With the possibilities of the Internet continuously expanding, it is noticeable how easy online companies begin and then grow into something so much bigger. Due to this new way of building an enterprise, there is the concern of online monopolies. By definition, a monopoly is “a single supplier” that “controls 25% or more of a particular market”. (Economic Online) Although this type of economic capitalization is heavily regulated in the United States, the government may grant a monopoly status to a firm that provides a scarce resource, copyright, images, or service. (Economic Online) However through innovated technology, corporations are allowed free reign to dominate and control the ever-changing web. (Ehrlich) In relation to social media, there is becoming a thinner distinction between advertising and consumer influence. (Auerbach, Ehrlich) To ensure consumer privacy with equal opportunities of resources and services, Internet monopolies should be controlled and reduced.
The corporations that have quickly gained monopoly momentum online include the well-known Google, Apple, Facebook, and Microsoft. In recent events, including net neutrality, these major platforms are now being exploited for their scheming and abusive influence over consumers. Google and Facebook have ‘gobbled up’ “about 85 percent” of internet advertising dollars and are found to have influence in politics. (Cooper) Another monopoly example is Amazon who bought out Whole Foods Market, which made policy makers worry about other web-based companies expanding into the “brick and mortar world”. (Ehrlich) Though these are now major networks expanding their reach by merging with others, they are able to morph into other markets creating more power and outreach.
There is the irony that these online-based corporations had their startup due to the open market, and now they are monopolized in their own particular market. Facebook began with Ivy League students, Google was a basic search platform, and Uber originally began as a luxury car service. Now, these firms are global and threaten the existence of other companies such as MySpace, Bing, Yahoo, and the general taxi service, respectively. The monopolized businesses utilized networking innovation and the growth of online consumers in order to become such vast platforms. With more attraction to these sites, they find expansion easier with online marketing and advertising opportunities.
Auerbach has a conveying argument of how online companies collect data about consumers based on what they ‘click’ on the Internet. He highlights the point that in 1990s when web ads and click-through rates were first monitored, people used induction to realize and form the belief that it was wrong. Though is it drilled into the newer generations about online privacy and protection, it seems still that anyone and any service can use the Internet to find out everything about a person’s interests, past purchases, income, own a home, rent, have a car, etc. With microtargeting becoming a global concern, there is a reappraisal of online markets using collected data and demographics to identify consumer interests. (Auerbach, Ehrlich) Sites that do this type of conniving include monopolized media platforms such as Facebook, Twitter, Apple, Google, and Amazon. The data collected from consumers are then analyzed and used by advertisers, internet marketing companies, and political campaigns to further their reach into consumer markets. (Ehrlich, The Economist) Using mobile application to order a pizza? The pizza place already knows your address, your phone, your previous orders, how much you paid, how much you tipped, and what your favorite toppings are even before you click ‘Order’.
