Antitrust action is not anti-business. Done well, it stimulates innovation and helps markets
Before a few weeks ago, I wasn’t obsessed with a particular bias regarding antitrust law and how it affected American businesses. If anything, mine was a prejudice that regulators should eliminate markets whenever possible.
Then I read a little book.
And now I recommend you read this book, weighing 139 pages. It’s “The Curse Of Bigness: Antitrust in the New Gilded Age” by Tim Wu. It not only changed my mind about what was probably going to happen during the Biden administration, but it also made me change your mind about what should happen.
Antitrust action, I see from reading Wu’s story, is something that improves markets. It improves competition. It is generally fought tooth and nail by the target company, but may be necessary for both industry and consumers.
I did not expect to come to this conclusion.
We somehow remember that the first wave of breach of trust involved the break-up of John D. Rockefeller’s Standard Oil into 34 regional oil companies. Far from destroying the oil industry, the break-up of 1911 kicked off a robust national oil industry made up of competitive and innovative companies in the United States.
Exxon, Amoco, Marathon Oil, Chevron and others flourished over the next 110 years. Compare them to national timber giants like Pemex in Mexico, PDVSA in Venezuela or Aramco in Saudi Arabia, and you would always choose our market structure over theirs. You can see there what a problem it would have been to leave Standard Oil’s monopoly intact.
Or take the case of AT&T, the last great antitrust disruption, in 1982. Its story is the most compelling part of Wu’s book, in which he connects the dots between monopoly power, innovation and the need for antitrust regulation to improve markets. AT&T would never have chosen the path of rupture if President Richard Nixon had not brought an antitrust action against it in 1974.
Prior to its dissolution, AT&T had a monopoly on long distance telephony, local calls, and all equipment that could be plugged into a telephone jack. He jealously killed innovators who threatened everything in his control, like the tiny MCI trying to innovate with microwave towers. As Wu puts it, the cutting edge technologies of the early 1980s – like answering machines and fax machines – would have been canceled or controlled by AT&T. The ability to innovate with modems, eventually allowing personal computers to connect to online service providers such as CompuServe and AOL, was only made possible by breaking the monopoly power of AT&T.
Compare that with Europe and Japan, which Wu said left their national telephone monopolies in place in the 1980s. Japan – a technological innovator in the 1970s and 1980s – suddenly found itself overtaken by corporations. American independent telephony then IT. The Nippon Telephone and Telegraph has retained its size and monopoly power for too long. As Wu writes, “After all, there’s not much you can do when your innovations have to be designed so as not to disrupt the mothership. “
It’s hard to imagine counterfactuals, but the size and control AT&T had over telecommunications until 1982 meant that all of the subsequent innovations in the United States might never have happened without the stocks. antitrust launched by Nixon.
Fast forward to the late 1990s. Microsoft almost established monopoly control over the Internet and search engines by crushing the startup Netscape and intimidating its way up to 90% of browser use with Internet Explorer. Google and Amazon – and Apple too, at that time – were just rambling midsize companies. After years of antitrust litigation and a finally quashed break order, Microsoft has given way in the browser and research wars. (Imagine if Microsoft hadn’t backed down. We’d all be using Bing for research. Ugh. Bing is awful.)
Now we have today’s Big Tech monopolies: Amazon, Apple, Alphabet (aka Google), and Facebook.
Don’t get me wrong, I love these companies. They are extremely user friendly. I use their products every day. I am grateful for the convenience and the services they provide.
After reading Wu’s book, however, I jump on the antitrust bandwagon. I am convinced that their size alone justifies their breakup. Notice I didn’t say their “destruction”. Just a separation into smaller, non-monopoly parts, like what happened with AT&T and Standard Oil.
The Big Tech Antitrust Train is currently gaining traction in state capitals and Washington, DC
Their size is why Republican lawmakers in Texas partnered with Gov. Greg Abbott to warn major social media companies that any perceived political bias would be punished and regulated.
It is their size that has resonated the recent story of the “60 minute” whistleblower. In it, a former employee said that Facebook deliberately emphasizes hateful and anger-provoking content because it is better to increase engagement with the platform.
Their size is why when Facebook and Instagram recently suffered an unexpected outage, the schadenfreude was palpable. Many of us use these companies, but we also rightly fear them and, frankly, hate them at least a little.
Their extraordinary control over speech and the media is what so angered President Donald Trump and his Conservative supporters when Trump was twisted after the January 6 riot.
US Conservative Senator Josh Hawley, a Republican from Missouri, is pushing his “21st Century Anti-Confidence Agenda”.
The language of his website, calling in particular Google and Amazon, could be taken directly from Wu’s book. On September 30, Hawley introduced a law allowing parents to sue social media companies if their children are injured.
Following the temporary Facebook / Instagram outage, Progressive U.S. Representative Alexandra Ocasio-Cortez, a Democrat from New York, took to Instagram to call for the separation of Facebook, Instagram and WhatsApp, in because of their size.
You could almost ignore calls such as fringe political voices. But you shouldn’t. Antitrust calls will soon come from inside the White House. Wu joined Biden’s National Economic Council as the president’s special assistant for technology and competition policy. I don’t believe Wu joined the group just to get a job. Things are going to happen.
After reading Wu’s book, I want things to happen. Greatness is its own threat. Bigness ultimately reverses the innovation. A better society and a better market sometimes require governments to check the ambition, size and voracious appetites of our largest and, yes, the most prosperous companies.
Don’t be afraid of trustbusters. We don’t know what technological wonders would be possible from the shattered pieces of Google. These software engineers don’t just walk away. They probably continue to invent, but without the crushing innovation created by the incumbent company and the monopoly.
Cut down the biggest tree and let the forest grow.
Michael Taylor is a columnist for the San Antonio Express-News and author of “The Financial Rules for New College Graduates”.
michael @ michaelthesmart
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