The Write Economist is an academic writing contest which comes under the umbrella of 'Econvista', the annual fest of the Economics department at Lady Sri Ram College, New Delhi. This year, Arthniti sent four entries to the contest, which have been compiled below. Merlin Jacob, Zaerius Namirian, Bharvi Dani, and Vikramsinh Patil participated in the event, each writing an evocative piece on the dangers of Big Tech monopolies. Read ahead to find out what they had to say!
Merlin Jacob : Too Big To be Tamed?
The dominance of the biggest multinational technology-based companies, popularly dubbed Big Tech, has constantly been a cause of concern to regulatory bodies. Google, Amazon, Facebook, and Apple have time and again been the focus of antitrust allegations due to their market size. The problem of market manipulation by monopoly firms only gets worse in the case of social media companies. In terms of the number of active users, Facebook alone has 2.4 billion monthly users. When accounting for Instagram, WhatsApp, and Messenger; Facebook’s outreach is simply enormous and unrivaled in most countries. The only other platform to surpass the 2 billion mark is Google-owned YouTube. China’s internet censorship calls for a ban on Facebook, YouTube, Instagram, and the likes causing Tencent-owned WeChat to enjoy the market share. With users heavily concentrated on these few platforms, regulators are often met with the challenge of addressing the consequences.
The most common worry is the potential for these companies to stifle innovation in the economy. Social media startups with unique ideas that are capable of attracting significant user base instantly pose a threat to bigger companies, which then prompts the latter to either kill the competition by redirecting the market to newer and costly technology or simply acquiring the startup. Instagram, WhatsApp, and YouTube are the perfect examples of monopolists curbing competition in the market. With billions of users on a per month basis, Facebook and Google had and continue to have access to immense data on their users which needs to be protected. With data being the new oil, not only do these companies have advantage over any new firm that was to enter the market, once again raising concerns about fair competition; but also perplex lawmakers on how to ensure that privacy of users is not breached and taken advantage of. Social media platforms have recently transitioned from a mere communication platform to one where a substantial amount of information is dispersed, and with very few market players, transmission of biased and divisive information becomes all the more rampant. Big Tech companies also raise red flags with regard to tax collection. With these firms operating with intangible intellectual property in a borderless world furthermore allows them to undertake dubious tax practices.
The size and power of these companies have stretched way beyond their home borders, that even identifying their consequences and implementing counter-strategies are no longer straightforward. Elizabeth Warren, a prominent advocate of fair competition opines that the confusion lies in the business model of these companies. Earlier, while monopolies were targeted for their size, restricted supply and high prices, social media giants are only deemed culprits for their market size. Companies like Facebook or Google have no products to sell, rather merely create a space for users to interact, that too, free of cost. This implies that existing antitrust laws require significant reconsiderations if they have to be applied to Big Tech (especially social media firms). Often proponents have suggested an easier fix to the problem—a break-up of these companies, taking them back to their pre-acquisition status.
However, not only does this strategy fail to resolve the issue but also deeply disincentivizes companies that are forerunners of today’s technological innovation for their profit-making motive. As critics point out, Facebook and Google were once startups that had to make their way through fair competition and their present dominance is a result of innovation and development. Tech companies spend billions each year to invest in infrastructure and property building. When their products ultimately begin to outperform the others in the market, politicians and regulatory bodies cannot merely force them to use their property rights in a certain way. Rather, what would benefit economies in the long-run is a clear definition of what constitutes unacceptable behavior. Breach of privacy, discriminatory practices and killing off newer competitors should be watched out for and regulated but firms, whether big or small, cannot be stopped from using their resources to their own advantage. Tech firms should not be hindered in terms of innovation or making profits, but they need to be bridled when the needs of the economy start to take the back seat.
Zareius Namirian: TechMonopolies, A Macabre Mess
There is some truth, perhaps, in considering that there are only two forms of businesses in the world - businesses that are perfectly competitive and those that are monopolies. And when I ponder on the latter, a striking resemblance can be found between what a monopoly should do and what it actually does in the form of big sharks and social media giants.
