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Saturday, May 25, 2024

Why True Free-Market Advocates Oppose Antitrust Laws

Trying to dominate the market isn’t an example of anti-competitive behavior. It’s what real competition consists of.

Image Credit: Photo Mix - Pixabay

A May 2, 2024, headline from the New York Times reads: “The first tech monopoly trial of the modern internet era is concluding. The judge’s ruling is likely to set a precedent for other attempts to rein in the tech giants that hold sway over information, social interaction, and commerce.” The focal point of this case is Google’s dominance in the search engine market. The government alleges that Google engaged in unfair competition by paying Apple and other companies billions of dollars to have Google’s search engine automatically perform searches on smartphones and web browsers. In contrast, Google contends that consumers choose its search engine because it offers the best product. Google is not the only company to have been in the crosshairs of government antitrust regulators—Microsoft, Apple, Meta, and Amazon have been targeted in recent years. As the NYT article also reports, in 2021, Google allocated $26.3 billion towards securing its position as the default search engine on browsers such as Apple’s Safari and Mozilla’s Firefox. This ensures that it is automatically chosen for users, as was highlighted during the trial.

In 2020, the Justice Department’s lawsuit against Google contended that these contracts were crafted to safeguard its monopoly in the search engine business while hindering the competitiveness of other options such as Microsoft’s Bing and DuckDuckGo. Microsoft CEO Satya Nadella expressed concerns about Google’s dominance, referring to the Internet as the “Google Web,” and forecasting a future where Google could employ analogous strategies to dominate the burgeoning field of artificial intelligence. Ironically, similar charges of dominance and abuse of power were leveled at Microsoft in the 1990s. At the time, Sun Microsystems CEO Scott McNealy stated, “Nobody should own the alphabet… You should not be able to charge when you invent new alphabet characters like N and T,” referring to Microsoft’s Windows NT.

In all areas of business, individuals and companies strive for excellence and dominance. Entrepreneurs aspire to become the next “shark” on Shark Tank or to become the next Steve Jobs, Bill Gates, Jeff Bezos, or Elon Musk. Amateur athletes dream of becoming the next top star in the NFL, NBA, MLB, or NHL. This competitive spirit, rooted in the pursuit of success, drives innovation and benefits society at large. When someone “hits it big,” he or she not only succeeds personally but also benefits millions of consumers by providing goods or services that enhance their lives.

Antitrust legislation ostensibly exists to maintain a competitive market economy; however, it is often wielded as a governmental tool to punish success. Not surprisingly, antitrust laws are supported by less successful businesses against their more formidable rivals. In addition, the words control and power are often misused when referring to business activity. Companies like Google, Apple, Amazon, Meta, and Microsoft are often portrayed as monopolies that exercise control and power. However, this obscures the true essence of what competition really is. Trying to “kill off” one’s competitors is the goal of dominating a market. Attempting to prevent other companies from successfully negotiating deals with rival firms is not anti-competitive. In fact, these are clear examples of real competition. Power and control imply force; in the case of Google and other “tech monopolies,” they cannot force individuals to use their services. Unfortunately, this point is often ignored by standard economics textbooks and economists who label themselves as “free market”-oriented.

Unless the government is involved, businesses cannot force consumers to do anything; ultimately, consumers determine success. As the economist Ludwig von Mises pointed out in his book The Anti-capitalist Mentality, “The captain is the consumer.” Pundits often dismiss the fact that private companies owe nothing to consumers other than what has been contractually agreed upon. Any business’s dominant or sole position stems from the superior value it offers, as evidenced by the voluntary adoption of its products and services by consumers. Consumers made Google the number one search engine and Apple the cell phone of choice. To be clear, people do not use Google services, buy Apple products, or communicate on Facebook out of love and kindness for these companies. But Bill Gates never forced anyone to use Microsoft products; Mark Zuckerberg did not force people to create a Facebook account; Sundar Pichai did not force individuals to use Google as a search engine.

Competition occurs when individuals strive to outperform their rivals. Is it anti-competitive to desire not only to reach the top of the hill but also to be the only one left in the game? Competition is a rivalrous process in which businesses struggle to be the best. This rivalry, which has no end state, can lead to the existence of many firms or just one. Neither scenario is better or worse, more competitive or anti-competitive. No external standard can determine the correct number of firms or the number of choices consumers have, and none should be allowed to trump the market process. True competition is dynamic, not a static snapshot of a moment in time.

The criticism leveled at Google and other tech giants—that they deny smaller firms access to their platforms or try to eliminate weaker and smaller rivals outright (i.e., “crush the competition”)—overlooks that this is evidence of competition. To clarify the true free-market view of competition, consider the following scenarios. Imagine that Apple denies a company from having its app on the Apple platform. Alternatively, consider a scenario in which Starbucks negotiates with a mall owner to prevent any other competitor from opening a coffee shop in the mall. What if a particular company’s operating system (e.g., Windows, Chrome, macOS) did not allow another company’s software to work on computers using its system? What if Google favors some companies over others on its search engine?

In all these situations, we cannot forget the sanctity of private property and that we must respect those rights. To truly cause harm, one must deny something that was owed to another person or business; in other words, this would be denying something that another party had a right to have or enjoy. In all the above-mentioned scenarios, no harm is caused—no one has the right to have their app, coffee shop, or software on another’s private property. So, if HP or Dell signed an exclusive voluntary agreement with Microsoft that stated that only Microsoft products can be used and only certain programs can be downloaded on their computers, as long as consumers are made aware of such agreements before they purchase the computer, that would not be anti-competitive behavior. Of course, rival software companies will not like that, and they might argue that this is “unfair.” But this claim arrogantly presumes that they have a right to the private property of another company (i.e., HP or Dell). As long as the government does not deny entry or force one company to do business exclusively with another company, then there is no foul and the charges of anti-competitiveness are wrong.

True proponents of free enterprise (capitalism, free markets) oppose antitrust laws. They understand that there is no objective “fair” or “reasonable” price, and they understand that there is no correct number of firms. Real competitive behavior occurs when a company tries to become the lone survivor in the marketplace. Freedom of association and competition go hand in hand. If Company A only wants to do business with Company B to the exclusion of companies C–Z, that is their prerogative. No organization has the inherent right to do business with another entity.

The only real monopolies that can exercise power through coercion are the government or businesses that have been given a special privilege from the government. Unfortunately, it is in the self-interest of many economists and lawyers to support antitrust laws in the name of “protecting consumers and ensuring competition” so they can justify their paid positions. But the real threat to consumers is when the government tries to “protect” them from the actions of true competition and the results of market success.

  • Ninos P. Malek is an Economics professor at De Anza College in Cupertino, California and a Lecturer at San Jose State 
    University in San Jose, California. He teaches principles of macroeconomics, principles of microeconomics, economics of social issues, and intermediate microeconomics. His previous experience also includes teaching introductory economics at George Mason University.