The New Yorker: How Elizabeth Warren Came Up with a Plan to Break Up Big Tech

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When Robert Bork published “The Antitrust Paradox,” in 1978, concerns about monopolies suppressing competition were not new. The first U.S. antitrust law, the Sherman Antitrust Act, was passed in 1890; during the early years of the twentieth century, President Theodore Roosevelt used the law to break up Standard Oil and to apply new regulations to the dominant railroad companies. In 1914, Congress passed the Clayton Act, which granted powers to the Department of Justice and the newly created Federal Trade Commission to insure companies did not become too dominant in the first place. President Franklin Roosevelt and other New Deal policymakers continued the tradition of aggressive antitrust enforcement. But Bork, a professor at Yale Law School and later a nominee for the Supreme Court, argued that many of these antitrust measures had been unnecessary. When deciding whether a particular enterprise posed an antitrust threat, he wrote, the government should only take action in cases where concentration of power in the market harmed consumers in the form of higher prices. In the decade after Bork published his influential treatise, there was a boom in corporate mergers as airlines, energy companies, pharmaceutical firms, and media conglomerates acquired their competitors; as long as it could plausibly be argued that the prices consumers paid for products wouldn’t rise, regulators generally allowed the deals to proceed.

Bork’s consumer-based theory had many flaws. One of the most obvious was that it did not anticipate the rise of online companies such as Facebook and Google, which offer their products to consumers for free. The companies make money by monitoring their customers’ online activity and selling the data, largely to advertisers. As long as the official cost to consumers to use the platforms remained the same—around zero—the giant tech firms argued that their increasing size and influence over every aspect of online life posed no antitrust threat.

In March, Senator Elizabeth Warren released a plan that aims to reverse what is now a nearly four-decade trend in the concentration of corporate power in the U.S. economy. The proposal, which was released as part of Warren’s campaign for President, would both break up the major technology companies and regulate them more heavily. Central to her argument is the idea that, though consolidation might not have raised prices for certain online services, it has helped depress wages, inflate executive pay, and stifle the rise of new businesses. This, in turn, has contributed to the decline of middle-class financial security and the rise of income and wealth inequality. “Left unchecked, concentration will destroy innovation,” Warren has said. “Left unchecked, concentration will destroy more small companies and startups. Left unchecked, concentration will suck the last vestiges of economic security out of the middle class.”

As a law professor, antitrust was not Warren’s expertise; rather, her background as an academic was in bankruptcy and consumer debt, and how those issues created rising economic insecurity for the middle class. In the years following the financial crisis, though, the two subjects seemed increasingly connected. Market consolidation reduced consumer choice, as Bork had argued, but it also led to job losses and wage stagnation as employees and small businesses had less and less power when faced with giant competitors. In particular, monopolies and oligopolies (when a few large competitors control a market) helped explain one of the biggest mysteries of the current economy: why low unemployment had not led to commensurately higher wages.

In early 2016, one of Warren’s advisers reached out to a Yale law student named Lina Khan. Khan had worked for Open Markets, a think tank at the New America Foundation, in Washington, D.C., studying antitrust in different industries, including agriculture and airlines. She was among a handful of legal scholars and journalists who have been trying to sound the alarm about rising monopolies for several years. In Warren, Khan and the head of Open Markets, Barry Lynn, found a high-profile figure in Washington who was willing to listen and who had the ability to draw attention to the cause. They met for dinner, where Khan and Lynn talked through their views with Warren, mainly that certain market-dominating conglomerates were abusing their power and undermining the country’s economic health. They suggested several anti-monopoly tools, including breaking up some of these giant companies.

Read the full article on The New Yorker. 

See the rest of Barry C. Lynn's work

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