Consumer choice as a market force shouldn’t be underestimated. From toppling industry giants to pushing for more inclusive products and services, consumers can influence markets to better reflect their needs and desires. State regulation should step in when needed, but lawmakers should not forget that consumers are a regulatory force as well.
In a light-hearted example, changing consumer preferences recently upended one of the most culturally recognizable duopolies. Coke-Cola and Pepsi have long dominated soda drinkers’ hierarchy, but this year Pepsi was beaten by a surprising rival as Dr. Pepper became the second most popular soda behind Coke-Cola.
While Dr. Pepper used changing preferences to bump Pepsi out of the top two soda spots, the desire to win consumer favor also helps curb company behavior.
In the decision on the Federal Trade Commission’s complaint against the Microsoft acquisition of the game development company, Activision, the court used consumer pressure as a consideration. The FTC’s complaint alleged that after acquiring Activision, Microsoft would have the incentive to exclude rivals’ access to Activision content. However, part of Microsoft’s defense, is that limiting access to games would upset consumers to the point that it would cause reputational harm to the company.
Simply stated, businesses can’t make money by alienating their base. This results in economic pressure on businesses to bend their actions to the desires and needs of consumers.
The desire to win consumer favor is also visible in the voluntary commitments of major artificial intelligence (AI) companies including Amazon, Anthropic, Google, Inflection, Meta, Microsoft, and OpenAI. The agreement outlined how the companies plan to develop and release AI products, in part to establish consumer trust.
The implicit recognition is that even tech giants must gain consumer trust to thrive the marketplace. This is especially true in AI development. According to polling from Pew Research, 70 percent of respondents reported that they “have little to no trust in companies to make responsible decisions about how they use AI in their products.”
While it is likely that the threat of government regulation was at least part of the decision to join a voluntary compact, consumer pressure likely played a role in both pressuring the companies and creating a push for regulation.
The principle of consumer power is recognized by business leaders and economists alike. Sam Walton, founder of Walmart and Sam’s Club, famously stated “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” Mark Perry, a Senior Fellow Emeritus at the American Enterprise Institute, summarizes consumer power in the following way, “In a market economy, it is consumers, not businesses, who ultimately make all of the decisions. When they vote in the marketplace with their dollars, consumers decide which products, businesses, and industries survive—and which ones fail.”
The upset of Pepsi by Dr. Pepper is a reminder of the power of the consumer, even against companies with massive influence. Ultimately the history of the market is a history that rewards companies when they meet the needs of consumers better than their competition.
Tirzah Duren is the Vice President of Policy and Research for the American Consumer Institute, a nonprofit educational organization. For more information about the Institute, visit www.TheAmericanConsumer.org or follow us on Twitter (X) @ConsumerPal.