick. When the book publisher Hachette refused to agree to Amazon's terms on e-book pricing last year, the company retaliatedby sharply increasing shipping times on Hachette titles, raising prices, and directing customers to rival publishers. Given that Amazon accounts for over 40 percent of book sales, and over 60 percent of online sales, Hachette faced truly enormous coercion. (The two sides eventually came to terms.)

Google and Apple take similar, if less aggressive, actions, using their portfolios of existing services to channel users toward their respective products. Everyone knows that if you choose an Apple or Android device, it's very hard not to get sucked into using one or the other ecosystem. In the EU, Google is under investigation for using search to promote its products, while in the U.S. the Federal Trade Commission is investigating the same allegation against Google's Android mobile operating system.

All these behaviors are competition of a sort, just not the kind that is taught in Econ 101 textbooks. These companies are competing with their market power —either by attacking competitors directly or preventing their own customers from fleeing — rather than competing on price or quality. Only a company with some degree of monopoly control could even attempt such a strategy — otherwise competitors would simply snap up the forgone business.

We should also note that such behaviors are not remotely new. Back in the Gilded Age, corporations fought against one other with militias, dynamite, stock market swindles, jurisdiction-shopping, anti-competitive compacts, and so forth. That truly inefficient competition — combined with the prospect of colossal wealth, of course — led incipient monopolists like John D. Rockefeller to set up their infamous trusts, since owning everything is easier than dealing with sabotaged pipelines.

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The question for the future is whether Amazon and its ilk will act any differently than the oil and steel barons did back in the day. While I doubt they will resort to open gun battles in the street, I see no reason to think so. The heavyweight capitalist slug-outs of the past ended with one victor — and effective monopoly control over a big chunk of the economy. It's easy to imagine a future dominated by Standard Search, Standard Online Retail, and so forth.

That also raises the question of government regulation. Neither Amazon nor any of the other budding monopolists (Intel, for example) could exist without the quality securities markets, limited liability, and stable institutions offered under the aegis of the government. That means the government has a role to play in either letting this trend continue or stopping it in its tracks.

Back in the Progressive Era, it was a given that breaking up the monopolies, or forcing them to compete on socially positive axes, was worth serious consideration. Such thinking has come somewhat back into vogue. After the financial crisis, no less a free-marketeer than Alan Greenspan noted that after Standard Oil was broken up, "the individual parts became more valuable than the whole."

Such a thought is still far outside the bounds of normal discourse when it comes to Amazon, Apple, and Google. But creeping monopolization is not going to stop of its own accord.

This article originally appeared on The Week.
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