Moneybeat: Antitrust lawsuits and Big Tech

JENNY ROUGH, HOST: Coming up next on The World and Everything in It: the Monday Moneybeat.

NICK EICHER, HOST: It’s time to talk business, markets, and the economy with financial analyst and adviser David Bahnsen. He’s head of the wealth management firm The Bahnsen Group and he’s here now.

David, good morning!

DAVID BAHNSEN: Good morning, Nick. Good to be with you.

EICHER: David, closing arguments came on Friday in the Google anti-trust trial. We’ve talked anti-trust before and it was in the context of this new Justice Department suit against Apple. So I came across this story in The New York Times, the title: “U.S. Antitrust Case Against Google Is Just the Start.” Subheadline: “As the Justice Department’s case against Google nears an end, the federal government has more suits in the pipeline trying to rein in Big Tech.” And this is not just on the left. There’s been a lot of concern raised on the right about the power of Big Tech. What’s the impact on markets of this sort of aggressive push to go after these companies, as the story suggests, prosecutions to “rein in Big Tech”?

BAHNSEN: Well, one can have concerns with big tech power and the way they use the power without believing that it meets any reasonable definition of a monopoly. Being good at what you do and having a lot of consumers want your product and use your service does not make you a monopoly. And so to me, big tech abuse should be very carefully defined. And so we can have critiques about censorship, we can have critiques about left wing bias, we can have all of those discussions.

But that has nothing to do with the regulatory state, whether it was Trump administration, or now the Biden administration deciding that because they're big and powerful, and popular that we want to bring antitrust case against them. They tried it with Microsoft in the late 90s. Right now, there's concerns about Apple and their use of their app store in concert with their hardware, Amazon having a cloud business in conjunction and web hosting in conjunction with being such an e-commerce power. And then now Google with search and advertising. And all anyone has to do is look at the advertising dollars spent across the web and realize Google doesn't have a monopoly on how internet advertisers spend money. People are spending money with Google, because they're the best search firm. And they're spending money with a gazillion other places of social media and websites that are useful for their own advertising needs. So, I really get bothered by these types of cases, not just because they're wrong legally and economically; I get bothered because they then distract us from a tensioning what we say is our real agenda, that we actually do want to deal with where there are big tech abuses. And you do not effectively deal with big tech abuses when you wrongly go after another aspect of the big tech business. That's to me the biggest problem is the distraction that represents or diversion from a more productive way of addressing it.

EICHER: We’ve talked a lot, David, about the campus protests, but not the central demand, namely that college pension funds divest from Israel. Suppose this succeeds at a certain level, what’s the overall impact of this and what do you think of the trend of weaponizing finance in this way?

BAHNSEN: Obviously, it's not gonna have any impact if a college pension fund were to go sell stock in Caterpillar, because they make, you know, tractors that people in Israel buy. Or they make pharmaceuticals that are manufactured in Israel. These people can't move the needle on this stuff. But it does speak to the ongoing weaponization of pension funds as at least an attempted strategy to try to implement social policy. And by the way, I want to point out this is not just radical college students. The first time I ever heard about a big movement to divest of companies that are connected to Israel was in the PCUSA pension fund, and those that wanted to put an end to any purchase of military equipment or anything related in Israel. And this was some years back and it was actually in an allegedly Presbyterian denomination looking to do this. So this kind of far left-wing idiocy in pension fund thoughts now has gotten out of control with ESG and environmental movement, DEI, other forms. But this goes back a bit, and that weaponization is, I think, just a tremendous problem.

EICHER: OK, defining terms, David, I’d like to go back to the beginning. As you were talking about the pursuit of Google, you said that just because a lot of consumers want your product does not make you a monopoly. So, what’s a monopoly?

BAHNSEN: A monopoly by definition is a company that uses the power of the state to force out competition. And it can be very direct, like the government just passed a law you have to buy all of your chicken from this chicken producer. Or it can be less direct where you use regulation and other policies from the state to try to benefit your business and hurt others. But a monopoly can never be defined as just customer preference. The late, great Robert Bork famously taught, and legal doctrine throughout the 20th century, the importance of the “harm principle,” there has to be a customer being harmed. It's the largest... And that's what Linda Kahn at the FTC now in the Biden administration specifically disagrees with. The new mantra for, unfortunately, some on the so called New Right and many on the left, is that big is automatically bad—where I think the legal history, and certainly the Bork principle, is in a monopoly, there has to be someone being harmed. And by again, just to get down to the basic definition, it's cronyism. It is the wedding together of power from the government with business—that is where I believe you get into monopolistic problems.

EICHER: So you defined monopolies in relation to coercive government power. But are there no natural monopolies? Does that ever happen without government, or is government power always a necessary component?

BAHNSEN: Well, a natural monopoly is a very undefinable term, because, again, by definition, a company can never be a monopoly without the power of violence, the power of the state. If what we mean is a company has 100% market share, which I've never seen. In a free society, Nick, that can't be sustained because there's so much money apart from government and hear me out is very important principle. By definition, I see how much money you're making in another business, I now have all the incentive in the world to come in and compete with you. And then your monopoly goes away. Now you say, Well, you can't compete. Well, why can I not compete. That's where the monopoly comes in. If the reason I can't compete is some regulatory barrier has been put in front of me, or a cost or governmental restriction, and so forth. But in any environment where someone has 100% market share, and it's profitable, automatically, there are natural incentives for competitors to come in. So what is the barrier keeping competitors from coming in where someone has that “natural monopoly”? Those barriers are what become monopolistic, and those barriers by definition have to involve the state. And if you say, no, no, there are other companies just so good at what they do, you can't get in. Well, then I guess somebody has really competed quite effectively in the marketplace.

EICHER: Ok, David Bahnsen is founder, managing partner, and chief investment officer of The Bahnsen Group.

Check out David’s latest book, Full Time: Work and the Meaning of Life at fulltimebook.com.

Have a great week, David!

BAHNSEN: Thanks so much, Nick.

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