Executive Summary
When a Senate committee considered regulating access to a popular National Football League (NFL) broadcast in 2007, the context was familiar to marketers: accusations of abusing monopoly power. The specific issue of NFL telecasts was eventually resolved outside the public policy arena, but it raises a more general question: What “monopolies” should governments regulate? U.S. antitrust laws arose from a desire to protect competition. However, public policy is beginning to apply these laws in marketplaces that are “monopolies” only in the sense that consumers perceive a lack of competition, even though alternatives indeed are available.
The dominant suppliers in these markets can be viewed as psychological monopolies created by consumer beliefs and feelings, not by economic reality. Viewing them this way makes it reasonable to argue that regulating them is misguided, whether that regulation takes the form of protecting what consumers perceive as a “must-have” brand (e.g., BlackBerry personal digital assistants) or punishing an equally must-have brand when consumers begin to resent its dominance. For example, in 2006, the French parliament tried to force Apple to allow any MP3 player, not just iPod, to seamlessly read and play iTunes music files.
Several arguments support the stance against government action when a structural monopoly is not involved. First, attempts to punish a psychological monopolist are likely to garner resentment among consumers intensely committed to a dominant brand or product category; if so, public policy makers may unintentionally create the equivalent of Prohibition, with buyers frantically trying to circumvent the laws designed to protect them. Second, for the most part, psychological monopolies are self-correcting because in the long run, the level of intense psychological attachment is nearly impossible to sustain in a rapidly evolving marketplace. Third, regulation of psychological monopolies could erode public support for antitrust action when it is potentially warranted, as in cases of structural monopoly.
Attempts to regulate psychological monopolies appear to rest on political rather than economic justifications—namely, the intention to give consumers what they want because they demand action and are voters, not because the marketplace lacks alternatives. For better-targeted regulation, policy makers need to distinguish clearly between economic and psychological monopolies and leave the latter alone.
Biography
Jill M. Sundie is Assistant Professor of Marketing & Entrepreneurship in the C. T. Bauer College of Business at the University of Houston. Dr. Sundie received her PhD in Social Psychology from Arizona State University and her MA in Economics from the University of Southern California. She studies motivations for consumer behavior and decisions, with a particular focus in the areas of social influence, conspicuous consumption, and negative consumption emotions. Her work has been published in Journal of Personality & Social Psychology, Social Influence, and Journal of Marketing Research.
Betsy D. Gelb is Larry J. Sachnowitz Professor of Marketing & Entrepreneurship in the C.T. Bauer College of Business at the University of Houston, from which she received her PhD in Management. Her recent publications have focused on the interface between marketing and the law.
Darren Bush is Associate Professor of Law at the University of Houston Law Center. Professor Bush received his PhD in Economics from the University of Utah, where he focused primarily on competition policy as applied to regulated industries. Professor Bush served as an Attorney General’s Honor Program Trial Attorney at the Antitrust Division’s Transportation, Energy, & Agriculture Section. Since returning to academia in 2001, he has written and consulted on numerous issues pertaining to the intersection of antitrust and regulated industries. He has testified before the U.S. House and U.S. Senate Judiciary Antitrust Subcommittees, the Federal Energy Regulatory Commission, and the U.S. Antitrust Modernization Commission, the latter with which Professor Bush consulted. His primary research interests are in antitrust and deregulated industries (and the intersection of the two, including airlines, telecommunications, electricity, and surface transportation), intellectual property, and law and economics.
Journal of Public Policy & Marketing, Volume 27, Number 2, Fall 2008
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