I was having a discussion with a friend about local business versus corporations. Normally he’s a firm believer in a free market, but on this issue, he kept insisting that there needed to be something in place to protect small local businesses from the domination of corporations. He owns a small cab company. A new outfit has come in, with a lot of capital, and wants to aggressively dominate the market, with the goal of eventually putting the other cab companies out of business. To me, he is in the position to only see the short term effects of what the new company is doing. He believes that they will lower their prices to the point that they are taking a loss for a time, in order to drive the other companies out of business. He grudgingly concluded that there must be some safeguard against practices like that, and I told him that no one really has the moral authority to tell a business that they can’t take a loss in this manner. I don’t like the practice, personally, but I don’t think anyone could be trusted with that kind of authority over them. I don’t really believe in the anti-trust, monopoly laws on the books (they’ve never actually ‘protected’ anyone in the manner they were sold to the public). I told him that the new company couldn’t sustain that practice of taking a loss no matter how much money they had to throw around, because eventually, when they returned to normal operation in search of a profit, someone would return to, or enter the business to challenge them. To best their new opponent in the same way, they’d have to go back to their silly practice of taking a loss, and the cycle would repeat itself indefinitely.
He then asked me, in a completely free market, what would keep the big corporations from simply dominating local business completely. My best argument at the time was that if it were possible, they’d be doing it already, because not only is there nothing to prevent it, but also that a lot of corporations already receive plenty of special treatment from government. In a more free market, there would be fewer burdens on starting new businesses and competition by new local startups would thrive. However, I feel like I should be able to make a more sound case. Any ideas?