Wang Tokyo: what should anti-monopoly be

2022-05-06 0 By

I have written many articles on anti-monopoly. In “Exchange of equivalent Value from the Perspective of social Division of labor”, I pointed out that the monopoly that the state should oppose is the behavior of buying and selling forcibly in violation of “exchange of equivalent value rules”.Is antitrust anti-Big?Then it analyzes the background and reasons of the American anti-monopoly from the original “anti-big” to “anti-unfair competition”, and points out that anti-monopoly should be precise to prevent hurting innocent people.It is not an idle concern to raise such a question.The prevailing view is that prosperity comes from competition, and monopolies repel it.Why can a monopoly shut out competition?The traditional economic explanation is that such enterprises have achieved “dominant market position” because of their large scale and high market share.Once enterprises have a “dominant market position”, they will often carry out “predatory pricing” and squeeze out small and medium-sized enterprises.Suddenly, this explanation seemed reasonable, and IT had seemed so to me before.About 25 years ago, I was inspired by the Economics of Imperfect Competition published by The British economist Robinson in 1933. I began to question the traditional anti-monopoly theory: is perfect competition or monopolistic competition the normal state of the market in real life?Is a firm’s “market dominance” determined by its market share?Can a company with a high market share really practice predatory pricing?For a long time, “competition” and “monopoly” have been regarded as two opposing states.If make theoretical analysis, can look like this of course.But in reality, the normal market is not “perfect competition” or “perfect monopoly”, but “monopoly competition”.According to the definition of economics, perfect competition has four constraints: there are a large number of buyers and sellers in the market, and no one can set prices independently;Homogeneity of products, no difference;Adequate information;Free flow of factors.Obviously, perfect competition is only a theoretical hypothetical state, and the real world is impossible.Take the yiwu Commodity Market in Zhejiang province as an example. I visited there 12 years ago and saw a number of wholesale lighters. One of them sold windproof lighters at a price twice that of other shops.Why is the price of the same lighter different?The reason is that the products are different.And the products are different, but of course it’s not perfect competition.Windproof lighters do contain more technology than regular lighters, which is why manufacturers have some pricing power.However, this does not mean that the vendor can set the price independently.From the perspective of demand, as there are a large number of substitutes in the market, if the price is too high, some consumers will give up and buy substitutes.From the perspective of supply, windproof lighters are “expensive and profitable”, and other manufacturers will also produce them, which will make the competition more intense.By taking the above example, I want to tell the reader that competition and monopoly are not exactly opposites in real life.On the one hand, due to product differences, all competitive enterprises are likely to have a certain degree of monopoly;On the other hand, because there are a large number of producers in the market, monopolies also face competition.But here’s the thing: since monopoly and competition can’t be separated, antitrust can also limit competition.It may be said that antitrust is mainly opposed to the use of “market dominance” by enterprises to exclude competition.Competition among enterprises will inevitably lead to survival of the fittest.But how can we tell if a company is using “market dominance”?Or, which companies can have “market dominance”?At present, the mainstream view in the academic circle is to judge according to the market share of the operator: the larger the market share, the stronger its “market dominance”.In fact, the current antitrust law says that an operator’s market share in the relevant market reaches half;The combined market share of the two operators in the relevant market reached 2/3;Three operators with a combined market share of 3/4 of the relevant market can be presumed to have a “dominant market position”.I cannot deny that operator “market dominance” is related to market share, but I do not agree with the presumption above.The logic behind presuming market dominance by “market share” is actually “anti-bigness”.It is also unclear what “relevant markets” mean.If the share of a certain enterprise in the domestic market is more than 50%, but in the global market share is less than 5%, I would like to ask whether the enterprise has a dominant market position?Take a step back, even if the company’s global market share exceeds 50%, why object?That would be a damning revenge!Some scholars explain that enterprises with high market share are prone to abuse their dominant market position and implement predatory pricing.Not all of this is true.I have said many times that the dominant market position of the enterprise comes from two aspects: one is government licensing;Second, key core technologies.The former is “administrative monopoly”, while the latter is “technological monopoly”.Administrative monopolies are authorized by the government and cannot be competed by others. Predatory pricing is indeed possible.For example, domestic “tobacco monopoly”, if the country does not limit the price, the price is certainly much higher than now.However, technology monopolies are different. Although they can seek price (independent pricing), they are not able to predatory pricing due to the large number of competitors or potential competitors.If an enterprise ignores the market supply and demand to set the price too high, the demand for products will be reduced, which will allow competitors to take advantage of the situation, so that they are in a passive position;On the other hand, pricing below cost to hurt competitors is suicidal: the more products you sell, the more you lose.Looking abroad, there are not many cases of “below cost pricing”.American tobacco companies and Standard Oil tried this in the early 20th century, with disastrous results.The reader thinks, how can enterprise competition rely on “loss” to win?Again, take the “lighter market” as an example. Suppose you make windproof lighters and I make ordinary lighters. If you price my product below cost in order to suppress mine, guess what I would do?I will buy your product immediately, sell it when you can no longer afford it, and continue to make mine.To sum up the above analysis, I have three conclusions: First, the normal market is not perfect competition, nor is it perfect monopoly, but monopoly competition;Second, it is not appropriate to use “market share” to determine whether an enterprise has a dominant market position or not, let alone to identify it as a monopoly because of its large market share.Third, it is not “predatory pricing” for technology monopolies to seek price. Anti-monopoly should be aimed at unfair competition behaviors such as forced buying and selling, and the emphasis should be on administrative monopoly.(Blame: Yousie)