Defining the term
In a discussion of antitrust on The Bob Zadek Show, Bob Zadek described the word “monopoly” as “squirrelly,” noting that it appears in the Sherman Act of 1890 and that enforcers are told to use the statute against monopolies without much guidance as to what the word means Antitrust 101 with Ryan Young (2019). Guest Ryan Young said the Sherman Act, unlike a lot of modern legislation, is two pages long, and that within those two pages it does not define what is meant by monopoly, a source of confusion 130 years later.
Young offered the economist’s definition: a monopoly is a company powerful enough to lower its supply and raise its prices, making its product harder to get and more expensive, which harms consumers. He noted, however, that economists are not in charge of antitrust policy; judges decide cases under what is called the “Rule of Reason” standard, using whatever definition of monopoly they find reasonable, so that the standard changes from case to case and there is no bright-line test for what constitutes a monopoly for legal purposes. The uncertainty, he said, leaves a company unable to know whether it is in trouble and unable to plan for the future or make long-term investments if it fears a possible antitrust action Antitrust 101 with Ryan Young (2019).
Zadek pressed the distinction between the power to act anti-competitively and the exercise of that power — whether a company that is large enough to reduce supply and raise prices but never does so is a monopoly. Young answered that the question has never been definitively answered and has been answered differently in different cases. He said the Justice Department generally does not have a “Department of Pre-Crime,” but that there is an actual antitrust legal term, “incipiency,” under which a judge or regulator who sees market conditions that might in the future permit monopoly can act; he said it has been invoked rarely but has happened, especially in the 1950s and 1960s Antitrust 101 with Ryan Young (2019).
Zadek framed the same question by analogy to criminal law, asking listeners to imagine a federal statute under which a person with a higher than average likelihood of committing a crime could be arrested or have his freedom denied, and asking whether such a law could be tolerated even for a minute. He described federal law, around for 130 years, as treating the mere power to do a bad act as a reason to break up an enterprise as a matter of judge-made law Antitrust 101 with Ryan Young (2019).
Monopoly by government grant and by business success
Zadek distinguished two paths to monopoly. The railroads, he said, became monopolies because the government made them monopolies: they operated with the government’s blessing and were protected in many ways, so that they became monopolies because the government gave them that power. Standard Oil was different — it became a monopoly, if it was one, through the cleverness of its business model, growing because Rockefeller and others were good at what they did Antitrust 101 with Ryan Young (2019). He called Standard Oil the poster child, along with the railroads, for “robber baron-ness.”
A different kind of government-created condition appears in a discussion of Venezuela. Ben Powell described the country as the polar opposite of a market economy, recounting that Venezuela ran out of beer: the monopoly beer producer, Polar, operated under a government that was planning the economy and did not allocate enough foreign exchange for the company to import barley, so it could not make the beer and the country ran out Socialism… Still Not Cool (2019). In Powell’s telling, the shortage ran through a monopoly producer whose inputs were controlled by state economic planning.
Monopoly in politics
Tom Campbell, a former Congressman and State Senator and former dean of the Fowler Law School and the Haas School of Business, applied the economics of monopoly to government. He said economics teaches that monopoly is inefficient and results in less output and less opportunity, and that when he applied that learning to the world of government he found a monopoly — a self-perpetuating one — so that people with good ideas have no place to express them Restoring Common Sense to California (2021). He said the dominant party in California insists that candidates adhere to an orthodoxy that does not admit of sensible other points of view, and that the Republican Party has become largely irrelevant; he cited the monopoly party holding 77.5% of the Assembly and 75% of the State Senate and every state office.
Campbell cited polling by the Public Policy Institute of California of registered voters: 56% of Democrats said a third party was needed because they felt shut out even of their own party, 53% of Republicans and 75% of independents thought a third party was needed Restoring Common Sense to California (2021). He described the party he helped found, the Common Sense Party, as a party for the rest of us, and attributed the legislature’s unrepresentativeness to party primaries in which the most active members — to the left in the Democratic Party and to the right in the Republican Party — win nominations. He said registration in California stands at 46% Democratic, 24.1% Republican and 23.7% independent, with independents or “no party preference” having switched back and forth with the Republican Party in registration.
Campbell described the top-two primary, adopted only in recent memory, as the mechanism that makes a challenge possible: with only two people on the November ballot for a state legislative district, a Common Sense Party candidate who makes the runoff could pick up the support a Republican, a Libertarian and other independents might have had. He said identifying seven Assembly districts out of 80 where an independent-minded candidate could win would bring the monopoly party below two-thirds, and that as long as it holds two-thirds it can put ballot initiatives to amend the Constitution to change Prop 13 without paying to gather signatures and can raise taxes without the people’s approval Restoring Common Sense to California (2021).
Zadek drew the comparison to antitrust statutes directly, saying the country locks in this anti-competitive political environment with strong statutory protection, and that if the same thing were done in business the Sherman and Clayton Antitrust Acts would come down on the actors and the FTC would be on their back. He said Americans want choice in breakfast cereal but not in ideas, and that the barrier to entry of a new political party is infinitely stronger than the barrier to entry of any business into a business activity Restoring Common Sense to California (2021).
Monopoly and consumer loyalty
Roger L. Martin, discussing his book When More is Not Better, told Zadek that the reason he does not want consumers to be loyal to Amazon is that such loyalty makes the company a monopoly, and that as companies become monopolies they start abusing the very customers they used to give great service to. He said Amazon is already abusing Zadek — deceiving him as to what is the most recommended product — and that it did not used to do that; serving customers superbly was how it became a monopoly. He advised buying 50% or 60% of one’s goods from Amazon but buying from other online services and local stores, because a resilient environment is needed and consumers will not like it when the company truly has monopoly power When More is Not Better (2021). Zadek answered that he encourages Amazon and will give it all his business, and that when it starts behaving like a monopolist he will close his account. Martin replied that it will be too late, because the good alternatives will have been destroyed in the meantime.
Across episodes: no development
The excerpts show the topic treated in four separate episodes — the Venezuela beer shortage, the antitrust discussion with Ryan Young, the consumer-loyalty exchange with Roger L. Martin, and the political-monopoly discussion with Tom Campbell — but they are fragments and conversations rather than a running argument, and the excerpts show no development from the earlier treatment to the later.
What the sources do not cover
The excerpts do not state the outcome or holding of any antitrust case, the text of the Sherman or Clayton Acts beyond the remarks quoted, or any amendment on which a case turned. They do not identify the statute or bill by which California adopted the top-two primary, the date of the Common Sense Party’s founding, or the content of its five principles, since the Campbell excerpt breaks off as he begins to list them. They do not give titles for Ben Powell or Ryan Young, and they do not say what, if anything, followed Zadek’s and Martin’s disagreement over Amazon.