How Big Should a Company Be Allowed to Grow/ Monopolization Laws

in #money3 years ago

Monopolization laws in the last few years have come back into talks again (after being very popular in the early 2000s with technology acquisitions), mostly due to the staggering growth of Amazon. This comes as no surprise after Amazon has been purposely cannibalizing any and all companies they can, but most of the time with techniques that really are only possible when you are a company with billions in revenue. I want to talk about my opinion on monopolization rules and whether or not there should be a point where we let companies grow to.

I should start off and say I am very torn on this topic, mostly because I come from an economic background, which pretty much says let the free market decide and have zero government intervention. The problem with this idea is it often clashes with what might be best for the consumer if a business is to grow to a point that makes it impossible to compete against. The benefit most small businesses have is that they can maneuver and adjust quickly in certain situations while large companies can not, but that benefit is often dwarfed by the ability for massive companies to use a slough of tactics that are unconventional, but work well.

One tactics companies love to use is to purposely lose money in the short to medium term and run their competitors out of business so they profit in the long run. This is a technique that works and is very competent in destroying competitors. Amazon has been launching their cheap Chinese products under their “Amazon Essentials” brand and pushes it to buyers with their shipping service until their competitors drop off. They either make no money or lose money on these products until their competitor is gone, but already it has worked amazingly. If you search many small items that are part of the Amazon essentials branding, you will see that hardly any competition shows up at anywhere near the same pricing.

However, these products are minuscule when it comes to Amazon going after real competitors worth billions. In the last 30 or so years the amount of companies that have consolidated is insane and the tech industry is leading this movement. They are so profitable and flushed with so much cash that it just makes sense to buy out a competitor rather than compete with them and this is where the problem lies. If they continue to buy up companies that have any sort of competition they will soon be a monopoly in the space. As it is we have oligopolies in the tech sector, monopolies would only be worse. Prices will be higher than in competitive markets and the only ones who would suffer would be the consumers.

If a company like Amazon merged with say, Alphabet/Google, they would literally control half the purchases on the internet overnight. They could charge whatever they wanted with no competition and could pretty much do it unrivaled. The benevolent dictator is a myth and that is exactly what these companies will become if it gets to that point. I think the government needs to stay out of the market in 99% of situations, but I would agree that if a merger is going to have such a large effect on the population, they should block it. I dont know how to calculate when this inflection point is or when it becomes feasible, but it definitely has a point.



It's a scary thought to think about and you never know it just might come true. Good chance actually. Irobot future is a possibility

Free markets rarely lead to long term monopolies.

Governments are the only entity that can create long term monopolies through protection either directly with laws or indirectly through Patents and other means.