De facto Monopolies and Customers

Antitrust prosecutors recently issued subpoenas to major airlines to explore possible collusion – but all they had to do was ask air travelers.

Anti-trust law is complicated. The price-fixing portion of the law makes it illegal for competitors to meet and set or even discuss pricing. But today, there’s no need to meet. Algorithms can survey and match competitor pricing in real time and they don’t do jail time.

Automated price-matching eliminates competition – which is one reason why gas prices, airfares, cellphone plans, credit cards, car rentals, and many other necessities of modern life all cost within pennies of each other. The goal of monopoly or price-matching is to be able to control price and profit. Once achieved, companies can ignore customer service and value and focus on shareholder return.

Customer service and brand loyalty cost money. Customers have service, billing, booking, and technical questions often best answered by a person. Monopolists can eliminate this wasteful cost using baroque phone trees, FAQs, and impenetrable online forms that lead to customer rage.

For example: a ticketed passenger’s name must now match the name on their passport. My name has a suffix, “the third.” So is this three capital “I’s”, three lower case “i’s” or three number “l’s?’ I tried to book online but nothing worked. Then I waited half an hour for an agent who didn’t have a solution. After dropping the suffix in frustration, I somehow got a ticket. Finally, after a four-hour flight delay on an over-sold flight, I gave up and went home.

Traditionally, the hallmark of good business has been customer service and value. These attributes ensured customer retention and growth. Reputation meant everything. It was understood that with power came responsibility. But in a near monopoly, this no longer matters.

Many familiar businesses have become the butt of customer jokes. Service and reputation only really matter when customers have choices. If you want to go to Aunt Millie’s funeral, there are two airlines that fly there, and their prices are almost the same, flip a coin and know that the airline you chose can sell your seat twice, charge you for baggage, junk food, and the legroom you once enjoyed and devalue your accrued airline miles. Choose the competition and discover they do the same.

Technology and deregulation have made abuses in antitrust law much less transparent. If free-market capitalism is to survive, we’ll need to create new or enforce existing laws that return shareholder value to paying customers.

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