> Scale. This applies to processing regulation and also to purchasing power, organizational ability and much else besides.
It's also a cumulative problem. If you have the existing level of regulation, you have Amazon and Walmart. At a lower level of regulation there might be ten of them instead of two. But wait, then they each have less scale which makes it easier for smaller competitors to enter and that turns it into twenty or fifty.
There are also ways to counter non-regulatory scale, like specialization. Newegg competes successfully with Amazon because they focus on electronics. Then they buy enough electronics to have scale in electronics, even if they can't match Amazon's scale in diapers or ice melt.
And some scale problems are intractable but they're also separable. If you wanted to compete with Amazon and FedEx and UPS didn't exist, you'd be screwed. No way you have enough scale to do that on your own, selling your printer toner refills or whatever. But they do exist. Which allows competition for the verticals that don't need that amount of scale to be viable.
Moreover, scale has limits. Maybe you need to move ten thousand units a month to be viable in a particular market, and that takes at least ten employees. You can't do it in your garage. But that doesn't mean you have to be the size of Amazon either. And this threshold is different in every market. The higher regulatory burdens are, the more markets go on the wrong side of the line.
The problem with regulatory costs is that they tend to be generic. You're stuck with every payments regulation, labor regulation, every jurisdiction's unique tax laws, regardless of what you're selling. Specialization doesn't get you out of most of them. And they can accumulate without bound. Add excessive regulatory burdens on top of all the other advantages to scale and you get what we've got, instead of some lesser scale advantage with greater competition.
> The fact is, regulation is hard to get right.
It's all cost benefit analysis.
There are regulations that cost a negligible amount of money and have an enormous benefit. Those aren't the ones that meaningfully impair competition, because they cost a negligible amount of money and if we only had the ones with an enormous benefit then the cumulative effect would still be small.
We also have some regulations with a large cost and a modest benefit. Those are hot garbage, but they're on page 7357 of a ten thousand page bill that nobody read before passing and the businesses they destroyed are already bankrupt instead of lobbying to have it repealed.
But the biggest problem is the numerous, numerous regulations with a small cost and a small benefit. Because those aren't worth it. Breakeven on the regulation, if you can even do the accounting that carefully, is still a net negative because of the effect on competition.
So we should keep the ones in the first category. A small cost with a large benefit. And get rid of all the others.