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Comment by SilasX | Hacker News Reader

Agreed, I made a similar point recently[1], that a monopoly should be judged by lock-in, not by raw market percentage, which is an arbitrary measure anyway; no one cares that I have a monopoly on SilasX-labor. What matters is whether it's hard for others to offer alternatives to SilasX-labor and whether buyers can switch to that alternative.

In that sense, you should worry about monopolies on OSes or rail routes, which have those kinds network/lockin effects, not search engines or (as was in the news recently) retail sales of organic foods (where it's easy for numerous grocery stores to enter the market if they wish)[2].

[1] https://news.ycombinator.com/item?id=18394628

[2] http://www.washingtonpost.com/wp-dyn/content/article/2007/08...

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> a monopoly should be judged by lock-in, not by raw market percentage

Monopolies are predominantly, in anti-trust law, judged by market (pricing) power, not raw market percentage. This directly relates to whether there is effective competition in the market—which may be slightly different than your question of whether buyers can switch to an alternative; it is more whether the alternative(s) are empirically substitutes rather than parallel non-substituting markets, whether or not buyers are able to switch.

>Monopolies are predominantly, in anti-trust law, judged by market (pricing) power, not raw market percentage.

In theory sure. In practice, explain the Whole Foods/Wild Oats case, in which Trader Joe's/Albertson's/etc could start carrying the goods overnight.

>This directly relates to whether there is effective competition in the market—which may be slightly different than your question of whether buyers can switch to an alternative; it is more whether the alternative(s) are empirically substitutes rather than parallel non-substituting markets, whether or not buyers are able to switch.

My point is that there can be "effective competition" even if there are zero competitors at the moment; what matters is whether someone could come online and compete away the excessive profits, so you can't just look at the current competitors.

That's the point of toy example: there is zero alternative to me for SilasX-labor. You should not thereby conclude that there is "ineffective competition".

My point is that there can be "effective competition" even if there are zero competitors at the moment; what matters is whether someone could come online and compete away the excessive profits

The whole point of the network effect, is that there can be more than zero competitors who even have a superior product, and it really doesn't matter.

But that's my point: it's the network effect (or related lock-in) that determines the monopoly, not the raw marketshare.

In fact, you can have "competition" while having all the substance of the monopoly. For example, if there are eight competitors with equal marketshare, but it's impossible for anyone new to enter the market, those eight can easily conspire to charge monopoly profits, despite each one's "small" market share.

If you have a situation where large swathes of the general public desperately want alternatives, but despair of ever seeing a viable one, then something there stinks like a monopoly.

Likely, although "everyone is dissatisfied, but not enough to leave" can also be a result of compromise. If there's value to be had by everyone using the same thing, while everyone wants that one thing to be a little different than what others want, a lot of people will "want alternatives" that they can't really have regardless of how the provider behaves.

Likely, although "everyone is dissatisfied, but not enough to leave" can also be a result of compromise.

That's a distortion. It's more like, lots of people are dissatisfied, but all of the alternatives are economic/network-effect suicide. It's more like people living and working in the crappy mining town, because the only alternatives are like living as a hobo in the woods.

I'm not sure if you're saying that what I'm saying is a distortion of the situation, or that the compromise represents monopolistic distortion of the market. I think the former? If so, that's a much stronger reading than I intended; I wasn't saying "this is what's happening" but rather "this is a thing that happens in general, it may be part of the explanation here, I don't know how to really pick it apart."

People cant want a lot of things that aren't economically feasible.

Toy example: if everyone demands at least $30/pound for some risky kind of coal mining, because it's such a pain to do and they'd rather a) rest or b) do easier work at any lower price ... that doesn't mean coal miners are colluding or that coal mining is a monopoly.

In that case, if you want a $29/pound alternative, your desire is economically unrealistic.

If there's a single coal miner that does it for $29/pound -- and is thus the most efficient one -- that miner will dominate the (tiny, niche) market. But it would not rightly be called a "monopoly", but "a single provider who is legitimately better and would lose business if he started to falter".

Telling me that someone currently dominates a market does not prove monopoly power.

The situation is far more like not being able to choose another broadband provider, with network effects taking the place of local cable regulations.

I can picture a scenario where some sites have an insurmountable advantage because of compromised network neutrality. I'm very sure that in that case, the winners would be crowing about how, "the market has spoken," when the reality is that the market is broken.

