American Tech Giants Are Fiercely Competitive Monopolies

Bottom Line: The moligopoly hypothesis is the idea that FAANGs (Facebook, Amazon, Apple, Netflix, and Google) – and perhaps Microsoft – are at the same time monopolists and oligopolists. Contemporary antitrust and regulatory policy must adapt to reflect this reality and take actions through a moligopoly screen. 

FAANGs display four features:

1) FAANGs are conglomerates. All have a core business: Apple in hardware, Amazon in online retail, and Google in search engines. But all also have a diversified portfolio of activities. 

2) FAANGs characterize uncertainty as a source of intense competitive pressure. The FAANGs’ concern is specifically on technological uncertainty, not on disruption caused by other factors like currency fluctuations, demand shocks or trade wars. 

3) FAANGs channel high amounts of financial and human resources into research and development (R&D). 

4) FAANGs’ competitive strategies display a degree of serendipity. Innovation strategies are a case in point. In parallel to outcome-driven R&D processes, some FAANGs follow blue-sky research processes designed to achieve unpredictable outcomes through experimentation.

Moligopolists participate in a four-dimensional competitive process:

1) Moligopolists compete as rival sellers of substitute products or services in a multiplicity of product or service markets. Mobile payments, cloud computing, games, and messaging are obvious examples.

2) Moligopolists compete against the ‘non-consumption.' Competition against the non-consumption often leads moligopolists to compete against other FAANG and non-FAANG firms. 

3) Moligopolists compete for entrepreneurial assets. This competition can be seen on the demand side of the labor market and on the supply of side of capital markets. 

4) Moligopolists also embody a degree of internal rivalry at subsidiary, division or business unit levels: Google has Waze and Maps, YouTube and Play Music; Microsoft has Word and Works or Mojang and Studios. 

Contemporary antitrust and regulatory policy pays almost no attention to the second, third, and fourth competitive dimensions of moligopoly competition outlined above.

Modern antitrust and regulatory policy must be re-channeled to be viewed through through a prior examination of several dimensions of competition, in order to establish whether the firm under scrutiny is a moligopolist. Antitrust and regulatory policy must scrutinize restraints to capital, labor restraints, and platform governance. 

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