One of the main pillars of capitalism is competition, the theory being that competition, whether sporting or commercial, will stimulate our best efforts and the winner will produce a product that best suits the consumer at the lowest price. A monopoly is when a single or small group of companies control the production and distribution of their product.
As experience shows, a monopoly defeats this purpose by cornering the market for a product or service and concentrating wealth in a small minority. If I own the production and distribution rights, unless there are state and federal regulations prohibiting that, I can pretty much charge whatever I want. This not only harms other competitors, but limits consumers’ choices and increases their cost of living. In short, a monopoly is a crude version of capitalism that benefits no one.
Monopolies were originally created to protect property. In 1623, the English Parliament created the “Statute of Monopolies” intended to protect patents which are now considered a fair and reasonable means of protecting the creators of new inventions and strengthening the economy. An unintended consequence has been that today’s monopolies achieve the opposite result by charging consumers higher prices and concentrating wealth at the expense of consumers. For example, in the early 19th century, the Pabst Brewing Company owned brewhouses, saloons, and even forest land for timber to make beer barrels, which certainly tipped the scales in their favor and it doesn’t There were no laws at the time to curb this practice. . It wasn’t until 1890 that “The Sherman Antitrust Act” was passed by Congress which prohibited corporations from colluding or merging to form a monopoly “The law prevented these groups from dictating, controlling and manipulating prices… The Act was intended to promote economic fairness and competitiveness while regulating interstate commerce.The Sherman Antitrust Act was the first attempt by the United States Congress to address the use of trusts as a tool to a limited number of individuals to control certain key industries (www.investopedia.com)
Today, we have federal and state laws that require private companies to compete on equal footing. For example, a company that sells its product at a lower price than its competitors is certainly legal, but when this price is lower than the cost of its production and/or the motive is to eliminate competition, it is considered breaking the law. As you can imagine, it is difficult to establish a motive in these cases and creative accounting can obscure the true costs of manufacture or production. There are, however, other methods that are not illegal. One of them is to form a holding company.
“A holding company is a business that does not produce goods or services, but only has investments in other businesses. Most businesses are organized as operating companies, which means that they manufacture items or provide services. Essentially, a holding company invests in operating companies that actually produce goods or provide services. Companies owned by both holding companies and parent companies are called subsidiaries. If the holding or parent company owns 100% of the subsidiary, it is referred to as a wholly owned subsidiary. Certain tax advantages accrue to holding companies that own more than 80% of the shares of a company. (smartasset.com)
Subsidiaries of parent companies are often not acquired through the purchase of stock, which is how holding companies typically obtain their subsidiaries. Instead, parent companies often create subsidiaries by splitting up operating units (for example, Alphabet became the holding company for more than 160 sites, including Google Search, Maps, Youtube, Fitbit, Nest, and Waze. OK, at Strictly speaking, Waze is a ‘relative’ is not a holding company, as holding companies enjoy certain tax advantages and are not liable for the actions of their subsidiaries. But why, you might ask, did Alphabet do you need both Google Maps and Waze as they are two navigation apps I will I don’t know – – but if you go to the HyreCar website you can at least look at the pros and cons both.).
To circumvent the regulations and the restrictions applied to the monopolies, the current strategy consists simply in absorbing competitors and/or forming holding companies which are only a group of other companies with similar or diverse products. A group of holding companies is called a “conglomerate”. What is a group of conglomerates called? Do not ask.
Internet service providers like Spectrum and Verizon and Internet sites like Alphabet (owner of Google) and Meta (owner of Facebook) present particular problems in that their software products are not tangible and visible like automobiles, telephones and beer. The internet, which connects everything and everyone, has provided opportunities to create and grow businesses that have never existed before, most of which supply and contribute to the growth of the internet (sounds like an unintended consequence like Frankenstein’s monster or a creature that grows by feeding on itself).
And the growth rate of the Internet economy is accelerating, that is, the speed of change is accelerating. In response to the situation, the United States Federal Communications Commission (FCC) and the Federal Trade Commission (FTC) are investigating, among other things, whether and to what extent a monopoly threat are the “Big 4”. the largest Internet companies: Amazon, Apple, Google and Facebook. (The growing tension between the FCC and the FTC is an interesting story in itself (broadbandnow.com). Additionally, “the UK competition regulator, the Competition and Markets Authority, has ruled that the acquisition of Activision Blizzard by Microsoft for $70 billion could harm competition in the video game market, and deserves further investigation.” (https://www.polygon.com/23332541/microsoft-xbox- activision-blizzard-deal-uk-regulator-investigation)
More than ever, we need a fair solution for consumer and business, but the current cantankerous political situation does not bode well for a quick or easy resolution. Buckle up.
Fun fact: I came across this treat while researching for this article:
“Why is Major League Baseball exempt from antitrust laws?
Antitrust laws aim to prevent companies from engaging in anti-competitive practices. MLB has held its exemption since 1922. Major league players are represented by a union, and labor law presides rather than antitrust law when a collective bargaining agreement is in place between management and employees. https://theathletic.com/news/us-senate-mlb-antitrust-manfred/czCdXJCAAatD/2
Dr. Stewart A. Denenberg is professor emeritus of computer science at Plattsburgh State. He recently retired after 30 years there. Prior to that, he worked as a technical writer, programmer, and consultant to the US Navy and private industry. Send your comments and suggestions to his blog at www.tec-soc.blogspot.com, where there is additional text and links. He can also be reached at [email protected]