Facebook and Big Tech are monopsonies, even when they’re not monopolies

Big Tech is often in a monopoly situation (for example, Amazon’s Audible owns something like 90% of the audiobook market), but even where they aren’t monopolies, they are often monopsonies: a single buyer that controls the whole market that a variety of sellers want to sell into.

This is a problem with many concentrated markets, from eyewear to Itunes, and it’s the end-result of the Chicago School’s bizarre version of antitrust, which took over the world in the Reagan years and has been wrecking things ever since.

In the Chicago School version of antitrust, the only thing that matters is “consumer harm” in the form of higher prices. So if a company like Walmart can drive every business in town into bankruptcy, then use its control over shopping to force manufacturers to charge so little for their wares that they shift their labor offshore, that’s fine — so long as the shoppers enjoy lower prices (or so long as someone can claim that the prices are lower than they would have been in a different world where there were lots of places to buy things).

In the wake of Elizabeth Warren’s plan to break up Big Tech, there’s been a lot of intense discussion about whether the platforms are truly monopolies, and while they are in some domains, in others they aren’t — but they are all monoposonies.

Writing in Wired, former Facebook exec Antonio García Martínez (previously) steps through a bunch of ways to think about the monoposony problem with Big Tech, and how Warren’s plan is equally suited to dealing with monoposony effects as it is suited to dealing with monopolies where they exist.

Why am I so sure that Facebook should be viewed through the lens of a demand-aggregating monopsonist?

Just look at the activities of its “Growth” team, which uses every piece of psychological or technical trickery—emails, notifications, hoovering your contact info or location data—to keep you engaged with the platform, and thus to expand demand. Consider a recent example: Facebook acquired Onavo, which purported to offer users VPN services but also measured mobile app usage. Why did Facebook want a VPN company? So it would have spyware on everyone’s devices (particularly valued demographics like teens) to detect pockets of overlooked demand. Apple yanked the app from the App Store for terms-of-service violations, but FB only rebooted the hack via a sketchy teen-polling app, causing a showdown between the two giants.

If Facebook were a conventional supply monopolist, it would be vertically integrating by, say, launching a rival media service to Fox News and then selectively amplifying its own content at the expense of outside rivals. It would be cutting ruthless, exclusive deals with celebrities to keep them posting on Instagram but neglecting Snapchat. It would be iterating endlessly around its own product, trying to find new social media “supply” that could be pushed on consumers.

Facebook Is Not a Monopoly, But It Should Be Broken Up [Antonio García Martínez/Wired]

(Image: Clcheatw, CC-BY-SA)

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Facebook and Big Tech are monopsonies, even when they’re not monopolies