Antitrust concern about big business underestimates customers’ power, and benefits
The size of a business is generally a reflection of its success at satisfying a lot of customers in a very productive way. Size, however, does not make businesses less vulnerable. Industry leaders such as the GAFA companies (Google, Apple, Facebook, and Amazon) were only recently the disruptors of the markets they entered. Soon enough, they will experience the same exact fate they inflicted upon their predecessors because customers’ loyalty is never permanent. Given the opportunity, patrons will abandon commercial giants they once revered and replace them with more innovative newcomers. Antitrust probes triggered solely by size are misguided because they underestimate (and undermine) our power as customers, and ultimately threaten our well-being.
The bashing of big business has become so commonplace that most critics would need to make a conscious effort to remember and acknowledge that they actually participated rather eagerly in their ascent. Global leaders in a given industry get big because of their continuous commercial success, their relentless ability to give customers more value for their money. Through growth, these companies are also trying to reach the optimal size that will maximize economies of scale and overall productivity.
Specialization is the name of the game in open economies. Constant innovation and improvements are key to overtaking the competition and remaining on top. Each of the GAFA companies changed our lives for the better. None of the core services they provide that became so ubiquitous was available before. Also, they kept reinventing themselves, reinvesting their profits into new ventures, disrupting new markets. Alphabet (Google’s parent company) invested its search engine profits to create health products such as smart contact lenses that monitor their wearer’s glucose level. Amazon went from online bookstore to universal distributor, cloud computing provider, and now satellite internet service provider. We have benefitted tremendously from their sizable success.
Big business is more vulnerable than ever
Still, big companies have never been so vulnerable to customer dissatisfaction, and therefore so mindful of it. Manufacturers spend millions recalling defective products to avoid losing the trust of the public. Internet giants are no exception. Facebook has been losing younger users at a very fast pace, and has received backlash for overwhelming visitors with ads. Apple dealt with complaints from otherwise loyal customers who did not want to upgrade phones every two years, and also has to contend with very powerful suppliers. Amazon has some serious competition at home and abroad. These are no hegemons, disregarding their customers’ wishes with impunity.
Let us not forget that every successful company, the GAFA included, started small. Current industry leaders were yesterday’s disruptors, and will become tomorrow’s disrupted. The pace of replacement is even accelerating, according to studies monitoring the evolution of tenures at the top of the capitalization charts. Given a good reason, consumers are swift to unseat commercial giants they once revered.
Finally, consumers are savvy when it comes to enticing producers to adopt what they consider proper ethical practices. Social responsibility is already the norm for most corporations—not only because of laws, but because some consumers required companies to be mindful of their impact on the environment. Labels and certifications have made their way to product specifications without being forced upon other customers who did not want or did not care for them (There are, however, attempts to make it mandatory). The plurality of consumer views and opinions is already reflected on store shelves.
Antitrust concerns are unsolicited for the most part. Consumers are generally unconcerned about the size of big businesses because they don’t experience the kind of restricted production or degradation of service that some antitrust advocates warn about. Moreover, when they do, they are fully capable of disciplining companies. Industry leaders know it well, especially given the speed at which bad publicity can circulate online. Whenever antitrust regulators step in to “protect” customers, they actually undermine consumers’ power to choose who they want to support. Specifically, going after the GAFA just because of their bigness or to carry out some political agenda is misguided, as it would disincentivize incumbents to keep improving, and discourage potential rivals. There’s no need to legislate what consumers already obtain faster and better voluntarily.
Gaël Campan is Senior Economist at the MEI. The views reflected in this op-ed are his own.