Rabble rousers are grumbling about an Amazon.com Inc. (AMZN, Financial) monopoly again, and the urgent need to hammer down some antitrust action. A long essay published in Investor’s Business Daily this week has brought attention to the clamor once again, this time inspired by the Amazon takeover of Whole Foods. Like most agitation for antitrust action against industry giants, though, the piece begins with blatant logical contradictions.
The very first paragraph began by observing that Amazon has slashed prices on certain key Whole Foods products by as much as 43%. The very next sentence said that price hikes are what is seen as the “surest sign of monopoly,” the very opposite of what Amazon just did in its takeover of Whole Foods. The article continued with the ponderous statement that “Wall Street is starting to ponder a trillion-dollar question,” regarding whether serious antitrust scrutiny will start to be levied against Amazon and other internet giants.
Did I miss something here? If price hikes are evidence of monopoly and Amazon slashes prices at Whole Foods, how does this raise an antitrust question?
Contradictions aside, though, there does seem to be more chatter around the issue of antitrust as regards Amazon, Facebook Inc. (FB, Financial) and Alphabet Inc. (GOOGL, Financial). The question is, what are the criteria that determine whether a company will be subject to antitrust law or left alone? Investor’s Business Daily asked the very same question and cited the Democrats’ “Better Deal” plan. Under these criteria, regulators would judge (ostensibly using their own expertise) whether a merger would reduce wages, cut jobs, lower product quality, stifle innovation and the like.
But how does the supposed “Better Deal” plan in any way better define the application of antitrust law? It basically means that regulators – in other words bureaucrats whose business experience and market prognostication credentials are entirely irrelevant to their positions of power – are supposed to make a businesslike decision about whether a certain business move will stifle or reduce competition, cut jobs, lower product quality, etc. When businessmen make decisions like these and try to forecast market reactions to their own executive moves, they lose their own money when they are wrong. If regulators are wrong and break up a company via instituting antitrust regulations, which then may cause the raising of prices if efficiencies are lost as a result, they lose other consumers’ money. So what incentive do they have to be right, and what if they’re not?
It’s not just the Democrats though. The Trump administration is also showing signs of itching for antitrust action against Facebook and Alphabet on the grounds that they provide services essential to 21st-century life and therefore should be regulated like utilities. The question about this is once again one of internal contradiction. The reason that the political class seeks to turn services it defines as essential into public goods like utilities is that the companies that provide these services are supposedly too big and therefore suspected monopolies. The solution to this is, strangely, to outlaw private supply of these essential services entirely and put them all under the monopoly of government control.
How is actual monopoly the solution to suspected monopoly?
Those in the White House who seek to define essential services – be they from Alphabet, Amazon or Facebook –Â as public goods may want to ask themselves the following question: Which goods periodically suffer shortages in the economy, meaning that the number of buyers exceeds sellers at a given price? There have been water and electricity shortages in recent American history, both public utilities, as well as food shortages resulting in rationing when the food industry was taken over into a public utility by the federal government during World War II. Perhaps, then, turning private goods and services over to the public sector is really not such a great idea.
Disclosure: Long Amazon.