At first, Google, being termed as a monopoly is far from debatable. There are multiple other search engines such as Bing or DuckDuckGo. More the number of search engines, the closer Google is to being perfectly competitive. However, this is a very narrow explanation and after studying search engines more closely, I realized I was wrong about the same. Google or Facebook might not be a pure or a “good” monopoly in the sense of a 100% absence of any competitors but having such a high degree of imperfect competition in the market is still undesirable (Google has Bing as it’s competitors while Facebook practically has only Twitter). A company with a few considerably weaker competitors still has massively uneven influence, which is still challenging for a capitalist economy such as the USA. Based on different locations, Google has a market share of around 65 percent to 80 percent of the entire search engine market. This is huge and is one of the major reasons I call Google a monopoly.
That's lower than the 90% market share of companies like Microsoft Windows which are termed as ideal examples of monopolies, even though, there exist far weaker competitors (Macintosh Computers). A counter-argument would be that Google doesn't manipulate prices because using the search engine is practically free. True, but in terms of pricing, search engine customers might not be Google's primary customers. Advertisers are. This is another crucial finding. Due to this, Google has been investigated under antitrust laws for changing the pricing strategies for advertisers.
As per the definition of a monopoly (single seller), Jio cannot be termed as one. But as an economist, sticking to a rigid definition that a monopoly consists of only one seller, is only glorified in textbooks.The market power of Jio rose exponentially through its dirt cheap data and talktime plans. This forced the other competitors to merge (Vodafone and Idea). Jio entered the Telecom Market and did steps every monopoly tries to do: It undercut the market price by attractive discounts and essentially “free” data. In order to experience this, users switched to Jio or at least bought a sim. Customer acquisition and customer base increased. Taking advantage, the price level of mobile data and network rose.
To take another example, Amazon issues, markets, trades, and distributes its own books, and it runs the entire system that publishers must use to advertise, sell, and deliver books. This means Amazon can pressure suppliers at every level of the market. Amazon’s power grows even larger when combined with the enormous volumes of data that it amasses. In other words, Amazon not only exercises huge amounts of monopoly power in the market but it is the market. One in which other businesses must compete. This power will allow businesses to amass wealth to a larger degree and harm the prospects of an already unequal society. Additionally, the huge influence of such tech monopolies hampers a consumer in the long run. However, the monopolies still remain profitable by offering free products popular with users and customers. Not to forget, these monopolistic companies break the anti-trust laws and come under the breach of Data Privacy. In conclusion, with the rise of such perilous monopolistic tendencies, the existence of far-fetched consequences can be perceived. There has been a rise in the market influence and concentration of some businesses in industries, leading to an upsurge in prices. This lowers the standard of living as much as it lowers worker’s (real) wages. Monopolies, thus affect a country’s GDP. A research paper from the University of Chicago found that individual wages today would be $13,000 higher per year if the economy had the same levels of competition as it had 30 years ago. This was also noticed by notable economist Joseph Schumpeter and Nobel Prize winner Joseph Stiglitz. They forewarned against such monopoly fatalism in the near future. This makes me conclude that the dominance of such corporate behemoths is not only a threat to privacy but also a fatal sword hanging over the economy.
Vikramsinh Patil: Social Media Monopolies, From Heroes to Villains?
The present climate of distrust and antagonism that surrounds Big Tech companies stands in sharp contrast to the idealism and positivity that heralded their induction to the modern cultural landscape. Facebook or Twitter provided a vision of utopia: say what you like without fear of retribution. They undoubtedly provided a sense of ‘cool’ to their users (this writer included, when he first joined Facebook in the eighth grade), a feeling of being a part of something new and liberating, and they sold the entrepreneurial dream to millions of young graduates struggling through university.
Over the years, Facebook or YouTube grew into lumbering behemoths, profiting off large-scale ‘network effects’ which make it inconvenient to not be a part of those platforms. When all my friends consume videos on YouTube, why should I be left out? But today, these social media giants stand accused of undermining democracies, damaging mental health, and stifling innovation. Senator Elizabeth Warren proposes breaking up Big Tech companies as she believes that the market power that they have amassed over the years is too large for their own good. What changed the script?
Monopolies dominate markets by gobbling up competitors. Facebook, for one acquired WhatsApp and Instagram. WhatsApp is known for generating heavy losses and was still considered a prized catch for Facebook simply because it offered an alternative to sharing content and keeping in touch with friends and family (and therefore, was a potential competitor). Monopolies are also known for pushing prices above competitive levels. However, Facebook and its constituents are free to access and use. It is this paradox that has stifled anti-trust litigation in the United States.