And yes, a broadband (often) would be an example of a monopoly provider. My point was that, "gosh, we want a better alternative" is not necessarily a reasonable desire or evidence of monopoly power.

"Gosh, we want a better alternative, but alternatives keep on getting squashed," is a pretty strong indicator. Doesn't every monopoly claim that the situation is due to market forces and that they're not a monopoly?

> > Monopolies are predominantly, in anti-trust law, judged by market (pricing) power, not raw market percentage.

> In theory sure. In practice, explain the Whole Foods/Wild Oats case

Pricing power explains that. Pricing power occurs when price increases from one market player do not result in losing business to a competitor; the fact that other players could in principle choose to enter the market and unbermine that pricing power is not an argument against the existence of pricing power.

> Trader Joe's/Albertson's/etc could start carrying the goods overnight.

But, whatever one might argue they could do, they didn't in places Wild Oats or Whole Foods were alone in the segment, with price competition occurring where one of the two opened stores where the other already operated, and avoiding that price competition being documented as Whole Foods own analysis of and CEO’s motivation for the deal.

> My point is that there can be "effective competition" even if there are zero competitors at the moment

Which is false. There can be speculative, potential future competition, but that's not what anti-trust law cares about, for good reason.

>Pricing power explains that. Pricing power occurs when price increases from one market player do not result in losing business to a competitor; the fact that other players could in principle choose to enter the market and unbermine that pricing power is not an argument against the existence of pricing power.

The counterfactual possibility, of entrants eating excess profits, is exactly what keeps businesses from charging those excess profits! The fact that no one currently judges them to be excess profits means the existing players are not really earning monopoly profits, properly considered.

See the coal mining example from the other thread: https://news.ycombinator.com/item?id=18469312

> The counterfactual possibility, of entrants eating excess profits, is exactly what keeps businesses from charging those excess profits!

Too the extent that's true, yes, there is no pricing power; it was not true in the case you cited, where the dynamics of price competition in local markets showed that, in fact, the speculative possibility you claim existed did not prevent Wild Oats or Whole Foods from charging monopoly rents in places where the other was not present, even though one might argue that other grocers could have chosen to sell similar products with little barrier to entry, but the entry, e.g., of WF into a Wild Oats market did result in price competition. Which internal emails showed was specifically known to Whole Foods and cited by their CEO as a reason for the buyout.

Pricing power explains perfectly the example you asked about.

Yes, the monopoly argument depends on believing that somehow, even though there were these absurdly high profit margins from simply carrying a different good, no grocer other than WF or WO will ever recognize that for eternity, because, over the short time intervals that one study looked at, they never switched to carrying the goods, despite it being trivial for them to add or remove product lines for their stores, and there definitely not being monopoly power responsive for this choice further upstream.

It's just not a good argument, nor does it refute that this "counterfactual competition" does, normally, in practice, keep vendors from charging excess profit margins; nor does it contradict the long history of sellers entering abandoned markets thinking they'll be the only one, only to face competition shortly thereafter.

> Yes, the monopoly argument depends on believing that somehow, even though there were these absurdly high profit margins from simply carrying a different good, no grocer other than WF or WO will ever recognize that for eternity,

No, it doesn't, because antitrust monopolies aren't defined exclusively over an infinite future time horizon; while simple economic models often only consider that, all useful economic models and regulations consider shorter-term effects, as well, or exclusively (“In the long run, we’re all dead”, after all.)

I think the interesting thing is that the users aren't the customers in these examples. Anti trust law would be concerned with the advertisers and fb/google. Not the users.

I suppose you could make the argument that fb/google are monopolies because the advertisers have to go through them to reach us. It isn't clear to me though that this is the problem we actually want to solve. This leads me to believe that anti monopoly laws might not be the correct tools for dealing with these companies.

You mean, fb/google have monopolistic power over the advertisers and since advertisers are generally not our friends, then go for it, let them pay up?

I think what's being got at is "the power over the users is also concerning, and not something we can get at directly with these laws."

Yes that's what I meant.

> I think the interesting thing is that the users aren't the customers in these examples.

There is an exchange for value between Google (FB, etc.) and consumers; the fact that it's an in-kind exchange rather than money doesn't prevent anti-trust analysis from being applied.

