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Who to Protect

May 8, 2016

I recently did something I don’t often do:  I commented on an article published on a web site.  The article was about the European Union investigating Google.  Google’s Android phones dominate the mobile phone market in Europe.  The investigation was to determine if Google has abused their near-monopoly position.  Some commenters claimed that this was impossible because all components of Android were free and open.  This isn’t quite true because Google sets conditions on the use of the Android name, and because they license Android to companies who manufacture the phones.  Google really does maintain some control over Android phones.

One of the commenters even said that the EU acts to prevent success.  I felt compelled to respond to that one.  I commented by saying that any monopoly puts  consumers at a disadvantage by forcing them to pay higher prices.  It does, of course, increase profit for the company.  That is success, at least for the company.  Governments, such as the EU, are well aware of the disadvantages to consumers of monopoly in any market, and are willing to act to prevent monopolies or to regulate them.

Many others responded to my comment on that web site.  One of them even claimed that Google was a natural monopoly, and that as such it should escape goverment action.  My understanding is that companies are natural monopolies when most of their investment is in infrastructure.  Where I live, companies that provide water, sewer, electrical power, natural gas, telephone, and cable TV services would be natural monopolies.  Some of these are government-owned.  All of them are government-regulated.  Google isn’t a natural monopoly.  For proof of this, you only have to consider North America, where Apple dominates the mobile phone market.  Google is a minor player in that market.

It’s competition that makes companies more efficient.  This benefits consumers in terms of lower prices and freedom of choice.  Good competition requires many companies producing the same product or service within the marketplace.  It also results in lower profits for the companies, encouraging them to reduce competition.  This tendancy is something that people and governments have to be vigilant about.  Of course, there are many anti-competitive practices, some of which are permissable and even ethical.  Think of advertizing, branding, copyrights, and patents.  There’s also buying up the competition, usually called a merger.  Things like that should attract the interest of goverments who want to maintain competition in a market.

Some people claim that private companies are always more efficient than government corporations, just because they are privately-owned.   That can’t be correct if both are monopolies.  In that situation, the only way a private company can be more efficient is by paying lower wages to employees, or by reducing the level of service.  Monopolies don’t have the advantage of competition to make them more efficient.  We need competition or regulation.

Who do we protect?  Should it be the ordinary people who purchase the product or service.  Should it be the companies who provide the product or service.  Ordinary people should be in the majority.  In a democracy, the majority should win!

 

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