The absence of a price is often associated with a public good. Instagram is free to download and me using the platform does not affect the consumption of its other users. Or, perhaps we have been looking at social media giants through the wrong lens. Certain commentators suggest that something like Facebook is really a monopsonist which pushes prices down. In this scenario, we are the suppliers of content and Facebook ‘compensates’ us by providing the use of this platform. Owing to the aforementioned network effects, Facebook ends up becoming the largest buyer of data and thereby dictates the terms of the exchange.
Either way, the concentration of market power in the hands of few firms exerts a deadweight loss on society. A few clicks and YouTube throws the user into a rabbit hole of conspiracy theorists, ‘fear monger-ers’ and disturbing visuals. Twitter amplifies hate and abets the spread of fake news which breeds fear and distrust of the state. WhatsApp through the innocuous tool of forwards has caused lynchings and mob violence and Facebook, with its lax content moderation policies allows for the proliferation of targeted misinformation campaigns that have (allegedly) influenced the results of elections.
The aggregation of users and their data has allowed social media companies to contribute to making our society more polarized and fearful. But perhaps their impact runs even deeper. The aggressive expansion plans followed by big tech companies stems from a Silicon Valley ideology of ‘go big or go home’. The leaders of these young companies are themselves young and embody a certain air of being anti-establishment. Rules for them are meant to be broken or simply do not exist. The success of these companies could engender a culture of disruptive behavior which disregards consumer welfare in the quest for profits and margins.
Power in the corporate world also breeds cosy ties with the political establishment. Lobbying dollars spent by social media behemoths prevent laws from catching up with the pace of technical innovation. When social policy becomes infected by the interest of a few young billionaires, a democracy veers towards plutocracy and institutionalizes societal inequalities.
To be fair, Zuckerberg may have never anticipated the influence that Facebook would have. For him, it was an interesting idea worth exploring. But today, as we collectively enter a future which will increasingly be dominated by tech and software, it is time to take cognizance of the effect of big tech monopolies and introduce regulations that ensure that markets and society are not compromised.
Bharvi Dani: Monopoly at its Best!
Social media has now become an integral part of our daily lives. This the era of the Internet. There has rarely been a day of our life which we spend without using it. Actually, let’s rephrase that: there has hardly been a single day in our lives where we have not spent some time using apps such as Google, Facebook, What's App, Amazon, and Instagram (Twitter for some). Have we ever thought of using any other messaging app rather than WhatsApp or a search engine other than Google? The obvious answer to this would be no. This is because there is a monopoly at work in the social media market. What defines a monopoly? A monopoly basically means that there is only one single seller of a particular good and the consumers have no choice but to buy the good from that seller.
How does a monopoly come into action in this case? Here the product that is being sold is a messaging app or a search engine where no other competitor exists and the consumers have no choice but to install their app. How do these apps generate their revenue? All of these apps provide free service to the public. They mostly generate revenue through advertising. There are millions of ads posted on Google and Facebook every day which generate enough revenue for them in exchange for the free services that they offer.
Monopolies exist not only in the social media market but also in the technology industry. Nowadays, we can hardly see a person who uses a cellphone or a phone which is not supported by android or iOS systems. From a businessman to a sweeper everyone now owns a smartphone. Amazon, often defined as The Everything Store, focuses on consumer benefits that are lower prices. This idea of providing everything at cheaper prices makes it a favorite among consumers. Amazon has now nearly entered every market and is making it very difficult for its competitors.
What are the various consequences of this monopoly on the world? These tech giants lobby the government into economic reforms. This leads emerging entrepreneurs to either sell their products or adhere to their demands. There has been a lack of choice and a lack of freedom. This often leads to large mergers and acquisitions. There have often been questions raised on the privacy of the consumers. The private chats of consumers are not encrypted. There have been various questions raised on the transparency of these apps. Manipulation of data has been an event that occurs frequently. Governments across the world have been trying to break monopolies into smaller companies. There have been various laws formed in different countries to tax these monopolies. These monopolies have also been the platform for movements like #MeToo which have raised a positive effect amongst the masses.
At this point in time, we just can’t disrupt these monopolies; we have to live with them whether we like it or not. We can just control them to an extent. Governments are still trying to control them but all of this will eventually take time.
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