You hear the word "monopoly" thrown around a lot these days, especially about Google and Apple.
After Google's bid to acquire Motorola, the integration of Google+ signals in Google Search and the announcement of Google's consolidation of privacy policies and data gathering across Google services, critics have been saying Google has a monopoly in the search market.
Consumer Watchdog, referring to Google, said: "The Internet is too important to allow an unregulated monopolist to dominate it."
U.S. Rep. Marsha Blackburn (R-Tenn.) said this week that "Google's move to eradicate consumer choice all together across their various platforms raises additional questions about how the company's monopoly power might hurt competition."
And after Apple last week announced new software, services and initiatives related to education and electronic publishing, critics of that company have used the word "monopoly" to characterize Apple's position in the tablet market.
OS News asked: "What about Apple using its tablet monopoly to push into textbooks and locking students in?"
Last weekend, I appeared on Leo Laporte's netcast "This Week in Tech," in which fellow guest and columnist Ed Bott said that just as Microsoft used its operating systems monopoly with Windows to make Internet Explorer the leading web browser, Apple is "leveraging their dominant position in the tablet marketplace with the iPad and then creating a proprietary, incompatible version of an open industry standard" with iBooks Author and iBooks 2.
The "monopoly" accusation is made freely. But is it true? Are Google and Apple actually "monopolies"?
What is a monopoly, anyway?
Economists view any given market as ranging somewhere between two theoretical extremes. At one end of the spectrum is something called "perfect competition," which involves, by definition, a huge number of companies selling into that market.
At the other end of the spectrum is "monopoly," for which there are three criteria:
1. There is only one company in the market.
2. There is no close substitute for the product or service offered by that company.
3. Barriers exist for other companies to enter the market.
The idea here is that with perfect competition and many companies, no one company has control over the price it can charge. Prices are determined by the market.
In a market controlled by a monopoly, that one company can determine prices because of the three criteria listed.
That definition alone technically invalidates everyone who says Google or Apple is a monopoly. That these companies are monopolies is obviously, literally and provably false.
But calling either Google or Apple a "monopoly" is just a lazy exaggeration to imply that it has a "monopolistic" position in the market, which means that although it's not actually a monopoly, it's close enough to be deemed "anticompetitive."
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