Change in Antitrust Thinking Could Be Problem for Big Tech

A shift in antitrust thinking is gaining momentum in the U.S. as regulators are increasingly scrutinizing Big Tech. Scholars are examining antitrust issues in a context that focuses on the clout of leading companies. Antitrust regulation has historically focused on consumer welfare and whether or not there is economic impact. In recent decades, tech giants such as Amazon, Apple, Facebook and Google have experienced massive growth by offering free or cheap digital services. “People might enjoy using the tech platforms but they are also asking, ‘What kind of society do we want?’” suggests Hal Singer of George Washington University’s Institute of Public Policy.

Many politicians appear to be ready to have that conversation. The New York Times reports that President Trump, House speaker Nancy Pelosi, House Judiciary chair Jerrold Nadler and the Justice Department assistant attorney general for the antitrust division Makan Delrahim all “endorsed in their own ways a heightened scrutiny of the tech behemoths,” with Delrahim “rejecting the consumer welfare standard as the sole determinant of harm.”

The Sherman Antitrust Act, passed in 1890, never defined the word “monopoly,” but the changing economy at that time created a “fear of the future.” “The rising fear of the day was that honest, hardworking people are being screwed and the system is rigged,” said College of the Holy Cross historian Edward T. O’Donnell, author of “Henry George and the Crisis of Inequality: Progress and Poverty in the Gilded Age.”

The big companies that people feared in 1890 were the likes of Standard Oil, whose founder, John D. Rockefeller, “was often seen as [a] rapacious octopus,” said O’Donnell. The Democratic Party railed against “private monopolies” in 1900, calling them “indefensible and intolerable,” and a danger to the existence of the Republic. What followed was the breakup of Standard Oil, among other reforms.

In 1956, Brown Shoe merged with G.R. Kinney Co., both of which made shoes, and “the government sued, saying the merger would increase concentration in the manufacturing and selling of shoes, eliminate a major competitor and deprive other shoe companies of a fair opportunity to compete.” The government won the case in the Supreme Court in 1962.

That case showed the government’s definition of “unhealthy concentration in a market,” which “could give Amazon, Facebook, Google and Apple nightmares.” Especially since Brown Shoe and Kinney together held only 7.2 percent of the country’s retail shoe stores.

By contrast, Google has 92 percent of the worldwide search market, Facebook has 70 percent of the social media market and Amazon about 38 percent of the e-commerce market in the U.S. NYT reports that, in the Brown Shoe case, Chief Justice Earl Warren wrote that “the protection of viable, small, locally owned businesses” was a priority, even if “occasional higher costs and prices” might be the result.

SMU School of Law professor C. Paul Rogers III wrote last year that Brown Shoe is a “foundational antitrust decision even though it embodies values that have fundamentally shifted.” Although he thinks the case was “wrongly decided on the facts,” he added that “if that populist approach comes back, it would be scary to these very efficient high-tech behemoths.”