Understanding Monopolies
Our last post on monopolies gathered good reader interest, so we thought we would delve into the topic of monopolies a bit more.
The question many people ask is “Is Google A Monopoly?” For some reason, this seems of more interest to many people that asking say…if Bank of America is a monopoly.
As soon as the question is posed as to whether a company is a monopoly, the question itself is weakened and a person offering the counter argument can easily say that it is not and that therefore there is no reason for concern. A more useful phrasing of his question is, “does XYZ company have significant monopoly power.” Now, many more companies fall into this category. It is not only pure monopolies which are anti-competitive and illegal in the US, but companies with monopoly power. Thus phrasing the question this way helps address if a company is behaving in an illegal manner, and is deserving of attention from the Federal Trade Commission. The FTC is the government department charged with overseeing anti-competitive behavior.
Monopoly Power With Google
It is difficult to make the case that Google does not have significant monopoly power. Estimates are that 64% of web searches are performed through Google. 64% control of any market is easily considered a strong indication of monopoly power. While some propose that consumers can easily switch away from Google, in practice this rarely happens. Furthermore, Google is no longer only a search engine. Google offers Google Docs, Gmail, Google News among many other services. With all these services, Google is making more and more difficult to live without them. For prospective monopolists out there take heed, this is the way to do if you want to accumulate monopoly power. Create such great services that people don’t want to switch away from you. There is another interesting feature to Google which separates it from other companies with monopoly power; all of its services (except corporate offerings and Google Adwords) are free. And most of them are also very good. In fact, while the discussion of Google’s monopoly power has occurred, what has gone unnoticed is that Google is probably the greatest contributor to the common good of any company in operation. When compared with monopolies like Goldman Sacks or Bank of America that have really destroyed public value, the comparison is stark. Both these companies should be subject to anti-trust investigations in addition to fraud investigations and broken into much smaller companies. Instead of being parasites on the economy, as these two companies have, Google has provided extensive functionality to internet users all over the world – and almost all of it for free. Google is currently, and has an even greater potential in the future to break the corporate control of media by selecting to show better content articles in their search results above articles that happen to be written by large media outlets. This would create a meritocracy in media and opinion that is currently insufficient to support democratic systems. However, the internet is far more democratic than any other media system.
Yahoo, AOL and Microsoft were all about putting themselves in front of their customer. AOL tried to make novice internet users think that AOL controlled the internet and that you needed to stay within the AOL interface, Yahoo tried to control internet users to not leave their site and to pay exorbitant fees for the most basic services. Microsoft’s anti-competitive behavior is legendary. Because the internet is a competitive environment, a small upstart company – Google beat them all, and did it pretty easily. What this tells us is that Microsoft’s other markets are not competitive because in any market with substantial competition (such as portable media players) they lose. There is a substantial lock-in with regards to operating systems and office suites, so Microsoft can continue to not innovate, bring out buggy products, and still maintain 90% market shares. The more software becomes web enabled, the less chance Microsoft has to monopolize the industry.
The Strange Monopoly
Thus we don’t dispute the fact that Google has monopoly power, however, what we can not see is how monopoly power negatively affects consumers. The textbook monopoly injures its consumers by overcharging them and limiting their choice. However, Google is doing neither of these things. In fact, Google is reducing the monopoly power of Microsoft by undercutting its Office Suite, and provided large email storage capacity, that other companies like Yahoo used to charge for. Google is in this way making internet services more, not less competitive. Furthermore, Google is not using its power to rest on its laurels, which brings so many monopolies down (just think GM), but is constantly improving its services.
What Will Google Be In the Future?
If there is a concern it is to the future. Google is accumulating a tremendous amount of power, not the least of which is the world’s largest email database which contains a mind boggling amount of private information. With Google’s massive email database, and its data mining capabities, it could analyze this database towards very bad ends. What type of ends? Lets just say that the FBI and Department of Justice would absolutely love to have full access to the Gmail database. Have you ever written an email critical of Homeland Security? Ever ordered a book from Amazon.com which is critical of the government. Both of these peices of information are in your Gmail account (the order confirmation from Amazon.com), and this does not even get into the web history file that in many cases Google has connected to your Gmail account. This is really not joke the NSA has connected monitoring devices to the ATT internet trunk line in San Francisco, and has most likely done the same thing with the assistance of other internet traffic carriers. What does ATT get? It gets preferrential deregulation legislation. If the government wants to create big brother, the single easiest thing they could do is pressure Google into giving them access to the Google database. There are a few ways to do this
- Threaten Google with an anti-trust investigation by the FTC unless Google plays ball, providing logins to the CIA, FBI and NSA
- Stage an attack, and bring up the fact that the terrorists communicated by Gmail, just to justify attempting to get this access as a way to stop future terrorist attacks
As Google gets more and more comprehensive, there will be greater incentive to do so.
Conclusion
Google has acted ethically since its inception and has pushed a number of opportunistic predators like Yahoo and Microsoft out of the way. Concerns about monopoly, which accurate, miss the mark somewhat because Google is not locking people in to their services to charge money, since almost everything they offer is free. However if Google will act as ethically in the future is anyone’s guess. To us the bigger concern is related to the gigantic and highly personal database that Google continues to amass on individuals and whether this database will eventually fall into the wrong hands and be misused. We must not allow the government to use the specter of anti-trust legislation into providing access to the FBI or DOJ to the Google database.
References and Info
Everyone feels bad for Yahoo now that they are on their way out, but their business practices were horrible. They were about capturing customers and then mistreating them. Yahoo is out of ideas and is now no longer in the position to manipulate internet users. Good riddance.
