Too big tech and the politics of antitrust
If you tuned in to the Senate testimony of Mark Zuckerberg and Jack Dorsey last November, you might have glazed over by hour four. In fairness, there are only so many hours one can be expected to suffer through political bantering and awkward responses. But if you hung in there through the end, you heard a strong signal from a top Republican Senator that future antitrust action for Facebook was inevitable.
In that Senate hearing, Senator Kennedy addressed the two tech CEOs in his cool, calm, and collected southern drawl:
“Gentlemen, each of you has founded an extraordinarily successful company, and they’re both American companies…. I’m very proud of the fact that it was American ingenuity that did this. I think we can also both agree that both Twitter and Facebook have enormous power as the result of your success…. You’re not companies, you’re countries, at least in terms of power.”
That last statement has a familiar ring to it that harps back to the fears and concerns of the U.S. legislature when it passed the Sherman Antitrust Act. As Gellhorn, Ernst, Kovacic, and Calkins write, “The American experience with antitrust since 1890 has been ‘complicated by the American habit of both respecting the accomplishments of bigness and fearing the political and economic consequences of increasing concentration of economic power.’”[1]
That fear of concentrated economic power is the beating heart of antitrust law in the U.S., and it’s deeply felt on both sides of the aisle. But when that fear is coupled with bogus claims and powerful enforcement authority, it becomes an unstoppable force that puts a drag on the economy and harms the consumers that legislators seek to protect.
Countries Not Companies: A Systemic Fear of “Bigness”
To understand how politics and antitrust coexist, it is helpful to put our antitrust statutes in the context of their nineteenth-century and early twentieth-century origins. The first antitrust legislation in the United States was passed at the state level, during a time when state legislators and judges tended to favor small storefronts and local businesses over larger, nationwide corporations. As such, states tended to bring lawsuits against corporations simply because they were too big. That’s not to say these brazen attempts to prop-up small, inefficient businesses were always successful, but the antitrust cases from the nineteenth-century are full of overblown skepticism of industrialization, speculation of downstream harm to consumers, and the transformation of independent businesspersons into “mere servant[s]. . . of a corporation.”
Anxiety among legislators produced colorful floor debates where claims were thrown around about private enterprise posing a threat to the political supremacy of the nation. Some legislators even predicted that corporations and their capitalism would lead to riots, anarchy, and the collapse of republican society.
For legislators and judges in the nineteenth-century, antitrust enforcement was a solution in search of a problem, and the problem that presented itself was competition in the marketplace. As industrialization created a boon to the economy, mom-and-pop constituents were, for the first time, being driven out of town by their cheaper, more reliable, and higher quality rivals. Instead of being recognized as a net positive for consumers, as Prof. James May concludes, economic concentration during this era was believed to go hand-in-hand with “illegitimate forms of private rivalry[,] combination, [and] improper governmental favoritism, rather than from normal competitive processes or the greater efficiency of the businesses that came to dominate particular markets….”
This anti-industrial sentiment continued to fester near the end of the nineteenth-century, and in 1890 Congress passed the first national antitrust legislation: the Sherman Antitrust Act.[2] During the Sherman Act debates, Senator Sherman referred to enterprising corporations as monopolies that constituted “a menace to republican institutions….” When Congress moved to pass the Clayton Act twenty-four years later, Sherman’s fears were still omnipresent, echoed by declarations like “The concentration of wealth, money, and property in the United States under the control and in the hands of a few individuals or great corporations has grown to such an enormous extent that unless checked it will ultimately threaten the perpetuity of our institutions.“ Sen. Hoar expressed fears that monopolies had “reach[ed] State authorities” through the exertion of political power, but in the House Rep. Kelly went further, declaring “Enterprises with great capital. . . sought not only industrial domination but political supremacy. . . . [and] must be dealt with in patriotic spirit, without fear or favor.“
Over a hundred years later, that kind of blatant distrust for private enterprise is few and far between, but the fear that concentrated economic power could overwhelm the social and political power of the United States is still alive and well, firmly established on both sides of the aisle.