There's also the possibility of monopoly in some advertising segment, sure.

You /may/ be right, I don't think that current laws were written with that in mind, but the laws could be munged to encompass the relationship.

I suppose then the anti trust argument would be that they are able to 'ask' for too much private data. It seems to me a first step would be gaining price transparency. Who is the cheapest (asks for the less data).

Actually if your theory holds water, isn't there scope to argue that the consideration (your data) isn't properly defined in the contract, and keeps changing (via defaults, and technological progress). Could then this not then be dealt with via contract law and consumer protections?

> What matters is whether it's hard for others to offer alternatives

It is monstrously hard to offer alternatives. The barrier to entry is the massive engineering effort to compete.

Google is not just a search engine. It is an email server and client, a calendar, an online office suite, a cloud provider, a mobile platform, and I can go on listing things to fill up several pages of what Google is.

Even if DuckDuckGo is a better search engine, it offers 1% of the feature set and can't compete. The engineering effort needed for it to compete effectively is astronomical. Imagine what it would take to build out all of those Google services that are tightly integrated and not just build them out (like Microsoft), but build them out well. That is the barrier to entry.

> It is an email server and client, a calendar, an online office suite, a cloud provider, a mobile platform, and I can go on listing things to fill up several pages of what Google is.

In my mind search, email, calendar, cloud, drive are all separate services. Just because I use Google Search doesn't mean I use google drive and gmail. In fact, I use Microsoft's OneDrive most of the time instead of Google Drive, and I don't use Calendar at all (much prefer Outlook).

You do not have to build out that entire list to compete with Google - you can build and compete with a superior version of just one. Even indie developers can (and do - successfully) compete with services like Calendar.

In general I agree with you, but there are certain cases where bundling of goods and services can lead to anti-competitive scenarios due to the "price" savings of bundling. Especially if that lower price is paid for by market power from another market.

Example: now that Google says that they don't mine email / calendar / docs data for ads, that means they don't make direct revenue from those services - unless a user pays for them directly a la G Suite or Google Drive pricing. Therefore Google leverages strong market share and revenue from Search to invest in these services to bundle them and offer them for free.

In theory any other company can build individual blocks, but most likely could not (1) offer them for free, nor (2) address the switching cost that a user of Google's services does not have (i.e. having multiple tabs or different applications opened to use email + calendar + files + etc.) If this wasn't a technology company, but like a p&g company, hypothetically, this would be clear cut monopolistic behavior.

That said, it's a thorny issue and I could see both sides, and the technology market landscape necessitates an analysis of our definitions of monopoly / market share / competition, etc.

The thing is duckduckgo is just a search engine. I dont want email or calendar or purchase histories to get involved in that. More interlinked services like drive/gmail/calendar are hard to compete with, but others are not. I think most users don't care about or even actively dislike youtube's efforts to include other services.

"Microsoft spent more than a decade, investing tens of billions of dollars and absorbing an astonishing $12.4 billion in cumulative losses, to establish Bing as a credible competitor. It is cheaper and easier to build a manned space program than it is to build a modern search engine."

- Matthew Hindman, "The Internet Trap", 2018 (p. 174)

Right, the issue was to make it credible. It was never difficult for someone to say "screw this, I'll use a different search engine instead" and be using it in minutes. Google would even find it for them!

The last sentence of the quote is false; only a small fraction of that money was spent on "building the search engine". Again, the relevant point is whether you can offer an alternative, which MS (and several others) have done with a fraction of that $12 billion. If it's difficult to offer something better because the top provider is legitimately the best at it, that's not the worrisome monopoly we should worry about.

Imagine the comparable investment to make a different OS that runs MS Word and getting a home user to use it instead of Windows/Word. Or running an alternate rail line from San Jose to San Francisco.

The problem with this is twofold: 1. How do we define the "best" search engine?

2. How can we know that the only reason Google can keep being the best out of incumbents is because of past network value. e.g. if a competitor had access to the same amount of historical sea h data as Google, could they use it in a better way?

The barrier to entry to selling cars is massive. The barrier to entry to building spaceships is massive. Lots of industries require tremendous amounts of capital to break into. But this is totally orthogonal to the discussion at hand.

I'd be interested to see something happen to remove the lock in on facebook. Namely, detach the network from the other services.

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