Technology: The New Frontier of Modernized Monopoly
Art by Marián Palacios Fernanández.
As the current state of our society is evolving along with the whirlwind of technology, it would not be an understatement to claim that we are amidst a technological revolution. There is no doubt that it has brought significant improvements to quality of life around the glove. Nevertheless, its incrementing dominance and control over the market have both shown to be encroaching the rights of competitors which, compared to advanced and innovative technology, are no match for a more convenient and virtualized option. Prominent examples, such as social media and online retail platforms, emerged as a more tempting and practical choice than that of a conventional brick and mortar shop or newspaper. Modern-day tech companies took advantage of this increasing demand for convenience. Thus, the private tech companies, driven by their capitalistic nature, began taking measures that are not the sole intention of benefiting the majority. Prevailing over conventional competitors, these tech giants gradually began squeezing them out of the market; exemplifying monopolistic behaviors.
Monopoly, widely regarded as inefficient and unequal, is characterized by the lack of competition among certain markets. Monopoly refers to the state in which a company has near-total control over a sector of the industry. Such instances are often considered as the result of free-market capitalism, where the absence of restraints and regulations directly contribute to companies dominating the market. Antitrust laws and anti-monopoly regulations have been imposed throughout history, and as early as 1890, the Sherman Antitrust Act became the first legislation to limit monopolistic activities in the United States. Other Antitrust measures followed, intended to protect consumers and allow small businesses to thrive. A company that dominates a business sector is allowed to use its dominance to its advantage – and at the expense of consumers. This could lead to fixed prices, bypassing the laws of supply and demand, creating artificial scarcities, inferior quality and services, and corrupt behaviors.
Seeing as technology is relatively new to the market compared to conventional competitors, then why are they a potential threat to cause monopoly? As our world is becoming more virtualized, tech companies are given the advantage. One prominent example is Facebook: a technology conglomerate posing as a social media platform for people to build communities virtually. The Federal Trade Commission is suing Facebook for maintaining its consociating monopoly through anticompetitive conducts, with allegations posed by a coalition of 46 state attorneys general, who accused Facebook of targeting industries with potential threats to their dominance. For instance, in April, 2012, Facebook chose to purchase Instagram for $1 billion rather than to compete with it. “The businesses are nascent but the networks are established, the brands are already meaningful and if they grow to a large scale they could be disruptive to us,” Mark Zuckerberg, CEO of Facebook, wrote. The complaints allege that Facebook feared the rising influence of Instagram would pose an existential threat due to its innovative form. Furthermore, Facebook’s acquisition of WhatsApp in 2014 also demonstrated its anticompetitive conduct. The FTC (Federal Trade Commission) also provided the allegation of Facebook cutting off API (application programming interface, which are interfaces between multiple softwares intermediaries) from rival industries. Back in 2013, when Twitter first launched Vine, Facebook cut off the API access for Vine users to connect with friends on Facebook. By eliminating potential competitors, Facebook is not only violating antitrust laws but also asserting dominance and further proving that their intentions are self-driven. Numerous other well-known tech companies also either faced or were accused of monopoly behaviors. Google, for instance, monopolized online search and advertising (prioritizing their own contents before contents from other organizations); Amazon, on the other hand, was accused of having anticompetitive conduct towards third-party sellers. The importance of limiting the span of tech companies’ control over markets–specifically social media platforms –is more evident than ever. Seeing as social media platforms are the voices of society, it would bring detrimental effects if the right of speech is controlled by a single force. Tech companies have direct control over what content is released, seeing as they can censor contents or suspend accounts when deemed necessary. By maintaining competition amongst social media companies, it allowed the companies to supervise and prevent each other from abusing their power. As the effects of division and political polarization are surfacing, it is imperative to ensure that no tech companies are granted access to impose upon the voice of the international community. Influences such as negative propaganda and fake news manipulated by a single force could lead to more uncalled-for turmoil in a nation.
Unlike social media platforms, other tech companies are not targeting competitors similar to themselves; but conventional competitors. Take community group buying for example Tech giants in China (Alibaba, JD.com, etc.) have been taking various measures to dominate the market. In order to do so, these companies (relying on advanced systems such as massive data, advanced algorithms, and assets) offered insanely low prices for vegetables, (as low as 0.99 yuan, or $0.15), which conventional stores can never afford to offer. These companies created platforms that allow consumers to buy in communities. By providing a more affordable and convenient choice, the tech giants have essentially cut off the demand from the supply and demand chain for conventional competitors. When competitors are eliminated, these tech companies planned to triple the price to earn back the profit they lost from their efforts. This not only ensured dominance in the market but also left consumers no choice but to purchase from those companies. From a long-term perspective, such measures would lead to issues that would take a long time to resolve. For consumers, this would mean paying high prices for commodities at fixed expenses. For the majority, this would mean unemployment and no sources of income. For the market, this would mean inflation, and eventually market failure.
Seeing as uncurbed monopoly could lead to severe detriments, how could such organizations be impeded? In some cases, the result of monopolization is inevitable. For instance, online shopping platforms are given the advantage of convenience over conventional stores. In this case, consumers would undoubtedly choose the more convenient and practical option. Technology has the capability of virtualization aspects of our daily life, the efficiency of such is incomparable to prior the technology era. Thus, with a lack of demand to the more traditional side of the market, the supply and demand cycle cannot continue. In other cases, monopoly and anti-competitive behaviors can be limited through stricter regulations and legislation from the government. By imposing the restrictions, it would prevent companies from exerting their sphere of influence or taking harmful measures. The government also has the ability to ‘split’ industries when they are granted too much power in the market. The technology industry has a promising future – but only if its existence does not bring detrimental effects to society.
https://www.investopedia.com/terms/m/monopoly.asp
https://www.theguardian.com/technology/2020/dec/09/facebook-lawsuit-antitrust-whatsapp-instagram-ftc
FTC Sues Facebook for Illegal Monopolization
https://www.investopedia.com/terms/m/marketfailure.asp
Nicely put, Kudos!
Whoa plenty of very good facts.
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