Nov
9
Antitrust and other anti-anti-competition laws (the two antis are intentional) make for a curious game. They allegedly protect consumers, yet consumers are hardly ever principal players in the game. Actions are more often brought by underdog competitors and would-be dragon-slayers in government.
There is no better case in point than the fact that, as reported by PYMNTS.com, a House Judiciary subcommittee on antitrust matters just …
… issued a 449-page report … after a 16-month inquiry that recommended big changes to antitrust laws and enforcement regarding Big Tech. Proposed changes included potentially splitting up the companies in question [Amazon, Apple, Facebook, Google] or making it more difficult for them to acquire smaller companies. The study also suggested capping future Big Tech acquisitions and truncating horizontal growth.
Let’s back up for a moment.
I need hardly point out the need for laws that protect marketplace competition. When honest competition reigns, consumers win, and a more just, equitable economy grows.
In the late 19th century United States, honest competition didn’t reign. A few mega companies controlled “whole sections of the economy, like railroads, oil, steel, and sugar,” according to a U.S. Federal Trade Commission website, making competition all but impossible and abuse of consumers all but inevitable. Accordingly, Congress passed the Sherman Antitrust Act, which forbids competitors from working in concert to limit competition; the Clayton Antitrust Act, which forbids competitors from price-fixing and outlaws a monopoly “if that company is cheating or not competing fairly”; and the Federal Trade Commission (FTC) Act, which established the FTC and gave it “authority to investigate and stop unfair methods of competition and deceptive practices.”
Sounds simple enough. If only it were as simple as it sounds.
Sometimes a single service provider makes sense in order to launch a nascent, needful service. The original Bell System, aka AT&T and Ma Bell, comes to mind. In 1885, to expect a national telephone network to emerge from disparate, competing companies was to indulge wishful thinking. A little over a hundred years later, however, with the infrastructure complete, breaking up AT&T into so-called “Baby Bells” made sense. (At least, it made sense to some. Some argue that the breakup delayed providing nationwide Internet services.)
Yet not even the AT&T breakup was all that simple. AT&T was a “legal monopoly” as long as it stuck to phone service only. Breaking it into pieces ended that restriction, allowing the parent company to delve into other high-tech areas, such as the then fast-growing computer market. Moreover, with the rise of cable and satellite companies and, later still, streaming, the old, unbroken AT&T looked less scary. So much so, that most of the Baby Bells merged or bought out one another and, by 2018, had re-become part of AT&T.
In any case, consumers were arguably well-served by the original monopoly. What led to the breakup was not so much consumer noise as would-be competitor noise.
The “crime” of improving the product and benefiting users
In 1988, the U.S. Department of Justice joined 20 U.S. states in suing Microsoft for alleged unfair competitive practices. At question was the practice of Microsoft’s bundling its software with its operating system. In a lengthy ruling, Microsoft was ordered to break up à la AT&T. Microsoft, however, appealed. Investopedia reports:
The appeals court overturned [Presiding Judge Thomas Penfield] Jackson’s decision against Microsoft. Instead of seeking to break up the company, the Department of Justice decided to settle with Microsoft. In its settlement, the DoJ abandoned the requirement to break up the company, In return, Microsoft agreed to share computing interfaces with other companies.
There is too much to the Microsoft case to go into here, however, I find this observation in Section VII, paragraph 408 of Judge Jackson’s opinion interesting:
The debut of Internet Explorer and its rapid improvement gave Netscape an incentive to improve Navigator’s quality at a competitive rate. The inclusion of Internet Explorer with Windows at no separate charge increased general familiarity with the Internet and reduced the cost to the public of gaining access to it, at least in part because it compelled Netscape to stop charging for Navigator. These actions thus contributed to improving the quality of Web browsing software, lowering its cost, and increasing its availability, thereby benefitting [sic] consumers.
Note that last sentence. Jackson’s ruling, it appeared, was about protecting competitors despite benefits to consumers. Theoretically, the former might have led to the latter in the long run. Still, it is a curious thing when a company stands accused of the “crime” of improving a product, lowering cost, and benefiting consumers.
Court of public opinion
The congressional subcommittee’s 477-page report regarding Amazon, Apple, Facebook, and Google does not so much demonstrate that monopolistic abuse has occurred, but that it exists in theory, or that its potential exists. Yet, back to the PYMNTS.com piece,
In a blog post entitled “Fringe Notions on Antitrust Would Destroy Small Businesses and Hurt Consumers,” Amazon said it’s done nothing to deserve such criticisms.
“All large organizations attract the attention of regulators, and we welcome that scrutiny,” the company wrote. “But large companies are not dominant by definition, and the presumption that success can only be the result of anti-competitive behavior is simply wrong. And yet, despite overwhelming evidence to the contrary, those fallacies are at the core of regulatory spit-balling on antitrust.”
Congressional subcommittee investigations aside, the American court of public opinion can be fickle. People cheer companies as they grow from inauspicious roots by hard work and by doing things better and/or cheaper. But grow too big—whatever “too big” means—and the public may turn on you. Don’t just ask Amazon, Apple, Facebook, and Google. Ask AT&T and Microsoft. For that matter, ask Walmart, Starbucks, and so-called “too big to fail” financial institutions. Business success in the United States can be a two-edged sword.