Antitrust Does Work

image: fbi.gov

The recent book by Jonathan Taplin, Move Fast and Break Things: How Facebook, Google, and Amazon Cornered Culture and Undermined Democracy, identifies not only the benefit consumers world-wide have obtained by three seminal conflicts, but also the sea change created by them.

In 1956, while AT&T might not have been brought down by the Department of Justice, it was nonetheless forced to license the patents which had been collected over decades for such items as transistors, lasers, cellular systems, satellite and solar cells, and so forth. It was not only required to license those patents, but it consented to do so for free.

Out of that litigation and the subsequent licensing, emerged companies all too familiar to us today: Fairchild Semi-Conductor, Motorola, Texas Instruments, Intel, Comsat, as well as many others.

That was significant enough, but what followed produced an even more massive cosmic shift that ushered in the beginning of what we now understand as the tech revolution. Prior to the 1970s, IBM had a virtual monopoly on the computer business. While there might have been other players in the market, they were small potatoes in relationship to massively vertically integrated IBM with its hardware and its software.

While the Department of Justice was unable to land a knock-out punch in its thirteen year litigation against IBM, it was able to effectuate a settlement that resulted in a consent decree whereby IBM agreed that other companies had the right to develop software for its hardware. IBM probably didn’t recognize at the time what type of shift that would ultimately produce, since it viewed itself primarily as a hardware manufacturer, but when Bill Gates and Paul Allen saw the opportunity, Microsoft was born not only as a software feeder for IBM products and other PCs, but also as a catalyst for shifting the balance of power from hardware to software.

And finally, while Microsoft ushered in a half century of software, its 1998 conflict with the federal government ended up ushering in the shift from software to the internet when Microsoft agreed to unbundle its internet browser from its Windows software. Once that took place, other providers stepped into the fray and, of course, without that, Google would never have been able to claim the seat on the throne it has subsequently crafted for itself.

While there were other cases over history that the federal government advanced to support Antitrust laws, these three particular cases, more than any others, set the foundation for what has been a virtual explosion resulting in the tech dominance we currently have in our economy.

When it comes to fostering competitive activity, Antitrust policy does work.