“Amazon is getting too big, it’s like a monopoly. I’m scared that they are going to take over the world. Other sellers cannot compete with them, and that’s not good.”
That was a concern my friend expressed recently. I was reminded of it again today, because the authorities of the European Union apparently have the same misunderstanding of what constitutes a monopoly. Today, the E.U. announced a fine on Google worth over $5 billion, claiming that Google’s partnerships with hardware makers such as Samsung, Huawei, and HTC to make Google’s applications the default services on the devices are in violation of antitrust laws.
Simply put, this ruling is not warranted. (Disclaimer: any views I express here are my own, and they are not of my employer, Google. For that, refer to their official blog.)
Antitrust laws exist for a simple reason: to prevent a monopoly from taking advantage of its status to remove competition from the market. Here’s a couple of examples of what might constitute a violation of antitrust laws:
- If my local cable company works out a deal with the politicians to make it illegal for other competitors to enter the market, then promptly jacks up the price of its services.
- If Google and Apple were to secretly agree that instead of competing to offer good products at good prices to the consumers, they would both jack up their respective phone prices (iPhone and Pixel) to some ridiculous amount.
Honestly, either of the above wouldn’t bother me at all because we’ll all be just fine without cable TV or smart phones, but still, I can see that such actions could be considered a violation of antitrust laws.
Now, let’s be clear about one thing. There is a big difference between a company who gets big because it has removed competition through corruption and has broken antitrust laws, and a company who gets big because the services and the products that they provide are so valuable to the consumers that so many of them choose to use it. So which is the case for Amazon and Google?
The reason Amazon is big is NOT because they are evil and they are taking advantage of all of us. Amazon is big because everybody chooses to use Amazon, which in turn makes them profitable. Why do we all choose to use it? Is Amazon our only choice? No, of course not. We can all stop using it any day, if we wanted to. But we don’t want to. We use Amazon because they offer better prices on many goods compared to their competitors, and that is a good thing for the consumers. That is far from a monopoly taking advantage of its status to jack up prices that it puzzles me why people confuse the difference. It might suck for a store owner about to go out of business due to increased competition, but the whole point of antitrust laws is to encourage this kind of competition, not to stop it. If that store owner were to argue he is going out of business and therefore Amazon must be harming the economy, he would be wrong. It is actually good for the economy for a company who does the job more efficiently to get more of the business, incentivizing businesses who don’t do it as well to step up their game and do it better. If they fail at that, they’ll go out of business as they should in a healthy economy, and hopefully they’ll go on to do something else with their time and resources to benefit the society in another way. Fallacies in economic thinking often comes from only thinking about a negative aspect of a small part of the economy (in this case, the store owners), so let’s make sure that we don’t forget about the positive aspects on the rest of the economy, which in this case obviously includes the consumers, but also the manufacturers whose customer-base has suddenly expanded to the entire world thanks to Amazon.
When it comes to Google and the Android platform, again, it would be wrong to say that they have taken advantage of their position to the detriment of the consumers. First of all, they have not at all removed the competition, and they aren’t trying to. Android is an open platform precisely because Google’s mission is to make the world’s data accessible to anyone and everyone. There are so many choices when it comes to Android devices, from over a thousand manufacturers. The competition in this market is alive and well, and there are many affordable options for the consumers because of it. Some of the manufacturers may have agreed to a contract with Google to pre-install Google’s apps, but it’s not as if they were forced to do so. If they thought that Google’s apps were bad and it would’ve been better to install other apps instead in order to sell more of their devices, they would have. Why didn’t they? Their choice. Customers also don’t have to use these manufacturers’ devices. So why do they? Again, their choice. And I didn’t even mention the competition from non-Android (which basically means iOS) devices, which is also a very healthy competition, so really nobody needs to use an Android device if they all choose to use iOS. Why don’t they all switch to iOS? Again, their choice. (Starting to see a pattern here?) All this competition is good for the consumer, and plenty of choices exist as we speak. There’s nothing confusing here, and I can’t put it any simpler. Despite the competition, customers are still choosing to use Google’s applications because of their high quality. These apps provide them with something valuable. When’s the last time Google Maps helped you navigate and avoid a traffic jam? It happens all the time for me. And recently at a sushi restaurant in Tokyo, I saw a Korean girl use Google Translate to figure out how to say her favorite fish, then proceeded to put in her order in Japanese.
My coworker told me about a time he witnessed a family at an airport attending a sick child, and a nurse happened to be nearby to help. They didn’t speak the same language, so they used Google Translate to communicate. Were they forced to use it? No, they chose to because it was useful and it provided them with something they needed.