Monday 10 June 2019

How strong is the monopoly power held in big tech's hands?


The US Federal Trade Commission and the Department of Justice have launched an antitrust probe into Amazon, Facebook, Apple and Google (Amazon and Facebook watched by the FTC, Apple and Google watched by the DOJ). It is undeniable that these companies have some degree of oligopolistic power. They are not the traditional oligopoly that they do not control some rare natural resources like some crude oil oligopoly. How do they gain and expand their oligopolistic power? They are building their own platforms and ecosystems to make their clients become more and more dependent on their products, platforms and ecosystems.
Some people might have such experience. Once they bought their first iPhone, then they started to buy other Apple's products including music from iTunes, after a while, they found themselves living in Apple's ecosystem. And when they enter this ecosystem, it is extremely difficult for them to get out of this ecosystem, because the convenience brought by the ecosystem is so significant and attractive. Moreover, even if they are able to get out one ecosystem, they are likely to find themselves quick adapt to another ecosystem by another tech oligopoly. Ecosystem is so power in terms of gaining market power, because ecosystem is able to bring a closed system, which can be treated as a separate market from the big general market and is entirely controlled by the firm who builds this ecosystem. In an ecosystem, the tech company can control the content, the technology, the charges and many other elements; more importantly, this system is relatively isolated from the outside. These big tech companies can lock their clients into their ecosystems; and because of the existence of these clients, other content developers including software developers, hardware developers, whoever want to win these clients, have to comply with the large tech companies who control the ecosystems.
Since these large tech companies have built up their ecosystems, as long as they have the control over their ecosystems, their oligopolistic power is almost unbreakable.

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