What kind of regulation is appropriate for 21st Century monopolies?

The Yale Law Journal article linked here, and the NYT coverage of the reaction (URL below) suggest we're finally beginning to address the question.

In the 1920s the doctrine of "Natural Monopoly" was developed for industries that worked better economically if a single provider served the whole market--telephone, electricity, railroad, etc. In 1934, for example, Congress gave AT&T the telecommunications monopoly in exchange for a guarantee of universal service and submission to rate of return regulation.

Now we have businesses that exhibit increasing returns to scale--i.e. they tend toward monopoly for reasons that create value for their customers, famously google and facebook--but the economics of their network platforms are different from the companies that had to build landlines and railroad tracks. Robin Chase 's book Peers Inc. explicated these businesses and their benefits succinctly, but it's not clear, as concentration grows, what regulatory response can best foster innovation, growth and protect consumers from the extraction of excess profits. What is clear is that current antitrust doctrine doesn't fit.

The reaction to the article linked below shows that this is heating up in academic circles (see Yale Law Journal - Amazon’s Antitrust Paradox, cited in the Times) enough that Amazon paid two ex FTC commissioners to write a rebuttal (spurious from what's quoted here). It's the beginning of an important conversation.

For NYT coverage of the reaction to this article, see here.

Here's the key paragraph from the abstract of the law review article:

This Note argues that the current framework in antitrust—specifically its pegging competition to “consumer welfare,” defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors.


Jeff Bezos, the founder of Amazon. Photo Credit: David Ryder/Getty Images