Elizabeth Warren says US competition is dead. Is she right?
Sen. Elizabeth Warren (D) of Massachusetts gave a keynote speech on industry consolidation in Washington Wednesday, suggesting it’s not just banks that have become "too big to fail" in the American economy.
Tech companies such as Google, Amazon, and Apple run awry of the country's antitrust laws, said Senator Warren in her address "Reigniting Competition in the American Economy" at New America’s Open Markets program, with each company using its power to "lock out smaller guys and newer guys."
"Strong, healthy markets are the key to a strong, healthy America. That's the reason I am here today," says Warren. "Because anyone who loves markets knows that for markets to work, there has to be competition. But today, in America, competition is dying. Consolidation and concentration are on the rise in sector after sector. Concentration threatens our markets, threatens our economy, and threatens our democracy."
Essentially, Warren says its wrong for tech companies to use the success of their product to "snuff out" all other competition.
Google, for example, uses its position as the dominant search engine to promote its own content over rivals, Apple has made it increasingly difficult for streaming services (other than Apple Music) to be easily accessible on the iPhone, and Amazon has been accused of only recommending books that also happen to be published by Amazon.
And many tech companies, the competitors of these three industry giants, agree with Warren.
"You know there's something wrong when Apple makes more off a Spotify subscription than it does off an Apple music subscription and doesn't share any of that with the music industry," Jonathan Price, who runs communications for Spotify, told Recode. "They want to have their cake and eat everyone else's too."
And while the Obama administration has blocked some large-scale mergers, such as AT&T and T-Mobile as well as Comcast and Time Warner Cable, a future Clinton administration could take these efforts one step further by hardening antitrust laws the same way the Ronald Reagan administration softened them: by rewriting the Justice Department’s enforcement guidelines, without input from Congress, Jordan Weissmann writes for Slate.
Warren says the "hands-off policies" of the Department of Justice and the Federal Trade Commission, the same agencies that are charged with enforcing the country’s regularly laws of the early 20th century such as the Clayton Act and the FTC Act, are to blame.
But competition is crucial for more than just the technology sector, the White House Council of Economic Advisors noted in April. The Federal Aviation Administration (FAA), for example, has successfully promoted pro-competition policies by providing low-cost airline carriers more take-off and landing access at "slot-controlled" airports.
However not everyone agrees with Warren.
Peter Thiel, who made the first outside investment in Facebook and co-founded PayPal, says "perfect competition" is not all that it's cracked up to be in Economics 101 courses.
"It is possible to question whether anyone should really be awarded a monopoly simply for having been the first the think of something like a mobile software design," Mr. Thiel writes for The Wall Street Journal in 2014. But "[i]n the real world outside economic theory, every business is successful exactly to the extent that it does something others cannot. Monopoly is therefore not a pathology or an exception. Monopoly is the condition of every successful business."
And monopolies like Google can afford to treat its workers better, adds Thiel:
"In business, money is either an important thing or it is everything. Monopolists can afford to think about things other than making money; non-monopolists can't."
