Social Media Companies Aren’t the Good Guys. They’re Also Not Monopolists.
There are plenty of good reasons to hate social media. It negatively affects mental health. It provides a skewed and inaccurate view of the real world. It is a tool of manipulation employed by deeply partisan billionaires.
But there is one thing that every social media company is not: a monopoly.
Yet, some critics of these companies casually throw around the word “monopoly” in an effort to convince the public and politicians that government power must be expanded (yet again) to regulate yet another industry. We’re told there is nothing users can do when these firms delete (i.e., “censor”) politically incorrect posts, thus controlling what users can read or share in their news feeds. The fact users don’t leave for some other social-media platform, is is claimed, is undeniable proof these companies are monopolists.
It’s not hard to find pundits and columnists who make this claim (e.g., here and here and here). Roger Simon at PJMedia provides the predictable conclusion: have the federal government solve the problem with new anti-trust powers!
Once we begin to dig a little deeper, however, it quickly becomes apparent firms like Facebook and Twitter don’t have monopoly control over supply—a prerequisite for securing a monopoly—and they don’t charge monopoly prices. Indeed, the people who run social media firms may do many unsavory and alarming things, but that doesn’t make them monopolists
Monopolizing the Supply, Then Charging Monopoly Prices
The first step in gaining a monopoly involves gaining a large amount of market share in a certain industry. Although monopolists are often thought of as gaining this market share through dishonest means, this is not necessary. A firm could gain immense market share by simply doing a better job of anticipating what the consumers want. But the sinister next step is always the same: the “monopolist” uses its exalted position in the marketplace to force competitors out of business and keep others from entering the market. Once this is accomplished, the monopolist can control the availability of goods and services and charge its customers inflated “monopoly prices.” The customers, with nowhere else to go, have no choice in this situation but to pay the higher prices.
Note that in order to charge these high prices, it is first necessary to eliminate the competition so as to control the supply of goods in the market. If a monopolist tries to hike up prices before controlling supply, high prices will invite new competitors to enter the market, and the competition will force prices back down. Put another way, as Ludwig von Mises phrased it: “Monopoly [over supply] is a prerequisite for the emergence of monopoly prices.”
What Services Do Social Media Firms Deliver?
But before we can determine if social media firms are controlling the supply of services—we must first understand what exactly those services are.
There is not an easy answer to this because social media firms supply services to more than one group. They supply advertising opportunities to advertisers and sell them access to the site’s users. But social media firms also supply the “social media experience” to users. This is provided to users in exchange for their personal data.
Because most recent criticism of social-media firms focuses on these firms supposed abuse of users through “censorship,” we’ll focus on the service offered to users: the opportunity to engage in communication and sharing of information with other users within the confines of a specific social media platform.1
Are Firms Controlling S
Article from Mises Wire