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Every entrepreneur dreams of becoming a monopolist and if he does not do so, he is not fulfilling his entrepreneurial function. The definition of competition and market forms -perfect, monopoly, oligopoly, monopolistic- by the number of participants has a perverse effect on the vision people and politicians have of business success. Also harmful is the notion of a relevant market and the static view of it held by the authorities in charge of “monitoring and preserving perfect competition.”
The distinctive feature of competition is the voluntary nature of the transactions that economic agents carry out with each other. Buying the business of a competitor is a legitimate form of competition, provided that the acquisition and the merger to which it gives rise are made by voluntary agreement of the parties. The acquisition by Facebook of the companies that created the WhatsApp, the Instagram and God knows what else, as far as we know, with the free consent of the sellers, who at the time happily pocketed the millions they received in return.
The antitrust lawsuits filed against Facebook in the United States and the persecution unleashed by competition authorities in Europe against Amazon, Google, Apple, and other technology giants exemplify the characteristic orientation of competition laws designed to protect unfortunate competitors from the consequences of competition itself. Most likely behind these lawsuits are the lawyers and lobbyists of repentant sellers who are now trying to get in court what they could not do by competing in the marketplace.
Certainly, from the perspective of the consumer, who must always guide economic analysis, the best monopoly is the one that lasts the least, as Sir John Hicks said. The only lasting and persistent monopolies are those that enjoy government protection, as was the case for years with telecommunications and public services provided by physical networks. All the others are perishable because their very existence, with the extraordinary profit that characterizes them, constitutes an incentive for competitors, seeking to appropriate part of that profit, to enter the market by eliminating them or limiting their power.
The competition does not exist because businesspeople wish to remain small so that there are many in the “relevant market.” Competition exists because businesspeople fight tooth and nail for market shares and thus control each other. Market “shares” are ultimately the result of the will of consumers who determine the relative size of the suppliers with their purchases.
It is the envy of entrepreneurs, not their benevolence, that determines the dynamics of the market and the number of suppliers at any given time. When an entrepreneur finds that his competitor is attracting a large number of consumers to his detriment, he investigates to see what is happening and, when he discovers it, imitates the successful product or procedure to try to preserve and increase his market share. In the end this always benefits the consumer.
Every businessperson, large or small, is a monopolist vis-à-vis his or her buyer because only the businessperson knows the extent of the gap between his or her own cost and the price, which, according to his or her subjective assessment, that buyer is willing to pay, at a given place and time. The large gaps attract suppliers and alienate demanders, and it is this incessant movement that causes the tendency to reduce them and disappear completely in the unattainable world of general equilibrium where value, price and cost are the same for all things and all agents. Without the concept of the tendency to equilibrium, we economists would be blind to understand the reality of things.
The case against Facebook reminds us of the AT&T case that lasted nine years before it was dismembered into the seven Baby Bells in 1984, when mobile telephony and the Internet had already appeared, technologies that were, more than laws, the ones that put an end to the fixed telephony monopolies. Surely the lawyers of the big technology companies will manage to delay the processes against them, while somewhere in the world, businesspeople envious of their profits develop the technologies and companies that will replace them.
The problem is that, as we know, bad examples are spreading. By now our competition authority -the ineffable SIC- must be thinking about how to dismember our nascent technology companies which, because of their narrow view of competition, they have treated with special hostility. The worst thing is that things will not end there if the enemies of economic freedom, already abundant in Colombia, manage to increase their share of the political market in the next elections. Therefore, watch out for 2022!
Luis Guillermo Vélez Álvarez is an economist and consultant at the Center for Systemic Economics Studies (ECSIM). @LuisGuillermoVl // Luis Guillermo Vélez Álvarez es economista y consultor del Centro De Estudios En Economía Sistémica (ECSIM). @LuisGuillermoVl