So, throughout my grade school education I was taught that monopolies are bad. They always seem to bring up the Standard Oil scenario, but when you look deeper into that you will see that all Standard Oil did was lower the price of oil, supply oil to more people, and save the lives of whales.
I’m not sure how that was a bad thing. Regardless, everyone thinks it’s super easy for companies to gain a monopoly and keep it for all of eternity – thus the reason for the FTC. So, the government is suppose to understand first which companies achieve a monopoly, and second how to break up that said monopoly. Never mind that the FTC is a monopoly it’s self.
The problem with that, is that essentially every company has a monopoly when you narrow down their focus of their business model. In the business world it’s called a differentiating factor. Take satellite radio for example.
Satellite radio provides music via outer space technology. When they wanted to start the technology, there were no other companies that provided this service so the wise FTC said there must be a competitor. The thing is, ultimately what satellite radio provides is music/talk radio and there is tons of options that are available.
Consumers can go to AM/FM broadcast, to cassettes and CDs, and most recently to streaming internet music (Pandora). Obviously, satellite radio is not a monopoly – but in the government’s eyes it was. Ultimately what you have is politically connected people and corporations influencing the government for their own gains, against the betterment of the consumer. In the satellite radio scenario it was the radio broadcast lobby trying to prevent losses to a potentially superior technology.
I’m not saying that monopolies are good or bad, because frankly I don’t think they could exist without government intervention. If they do exist, it’s simply because they are providing more value to consumers than any competitor could provide.
But, we don’t live in a world without government intervention and where you see the most monopolies is in the patent world. I get the most confused with how the FTC can stop and breakup businesses (which ultimately harm the consumer in order to protect competing businesses) only to have the Patent Office grant monopolies every day. Essentially a patent says the government will prevent any competition for your invention for a certain period of time (a monopoly).
If according to the government, monopolistic companies are bad for the consumer, why are monopolies for inventions good? Any advantage that a patent defender would claim could also be claimed by a “monopolistic” company.
The realities are that patents harm consumers, and they harm businesses. They require significant amount of resources to be devoted to lawyers and for fees to the government. Resources that are limited in supply and would be better served in R&D, marketing, customer service, or other core business practice.
In a truly free market, competition will always provide better solutions to life’s problems. Government enforced monopolies are bad for competition, bad for consumers, and bad in general.