By limiting these companies previously mentioned, there are many positive economic and consumer effects. First, there would be a growth in competitive markets both nationally and globally. (Economic Online) With this comes safer advertising, entrepreneurship, product efficiency, and increased employment. The surge in competition also allows consumers to have the freedom of choice with lower and fairer prices, as monopolies dominate the pricing charges. (Economic Online) The general economic welfare will be influenced by the consistent, competitive markets and the availability of supply and demand by consumers. Also with the limitations, the invasion of privacy into consumers’ lives are reduced allowing for independent advertising not based on collected data. (Economic Online)
In rebuttal to the argument, online monopolies are argued that they are not “real” due to their Internet basis. (The Economist) Dominant monopolies also have advantages that can have constructive attributes economically. Monopolistic companies limit the waste of resources and allow for high innovation efficiency. This then leads to technological progress and high profit generation that would help regulate the national economy. Firms are continuously modernized through ‘creative destruction’, which is when older companies “would eventually be replaced by more efficient and effective” technologies with an open transitioning process. (Economic Online) Another economic advantage is the monopolies first starting small, then “penetrate overseas markets, earning a country valuable export revenues” increasing the influx of revenue. (Economic Online)
As ruled by the government, the benefits of regulating monopolies outweigh the existence of the monopoly powers. To reap the rewards of open markets online, there are many individual and combined solutions that can be instilled and lawed. (Economic Online) The prevention of company mergers, buy-outs, and other forms of combined markets allows the various markets to remain independent. Price regulations set by federal governments are a popular form of limiting monopoly power. (Economic Online) First is the rate-of-return rule, which monitors and limits, by an overseeing body, the average price of a product or service. The other option is the price capping that forces “forcing the monopolist to charge a price, often below profit maximizing price” (Economic Online)
For the corporations currently in the position that are considered as a monopoly, regulations can be instilled in order to limit their influence on consumers. Here again, price regulations and advertising policies can be implanted by a governmental level. On online media platforms, data collection and invasion of privacy needs to be banned. Another alternative is splitting a corporation up into smaller, independent platforms. (Economic Online) An example of this type of regulation can be done with Microsoft, which can be divided into retail and wholesale businesses. (Economic Online) An additional option to reducing a monopoly is to open the business to be under public and nationalized control. In order to determine reform, the United State Supreme Court decided that a company would be found a monopoly “it abused its dominance to the detriment of consumers” in a particular market. (The Economist)
Governments are now realizing the size, power, and dominance of platform corporations over people. Regulators now call for reform of the Internet’s market to include privacy rights, advertising limitations, monopoly bans, and data collections. (Ehrlich) Recently, “writers have called for Amazon to be investigated on antitrust grounds”, Google was fined $2.7 billion dollars for it’s biasing search results, and networks buying out of other companies all have economists worried. (Ehrlich) Despite the concerns by the consumers and citizens, federal policymakers are stuck on the net-neutrality debate. (Bourreau) The main concern is allowing Internet traffic open equally, with no “discrimination with respect to the type of content, service or application and the identity of the data transmitter”. (Bourreau) Though social sites are free, the growth of Internet Service Providers (ISP’s) has grown tremendously, giving platforms the possibility to charge for data use and to throttle bandwidth unilaterally. (Bourreau) However, the opposing and most popular argument is that the Internet was created neutrally, and should remain so unrestricted.
Corporations that are based online have exploded in availability, with new and unanswered questions about how to move forward. The powerful, Internet monopolies have people more focused “on privacy than on market dominance”. (The Economist) However there is no doubt that Google has become “the ultimate digital monopoly”, along with Facebook and Amazon. (The Economist) Due to these powerful corporations, the consumers have their privacy targeted and exploited through the social media. Also, both national and global economies are having repercussions from the monopolies, with limited competition, restricted market output, and removing the freedom of choice for consumers. Using the reasons and examples outlines, Internet monopolies including social media, should be controlled for the sake of the people and global economies.
Resources
Auerbach, David. “You Are What You Click” The Nation. 13 Feb, 2013. <www.thenation.com/article/you-are-what-you-click-microtargeting/>.
Bourreau, M., Kourandi, F., Valletti, T. “Net Neutrality with Competing Internet Platforms”. J Ind Econ. 30 March 2015. 63: 30-73. doi:10.1111/joie.12068
Cooper, Ryan. “Google is a monopoly- and it’s crushing the Internet” The Week. 21 April, 2017. <theweek.com/articles/693488/google-monopoly–crushing-internet>.
Ehrlich, Ev. “Break up the Google-Facebook-Amazon web Monopoly”. USA Today. 19 Oct, 2017. <usatoday.com/story/opinion/2017/10/19/google-facebook-amazon-time-to-break-up-web-trusts-ev-ehrlich-column/759803001/>.
“Everybody wants to rule the world” The Economist. 29 Nov, 2014. <www.economist.com/briefing/2014/11/27/everybody-wants-to-rule-the-world>.
“Monopoly” Economic Online: News Comment Analysis Theory. <economicsonline.co.uk/Business_economics/Monopoly.html>.