With every passing year, the tech giants -Microsoft, Amazon, Google, Facebook, and Apple- continue to acquire hundreds of smaller companies, eliminating current competitors, and snuffing out future rivals who could have mounted a challenge to their empires. Many economists have made a strong case that big companies are distorting the market to drive out competitors.
John Kwoka, the Neal F. Finnegan Distinguished Professor of Economics at Northeastern University, talks about what’s going wrong with the American economy in light of these monopolies. He says, “Over the last two decades, the number of major airlines has shrunk from seven to four. In that same time, the eight big accounting firms have been consolidated down to four. Where there used to be eight or nine rivals in the car-rental business, there are now only three. There are two surviving pharmacy chains, two dominant mattress manufacturers, two colossal brewers.”
Constant mergers have led to conglomerates becoming more powerful. This allows them to control the market and charge higher prices for lesser goods and services. In the American scenario, people now have fewer airlines, fewer producers of pet food, and a smaller variety of other products and services to choose from.
Despite the Antitrust laws being enforced in the US that ensure that fair competition exists in an open-market economy, Kwoka says that the American economy was probably more competitive in 1998 than it had been for a very long time. There has also been demand for new standards for monopolies, one that focuses less on consumer harm and more on the development of newer companies.
A solution to this situation Kwoka suggests is to return to the oversight of the previous millennium when the burden of proof was on companies to show that their proposed mergers would not hurt competition. “This would simultaneously make merger control both more effective and more efficient—a hard combination to beat,” Kwoka said. This will tackle antitrust issues and allow other companies to grow and compete fairly.
Anisha Naidu