That is why a firm can lawfully become a monopolist by offering a superior product, better service, or more attractive prices than its rivals. But it is illegal for a monopolist to stop challengers from entering the market with lower-priced products. Last month, for example, the FTC required the monopolist of a critical drug used to treat sick babies to divest the rights to develop a competing drug. The FTC alleged that the company had acquired the rights just to keep any other company from developing a lower-cost drug.
Promote economic opportunity. Looking for a new job can be stressful, but the last thing a job-seeker should have to worry about is a back-room deal among employers that would keep her from getting the job of her dreams or from being offered a competitive salary.
As the FTC explained last year, the antitrust laws apply to job markets, and agreements among employers that would fix wages or other terms of employment for workers are illegal. Also, the FTC recently formed a task force on economic liberty to broadly examine the increase in occupational licensing regulations that may limit job opportunities, especially for low-income workers and military families who move frequently.
Overly broad occupational licensing can limit employment opportunities for individuals moving to a different state, or prevent them from using vocational skills to open a new business. Track emerging trends and innovative products. The FTC also holds workshops to bring together industry experts, consumer groups, and other stakeholders to share ideas and knowledge about new products or business models that could benefit consumers. Indeed, ongoing regulation induces high transaction costs and requires strong capabilities that the regulator may lack.
Comparative competition 6 or benchmarking competition is an approach that compares the performance of an operator in different jurisdictions that it serves, or the performance of utilities in different countries. It is the case for instance in the UK where regulators regularly assess regulated entities against utilities in other countries.
It is also the case of Paris France and Manila Philippines , two large metropolitan areas, where the water market is split into service areas covered by companies that do not compete directly but can be compared by the regulator. While these comparisons may be useful for regulators , care must be taken to ensure that operating conditions in compared jurisdictions are similar. Competition via financial markets occurs when operators can purchase their competitors by buying shares on financial markets or through direct mergers.
The regulator can be tasked with allowing or disallowing such mergers depending on their forecast impact. For example, Ofwat, the regulator of water and sanitation services in England and Wales has disallowed some proposed mergers as it feared it would reduce the number of comparators used for its benchmarking analysis. Washington, D. Jadresic, Alejandro. Competition in Water and Sanitation Note no. Their size enables them to dish out huge sums for shelf space in grocery stores, making it effectively impossible for an independent producer to bring a new candy bar to mainstream markets.
Reflecting this trend, a host of studies now shows that business formation in the country has declined drastically over recent decades. In the first of these reports, which I co-authored for New America in , we found that new business creation per capita fell by 50 percent between and Similarly, in the Brookings Institution documented that the firm entry rate—firms less than one year old as a share of all firms—fell by nearly half between and This dramatic fall-off in entrepreneurship is troubling in part because new businesses are a vital engine for new jobs.
Second, excessive consolidation may also have the effect of suppressing personal income and benefits. One result of consolidation is fewer jobs, as companies routinely lay off thousands of workers after merging. Another result is less competition for workers. The rise of platform bosses like Uber promises to make the situation only worse. Again, the data reflect this dynamic.
The vast majority of American workers have seen their hourly wages flatten or decline since Increasingly skewed distribution of labor income, meanwhile, has driven inequality to staggering levels. Facing job insecurity and stagnant wages, individuals are staying put in jobs rather than starting new ventures—a fact reflected not just in declining rates of new business formation, but also in lower rates of self-employed Americans.
And third, concentration of economic control undermines growth because dominant firms can hold back the pace of advancement. Today a handful of companies across sectors wield outsized control over key technologies—Monsanto over genetic traits, for example, or Intel over semiconductors.
Many of these businesses have come to monopolize these tools primarily through rolling up competitors and their patents.
While patents are vital for promoting innovation, they are also routinely abused, to weaken rivals as well as to stunt development by fencing off corporate estates.
Short of actively obstructing progress, firms may simply refuse to invest in it. Absent competition, companies face scant pressure to tinker and improve—potentially explaining why business investment remains low even as firms spend billions in stock buybacks or simply sit on piles of cash instead.
Compounding this hazard today is the rise of dominant platforms like Amazon and Google, which increasingly determine how buyers connect with sellers and producers connect with users. Given the network effects at play, a few companies have emerged as de facto rulers, serving as the railroads and roadways of the Internet economy.
Flush with capital, dominant platforms routinely buy out companies that might threaten their empires. Since these firms—which also include Apple and Microsoft—vertically integrate across multiple lines of business, they are allowed to compete directly with many of the players that now depend on them, creating conflicts of interest.
Amazon, for example, hosts millions of third-party merchants that sell through its platform, but also directly retails goods that compete with these merchants. The troves of data that platforms amass heighten the potential for abuse. Amazon, for instance, uses the information it collects on what third-party merchants are selling to boost sales of its own products. The future, in short, belongs not to the people devising better products and ideas, but to the giants that pick and choose among them to serve their own interests.
In his Economics and the Public Purpose, John Kenneth Galbraith concluded that centralized planning, rather than open markets, was the best way to stabilize industries and boost prosperity.
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