Tuesday, May 10, 2005

Mega-Corporations and the Danger to Free Markets

Bertelsmann AG is reportedly set to buy CD seller Columbia House. Bertelsmann already owns CD seller BMG Direct as well as a whole slew of other media companies, including uber-publisher, Random House.

This once again raises the question, exactly how far are we willing to let mega-corporations go in their consolidation of the market? Verizon is buying MCI. Sprint and Nextel are merging. Clear Channel Communications owns over 1,200 radio stations. And so on.

Why is this bad? Because it’s bad for the free-market. A lot of anti-corporate activism comes from groups who are simply anti-capitalism. But there’s good reason for capitalists to also worry about corporate power.

The problem is, these mega-corporations are not free-marketers. They aren’t looking to compete in a free market, they are looking to dominate markets and use their money to stop competition. How will Bertelsmann’s purchase of its main direct CD competitor benefit the consumer? It won’t. In the same way the homogeny we see in media ownership leads to a restriction of viewpoints and a dearth of the diversity free markets require in order to flourish.

Corporations are not evil and capitalism is an excellent system. But, like all systems predicated on freedom and responsibility, some groups will commit abuses. That’s when the government must intervene. But that doesn’t seem to happen much anymore. Anti-trust laws exist but are rarely applied. For the most part, corporations buy each other out, merge and consolidate power with impunity.

The most egregious offenders are in the telecommunications and media industries, but it happens elsewhere as well. And it’s wrong. We cannot sit back and permit mega-corporations to subvert the free market. We must support open competition. We must support capitalism as it is intended. Where’s the leadership from our elected officials on this?


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