Monopolies

Why has Apple received so little criticism compared to Microsoft, when it comes to its questionable business tactics and strong arming around its successful products, compared to Microsoft’s Windows back a few years?

Apple clearly has a dominant position with iTunes/iPod and AppStore/iPhone in a number of countries. It uses this advantage to restrict competition in App Store apps (Windows was an open platform in comparison, as Apple allows no competing browsers, voice over IP, or Flash) and as leverage against cellphone carriers (which are begging to offer the iPhone, or upcoming Tablet). The recent mention by an Orange executive of the unannounced Apple Tablet raised the question of reprisals from Steve Jobs (here and here [paid subscription required]), such as a canceled or delayed deal with Orange.

Actually, I think there is nothing wrong here, or worth requiring some anti-trust action. Those are only business tactics as usual, mixed with some marketing and PR subtleties.
Austrian economists arrive at the conclusion, more generally, that there is nothing harmful or anti-competitive about a business having some temporary dominant position, and such a position cannot be sustained unfairly in the free-market.

For one, identifying a monopoly requires defining the scope of the market. If defined arbitrarily narrowly, it will apparently lack adequate substitutes. Is the iPhones in the market for large-screen touch-based smartphones, consumer smartphones, cellphones, communication devices, or social networking tool?

But more importantly, competitive forces (both actual competition, potential competition, and indirect competition) are sufficient to regulate how much control a company (or a cartel of colluding companies) can get over the market. Despite its dominance of a market, the company will always feel the pressure to perform well or else it will lose customers to rival companies. Anti-competitive conditions can only arise legally from the government (and illegally through other kinds of force, like the mafia). Such government-granted monopolies are indeed harmful to consumers and the market.

Mainstream economists have this theory of so-called “natural monopolies“, whereby if a company manages to get far ahead in a capital intensive business with economies of scale, it creates a very difficult situation for competitors and allowing a long-term monopoly (which has bad effects on prices and quality). This theory is often used to justify government stepping in with anti-trust regulations, to “fix the market” and regulate the “unavoidable” monopoly (therefore actually sustains the monopoly).
But as Thomas DiLorenzo explains in this presentation, another presentation, and essay, and history shows that such sustained natural monopolies do not exist in practice. All sustained monopolies to date can be traced back to some unfair advantage secured through government (diamonds, cable TV, phone service, railroads, …).
Also, he explains that the supposed problem of “excessive duplication” is also a consequence of a pre-existing public utility. Because of their lack of pricing, economic calculation is impossible so trade-off cannot be made on a rational basis. Even so, this can be mitigated with “competition for the field”, whereby utility companies bid for a monopoly contract which is open on auction again every few years.

As a final thought, the current (temporary) dominant positions of Microsoft, Google, Amazon or Apple with their successful products are deserved business achievements (no privileged support from government afaik, if you don’t count the intellectual “property” laws which are monopolistic, but are at least are generic). The dynamic competitive process ensures they cannot abuse the consumers. And trying to squash such legitimate successes with anti-trust regulations is counter-productive.

 

“Let me suggest an experiment. […] [In one year] don’t buy or use any of Microsoft’s products. […] At the same time, send the government no money. That is, don’t pay your taxes. Then wait. Watch who comes after you for your money and how and with what weapons.” — Richard M. Salsman

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