Monopoly, is it a problem?

> Monopoly power is market-distorting, and prevents the normal free-market mechanisms from working to allocate supply and demand efficiently--- even if the monopolist did nothing "wrong" in getting to be a monopoly. The main argument for anti-trust laws is that society is better off when the "invisible hand" can work its magic, and use of monopoly power, especially to influence other markets (e.g. Microsoft demanding that Dell not ship any non-Windows computers), prevents the market from operating efficiently.

Having large market share lets a company generally get its way in many things (favorable terms, high margins), but the company always has a tradeoff consideration to make: If quality gets too bad, or prices get too high, someone is going to come and try to eat their lunch.

Microsoft is a great example. They succeed in markets where they make products that are good enough to great, and fail when they do not. The XBox and Windows 7 sell quite well. But when they put out poor products or fail to keep innovating, they stagnate or lose - Hotmail, Windows Vista, Internet Explorer.

People get upset because a company with high market share can antagonize customers and suppliers in the short term and there's not immediate recourse. But there is recourse. Internet Explorer had a near monopoly position, they got arrogant and stayed in IE6 forever, this left a hole that Firefox and later others came through. Letting Windows stagnate and then putting out Vista with its bloat and driver issues let Apple grow in power to compete.

Microsoft has large market share, but if they abuse it and don't deliver appropriately, they get bitten. The alternative - trust busting - has produced some horrific corruption and lobbying. I present the following as one of the most corrupt rulings in American legal history:

http://en.wikipedia.org/wiki/United_States_v._Alcoa

"Alcoa said that if it was in fact deemed a monopoly, it acquired that position honestly, through out competing other companies through greater efficiencies. Hand applied a rule concerning practices that are illegal per se here, saying that it does not matter how Alcoa became a monopoly, since its offense was simply to become one."

Alcoa was a great company that took a large market share by making a great product, doing it efficiently, and ran their company well. They didn't anything sleazy at all - but they were broken up under antitrust laws as a political power play.

Giving governments the power to break companies based on the subjective judgment that they're too powerful leads to bad places. The power tends to get wielded rather arbitrarily. There's a natural check on companies with large market share - if they overprice or produce low quality, it stimulates competition and they lose that market share. People point to bad companies abusing monopoly position, but there aren't many examples of companies that holding a monopoly position with a bad product for very long at all. The only way it happens is when it's the "official" provider as blessed by some kind of government agency.

Letting political figures and bureaucrats break up a successful company just by virtue of it being successful goes to bad places - in particular, a company with a positive history of acquisitions having to run things by the Department of Justice is a problem. Google should be allowed to acquire whatever the heck they want - if they stop innovating or start gouging suppliers or clients, then they'll enable competitors to rise up. But if they're providing good services and winning because they meet people's needs, then they should be allowed to win, not broken because a competitor started lobbying and donating money to a powerful Senator.

Market draws it's power from being multiagent and dynamic. All monopolies are evil not because they exploit workers and consumers (which they may o may not actually do) but because they harm things that power market. They reduce number of actors, narrow choices and lower the speed at which market adapts to situation.

> If quality gets too bad, or prices get too high, someone is going to come and try to eat their lunch.

The problem is that in monopoly, things have to be really, really bad and prices must be really outrageous before anything changes. Healthy markets are the opposite - even a minor decrease in value creates a niche that is filled by a competitor.

> The problem is that in monopoly, things have to be really, really bad and prices must be really outrageous before anything changes.

That's the theory, but do you have any examples of a company abusing monopoly power without government backing for any extended period of time? I don't know any examples of a non-government-backed company abusing monopoly power for any considerable length of time without losing market share.

Good point. But, what if in the "imaginary case", Google starts to become the one and only internet service?

They will have the largest capital, the best human resources, and they could control the market. I mean factually nobody could compete with Google. Because of a reality that nobody could make money if they want to compete with Google.

Let's also imagine that they start venturing into non-internet service, and they were able to do that too because of the large amount of capital that they have amassed from a long time.

I understand that government should not break companies just because of their political power, but in this imaginary Googlism society. How do people who are upset with Google or at least not satisfied, start to find or build another provider?

(I know this is quite impossible, given the amount of competing internet services, but just imagine).