The Political Landscape of Modern Antitrust
On the right, expressions of opposition to tech industry giants like the one Sen. Kennedy made last month are commonplace. Senators Ted Cruz and Josh Hawley, and Rep. Devin Nunes have all been especially vocal in the past few years, railing against “big tech.” Similarly, President Trump has threatened companies like Google and Facebook with antitrust action, calling them threats to a Democratic society dependent on the free flow of information.
On the other side of the aisle, Senators Elizabeth Warren and Bernie Sanders rolled out their “Better Deal” platform back in 2018, which included tightened merger review and competition standards. Still, in the recent election cycle, Sen. Sanders put forth even broader proposals for enhancing antitrust enforcement calling for the break-up of monopolies and oligopolies that have accumulated dominant market power (regardless of whether they exert that power in an anticompetitive manner). Sen. Blumenthal, in the same Senate hearing last November, called for antitrust action by the FTC against Facebook for the acquisition of Whatsapp, voicing support for an order requiring the divestment of Facebook’s subsidiaries Instagram and Whatsapp as well as imposing strict conditions on data use and competition with rivals. In the House, Speaker Nancy Pelosi held a press conference in 2019 to unveil the “Save the Internet Act,” where Democratic representatives stated that it was designed to “take on the big boys [telecom companies].”
Fortunately, after a century of common law and legislative amendments, political rhetoric and partisan positioning are usually harmless in the realm of antitrust, owing to the DOJ and FTC’s shared approach to antitrust enforcement in an apolitical manner. However, as was charged by DOJ Antitrust Division whistleblower John W. Elias in his House Judiciary Committee testimony, the DOJ’s judicial power can be wielded even where the basis for action is as slight as an administration’s distaste for a particular business.
The FTC, on the other hand, is an independent agency situated under the Executive branch but beholden to Congress, which gives it a bit more insulation from partisan political pressure. What’s more, the 5-member panel is prohibited from having more than three members of the same political party. These two factors typically keep the FTC from going overtly political. However, now that both sides of the aisle in both chambers of Congress are calling for the break-up (or just downright political punishment) of tech companies, including the incoming President, it would be hard to argue that the FTC’s Competition Bureau hasn’t been coming under some extraordinary pressure from all angles to pursue political claims of anticompetitive tech monopolies.
What’s more, even in the presence of apolitical antitrust norms, the fact remains that one of the underlying purposes of both the Sherman Antitrust Act and the Clayton Antitrust Act is ensuring the political and social supremacy of the United States over concentrated economic power.
Putting a Check on Political Antitrust
If history is any guide, it is clear that the uptick in political attention toward antitrust and tech companies means antitrust reform and enforcement is inevitable. Indeed, legislators have shown bipartisan support for antitrust reform, and more antitrust litigation is expected to be rolled out in the near future. However, as legislators grapple with the sheer complexity of the problem at hand, it is critical that they balance the global standing of the U.S. and its economy with the proper outcome of antitrust legislation: consumer welfare.
As some experts have indicated, the problem with applying antitrust laws to tech companies is a matter of technological complexity and rapid innovation. But there is a more foundational issue in applying antitrust to tech companies that stretches the entire landscape of antitrust law: the way we define anticompetitive conduct in this country. While Congress debates the merits of various reforms, it should seek above all else to define in clear and certain terms what constitutes beneficial competition in the modern age.
Of course, politics will always exist in antitrust, but a clear standard of beneficial competition would mean the difference between arbitrary antitrust enforcement against “American ingenuity” and legitimate antitrust enforcement against truly anticompetitive actors. It would mean the difference between calling a large domestic firm an anticompetitive monopoly, and calling it, as Sen. Kennedy called Twitter and Facebook, “an extraordinarily successful company.” With that simple clarification, antitrust reform could propel the United States forward into an innovative and prosperous future.
[1] Gellhorn, Ernest, William E. Kovacic, and Stephen Calkins, Antitrust Law and Economics in a Nutshell, Ch. IV p. 109, Fifth edition. (West, 2004, Print)(citing Marver H. Bernstein, Regulating Business by Independent Commission at 222 (1955).
[2] Fox, Eleanor M. / Crane, Daniel A., May, James, Antitrust Stories: Chapter One: The Story of Standard Oil Co. v. United States at 11 (1st Ed. Foundation Press 2007).
