Democracy & Technology Blog New monopolists have a tenuous grip, at best

Prof. Tim Wu has a provocative essay in Saturday’s edition of the Wall Street Journal, arguing in effect that a company which is successful is by definition a monopoly that should be regulated. Fortunately, the antitrust laws don’t punish companies that are successful as a result of superior skill, foresight and industry; only those who engage in anticompetitive conduct. That would not include Google, Facebook, eBay, Apple nor Amazon so far as I know.
Every businessperson dreams of a monopoly advantage. The pursuit of a monopoly advantage either justifies the high rent that a retailer pays to an airport or the owner of a shopping mall in exchange for an exclusive right to serve coffee or ice cream on the premises, or it summons investment and innovation to offer a superior product or service. Other than in a walled garden during the term of a lease, monopolies are inherently temporary, unless aided and abetted by government.
Perhaps in gratitude for free tickets to sporting or cultural events or in anticipation of future employment opportunities, FCC commissioners and bureaucrats protected Ma Bell for years, for example. The old Civil Aeronautics Board protected airlines (intrastate airlines in California and Texas not subject to CAB regulation offered lower fares than interstate airlines flying the same routes).
If a temporary monopoly advantage offers a profit window, that is intrinsically pro-consumer because it incentivizes investment and innovation.
Absent a regulatory umbrella, a profitable monopoly advantage summons eager competitors seeking a piece of the action. We can either force rivals to compete in the marketplace by offering a superior product or superior terms, or we can allow them to hire lobbyists and lawyers to influence policymakers to apply misguided antitrust laws to hobble successful innovators and deprive innocent investors of their just rewards.
Wu claims that the costs of monoploy are “mostly borne by entrepreneurs and innovators,” but this is absurd. Monopolies are only a detriment for speculators seeking to profit from offering copy-cat products or services. True entrepreneurs and innovators are people who seek to dethrone a dominant player by offering a better value proposition.
I wonder if Wu, as chairman of Free Press, is working backward from his objective. In other words, I wonder if Wu is determined to regulate the Internet and is simply casting about for a rationale. Perhaps this column was a pathetic test balloon.

Hance Haney

Director and Senior Fellow of the Technology & Democracy Project
Hance Haney served as Director and Senior Fellow of the Technology & Democracy Project at the Discovery Institute, in Washington, D.C. Haney spent ten years as an aide to former Senator Bob Packwood (OR), and advised him in his capacity as chairman of the Senate Communications Subcommittee during the deliberations leading to the Telecommunications Act of 1996. He subsequently held various positions with the United States Telecom Association and Qwest Communications. He earned a B.A. in history from Willamette University and a J.D. from Lewis and Clark Law School in Portland, Oregon.