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This is quintessential Levine: taking a concept that seems pretty straightforward at first blush (the worry that tech companies are becoming monopolies – duh, right?), and using very simple words and ideas to make you slowly realise that you haven't thought this through, clearly.
I aspire to create content like this.
Bigness
Some banks are very big. Some people think this is bad. There is a traditional way to say “it is bad that this company is so big,” and that way uses the word “monopoly.” “This company is so big that it is a monopoly, which is bad.” It is useful to be able to say this, because the government has a lot of power to limit monopolies, to regulate their behavior and break them up.
It is not, however, particularly true of the big banks. A monopoly is a specific thing, a company that is so big that it dominates its market and can force out competitors and raise prices. The markets in which banks compete are, for the most part, extremely competitive.[5] If you want a mortgage, you pretty much pay the market rate for mortgages; JPMorgan Chase & Co. can’t charge you whatever it wants.
Still, people think it is bad that the banks are so big, for other reasons. They worry about risk concentration, about banks that are “too big to fail” taking too many risks and the taxpayers bearing those risks, about too much centralization of banking making it more fragile, about banks that are “too big to manage” doing dumb things and crashing the financial system. Those worries are controversial, but never mind that. Assume for now that they are correct. What should the government do about them?
One possibility is that the government’s antitrust regulators — at the Justice Department and the Federal Trade Commission — should go after the biggest banks for antitrust violations. The regulators could say “you are too big, you are a monopoly, we need to break you up into smaller pieces.” And then the banks would say “no,” and they would go to court, and the regulators could try to prove that the big banks are monopolists. And this would be hard to do, because they basically aren’t. It wouldn’t be impossible, though, I guess, because they are in lots of businesses and some of them are less competitive than others and there are probably some bad emails somewhere and so forth. The regulators’ odds of breaking up the big banks on antitrust grounds wouldn’t be zero. But they would be low.
The other possibility is that other government regulators should, in setting other regulations, take bigness into account and try to regulate and discourage it. Conveniently banking is a very regulated business, and there are regulators and prudential supervisors who can do all sorts of meddling in a bank’s business. So for instance if you worried that giant banks could be “too big to fail” and pose a systemic risk to the financial system, the banks’ capital regulators could put out a rule saying “very big banks need to have more capital to offset the higher risk they pose to the financial system.” That would both reduce the risk of big-bank failure and also create an incentive for banks to stay smaller or break themselves up. And in fact there is such a rule, for exactly those sorts of reasons; it is called the “G-SIB surcharge.”
Or if you worried that giant banks could be “too big to manage” and do dumb things, then the banks’ supervisors could tell a big bank that did a dumb thing “you can’t get any bigger until we’re satisfied you won’t do more dumb things.” They can just do that! The supervisors can just tell a bank not to get bigger, and it has to listen! They actually did it to Wells Fargo & Co., it’s kind of amazing. The theory wasn’t “Wells Fargo is a monopoly”; it was just “we don’t like what Wells Fargo has been up to so it can’t get any bigger.”
I should emphasize that banking is a very regulated business, and the government doesn’t have quite as many levers to pull with most other businesses. Still lots of businesses are regulated in lots of ways, and the same general principles apply:
If you think it is bad that a business is big, because it has a monopoly, sure, have the antitrust regulators go after it for antitrust violations. If you think it is bad that a business is big, for other reasons, have other regulators try to limit its bigness in ways that directly address those other reasons. In a pinch, if you think it is bad that a business is big, you could always have the other regulators try to limit its bigness in ways that don’t relate in any particularly logical way to those reasons. If you think that the bigness of social media companies is bad because they spread misinformation and undermine democracy, that is not really an antitrust problem,[6] and there is not exactly a Federal Truth Regulator that can promulgate misinformation rules. But maybe you can find some regulatory regime to shoehorn into that purpose. Maybe you’ve got a regulator in charge of, I don’t know, internet bandwidth or wireless spectrum or electricity usage or truth in advertising or whatever,[7] and you tell that regulator to turn up the heat on big social media companies. Not because you care about their electricity usage or whatever, but just to deter them from being big, because you think their bigness is bad. If all else fails, you can have the antitrust regulators try to break up the business because it is too big, even though it isn’t a monopoly. That may not work though. We talked yesterday about Facebook Inc. Lots of people think it is bad that Facebook is so big, but it is a little hard to put that in traditional monopoly terms. Is the problem of Facebook’s bigness that it can charge users monopolistically high prices for posting on Facebook? No; posting on Facebook is free. Is the problem that it can charge advertisers monopolistically high prices for advertising on Facebook? No. I don’t know if it can; I just know that I have never heard anyone make that complaint: If you don’t like Facebook, it’s not because you worry about advertisers overpaying.
Is the problem of Facebook’s bigness some other form of anticompetitive behavior that makes consumers (Facebook users) worse off? Sure, maybe; intuitively I suspect Instagram would be a nicer place if it was still independent than it is under Facebook’s ownership. But this stuff is a little hard to articulate, which is why the FTC failed to articulate it: It sued Facebook for antitrust violations, and this week a judge dismissed that lawsuit for failing to even say why Facebook might have a monopoly. “It is almost as if the agency expects the Court to simply nod to the conventional wisdom that Facebook is a monopolist,” wrote the judge. The conventional wisdom is that it is bad that Facebook is so big! But that does not make it a monopoly in the technical, legal sense of the term.
I suspect the main problem most people have with Facebook’s bigness is not about consumer choice but rather about Facebook’s political and social influence. You could imagine addressing that more directly than with antitrust law. And there have been suggestions for doing so — repealing Section 230, using election law to regulate Facebook, etc. — though I can’t say any of them strike me as great. Still it’s the right basic idea. Figure out what you don’t like about Facebook’s dominance and then regulate that, rather than just equating bigness with antitrust.
Anyway here’s this:
The Biden administration is developing an executive order directing agencies to strengthen oversight of industries that they perceive to be dominated by a small number of companies, a wide-ranging attempt to rein in big business power across the economy, according to people familiar with the plans.
The executive order, which President Biden could sign as soon as next week, would direct regulators of industries from airlines to agriculture to rethink their rule-making process to inject more competition and to give consumers, workers and suppliers more rights to challenge large producers.
The goal is to broaden the way policy makers approach business concentration in the U.S., going beyond conventional antitrust enforcement focused on blocking big mergers. For example, companies in industries controlled by a small number of big firms might face new rules for disclosing fees to consumers or for their relationships with suppliers, the people familiar with the effort said.
Seems right! Or not, I mean; I guess it depends on how you feel about big business generally. But if you feel bad about some big business specifically, addressing that in a specific way — rather than assuming that big business is exclusively an antitrust problem — seems like the way to go.