Executive Pay: The Curious Case of Carlos Ghosn’s Arrest
February 12, 2025
AT&T is one of the biggest phone companies in the world. In fact, this was the company that first started building telephones. On the other hand, Time Warner is a giant in the media space. It owns major media channels like HBO and CNN. Each of these companies is gigantic in their own right. This […]
In previous articles we have seen how the BPO phenomenon benefits the Western countries (US, Europe etc) by slashing the costs of the firms who outsource their back office work. In this article, we look at how the BPO phenomenon is transforming the economies of the countries that are the recipients of the outsourcing phenomenon. […]
Introduction The last two decades have changed the way business is getting conducted. Some businesses are still using traditional channel systems but advent of the Internet has revolutionized distribution channels. Companies are changing business models to leverage Internet advantage. With open proliferation of information, customer expectations are reaching new heights. Companies need to figure out […]
HR Metrics and Workforce analysis is a useful strategic tool for HR which shares information and evidences about the functioning of the entire system by relying on facts and figures, as opposed to mere assumptions or personal opinions. Over a period of time, the HR Metrics has evolved with the usage of more quantitative and […]
Introduction A production defect in a company like GE (General Electric) might result in that specific product or the part being removed from the assembly line and not sent out as finished product. However, in the service sector, a process error might prove to be costly as in the case of the JPMC or Citigroup […]
The recent Cambridge Analytica scandal has ended up putting companies like Facebook in hot water. The common man has now become aware of the fact that companies like Facebook have access to a lot of personal data. They have also become aware of the possibility that Facebook could use let third parties access some of this information. This resulted in a public outrage over the information Facebook holds about common people. Politicians were quick to jump in to score some brownie points. Mark Zuckerberg was summoned by Congress. It is now likely that Facebook and other social media companies might end up being regulated.
However, is regulation something that companies like Facebook want to avoid? The reactions from the Facebook founder, Mark Zuckerberg prove that Facebook is somewhat eager to be regulated. This comes as a surprise to free-market advocates who believe that big businesses want to avoid regulation as much as possible. Mark Zuckerberg seems to be embracing regulation and even rooting for it! In this article, we will have a closer look at how Facebook is likely to benefit if more regulation is increased in the social media space.
Dominant firms are always in favor of regulated markets. Mark Zuckerberg was quoted by journalists talking about regulation even before the Cambridge Analytica scandal broke out. He was of the opinion that there is no question that social media firms need to be regulated. However, the correct model of regulation is something the firms and the governments should figure out together.
This should come as no surprise. Facebook is in favor of regulated markets because such regulations will prevent the inflow of competitors into the market. This will allow Facebook to develop an even more dominant monopoly wherein they do not really need to care about the thoughts or opinions of their customers since the customers will have no real alternative. The real reason regulations are being considered is not to prevent Facebook from misusing customer data in the future. Instead, these regulations are meant to create an intervention that reduces the threat from new players.
Regulations work in a favorable way for the incumbent firms. These regulations create new rules and regulations that newer firms need to comply with. The compliance happens on two levels, i.e., once during the inception of the firm and then during the course of conducting regular operations. In both these cases, the incumbent firms have several benefits over the new competitors.
To sum it up, regulation changes the cost structure of the industry to be in favor of incumbent firms. This is the reason why all regulated firms in the world tend to be monopolies or closely controlled oligopolies. Facebook wants to ensure that the social media market also becomes a monopoly. Hence, it is itself lobbying to introduce regulation.
Facebook is known to have deep pockets. Its ability to influence politicians is well known. Facebook spends billions of dollars on lobbying and controlling politicians. This is opposed to zero dollars that most startups would be able to spare for this kind of activity. It is, therefore, no surprise that when these laws are written, Facebook will have a tremendous influence. The common man is not going to spend time trying to figure out if these regulations are fair. The media will not publish articles about this because they will receive payoffs from Facebook. Simply put, Mark Zuckerberg wants to legislate his opponents out of existence. He knows that there are no real competitive barriers in the tech industry. Hence, anybody can create a website that may someday rival Facebook. Regulation is an effective way to prevent this from happening.
Many proponents of Facebook have been saying that Facebook does not need to do this since it has virtually no competition at the moment. However, these people do not realize how the tech industry works. When Orkut and MySpace were ruling the roost, Facebook was just a tiny startup. However, over time Facebook has come to become the dominant player. Similarly, someone else could also overtake Facebook! These are just pre-emptive measures being taken by Facebook to maintain its dominance. Also, it needs to be understood that Facebook is losing several customers in the sub 25 years demographic. Competitors like Snapchat are quickly catching on. Facebook needs to consolidate its monopoly power in order to continue to be the number one social media firm in the world.
Your email address will not be published. Required fields are marked *