“About 49% of all sales online happen in one place,” said Sen. Elizabeth Warren in October. “That’s Amazon. It collects information from every little business, and then Amazon does something else. It runs the platform … and then goes into competition with those little businesses. … We need to enforce our antitrust laws, break up these giant companies that are dominating big tech….”
Warren’s fairly nuanced argument — about a genre of alleged abuse on digital platforms — was not being made before an antitrust subcommittee or a law school class. She was addressing the nation during a televised Democratic presidential debate. Six other candidates then weighed in on the same issue, each trying to sound as tough as Warren. (Though research company eMarketer once estimated Amazon’s share of online sales at 49%, it revised its estimate to 37.7% this past June. An Amazon (AMZN) spokesperson says its share, when counting brick-and-mortar stores, is “less than 1% of global retail and less than 4% of U.S. retail.”)
The debate reflects a turning point in American history.
“I expect all four of the tech giants will be sued — maybe within the next 12 months,” said Bill Kovacic in an interview.
Kovacic, a Republican-appointed Federal Trade Commission (FTC) member from 2006 to 2011, and its chairman from 2008 to 2009, is predicting federal or state government antitrust actions against Google (GOOG, GOOGL), Facebook (FB), Amazon, and Apple (AAPL). Any one of these cases alone might represent the biggest competition case in decades — since the Department of Justice tried to break up Microsoft (MSFT) under the Sherman Act in 1998.
Astonishingly, the sentiment is bipartisan. The enforcers now encircling the four most innovative and investor-beloved companies in America include the Trump Justice Department; the majority Republican FTC; the antitrust subcommittees of both the Democratic House and Republican Senate; a posse of 51 state and territorial attorneys general pursuing Google, and a squad of 47 AGs dogging Facebook. By contrast, recall that when Justice sued Microsoft in 1998, only 21 AGs joined in — nearly three-quarters of them Democrats.
Many stars aligned to bring us here. Populist, anti-monopoly movements have been building since the 2000s, when debates over “net neutrality” drew attention to concentration in the telecom and cable industries. The financial crisis of 2008 then triggered fury over concentration in the banking industry. That’s when we, as a nation, found out that our financial institutions had become Too Big To Fail. Resulting outrage spawned both the Tea Party on the right and Occupy Wall Street on the left.
At the same time, economists’ empirical studies were gradually confirming what the populists sensed in their bones: growing concentration across all sectors; rising price markups; decreasing investment; a decline in startups; and dramatically increasing inequality of wealth.
A new group of antitrust insurgents
But what happened at the presidential debate in October also reflected a dramatic sea-change within the specialized biosphere of antitrust experts. It was driven by a loose collection of lawyers and economists who have become alarmed by the growing consolidation and concentration of corporate power occurring across all industries, and particularly evident in the technology industry. They fear the “curse of bigness,” a term coined over a hundred years ago by Louis Brandeis, the attorney and Progressive Movement leader who served as a Supreme Court justice from 1916 to 1939. For Brandeis, the antitrust laws served a much broader purpose than is assumed today. He saw concentrated economic power as dangerous in itself. It could disrupt communities, crush small businesses, throw employees out of work, and pose a threat to democracy. It’s a perspective that resonates in a nation that has discovered that policies adopted by private companies like Facebook or Google may impact the outcome of elections.
Though a disparate group, these reformers all argue that the standards and precepts that have guided antitrust enforcement for the last 40 years are misguided, inadequate, and even fraudulent. They demand a new approach — or, more precisely, a very old one.
“Every revolution is always styled as a counter-revolution,” notes Columbia Law School professor Tim Wu, slyly, in an interview.
The insurgents have coalesced under some non-mellifluous rubrics: The Neo-Brandeisians or the New Brandeis School. Best known for coining the phrase “net neutrality,” Wu helped baptize this new movement in a slim volume he published last November, “The Curse of Bigness.” The 139-page manifesto quickly became a Washington Post bestseller — quite an achievement for a tract about the history and philosophy of American competition law. (Last month, Wu published, in the technical language of antitrust specialists, a distillation of the movement’s core tenets.)
The Neo-Brandeisians blame the rise in monopolies and oligopolies on the ascendancy of the Chicago School of law and economics in the 1970s and 1980s, and especially on the teachings of its most combative evangelist: the late law professor, U.S. Solicitor General, federal appeals court judge, and rebuffed Supreme Court nominee, Robert Bork.
Bork preached that the sole legitimate purpose of the antitrust laws was to advance “consumer welfare.” In practice, that standard has come to focus narrowly on the question of whether suspect practices can be proven to raise prices for consumers. Cases hinge on abstruse, inconclusive, swearing contests between equally credentialed economists. The government’s burden is hard to meet.
So long as a company’s prices were low, Bork preached, its “bigness” and market dominance were likely just signs of efficiency and innovativeness. These were qualities to be lauded, not hobbled.
“This was an antitrust with the ‘anti’ removed,” Wu wrote in his book, “a law that now glorified monopoly instead of condemning it.”
Wu’s book preached a return to Brandeis’ broader and more commonsensical view of antitrust — one that saw extreme concentrations of economic power as threats to democracy. This was also, Wu noted in his book, the view of Senator John Sherman — the sponsor of the Sherman Antitrust Act of 1890 — who characterized the power yielded by monopolist CEOs as “a kingly prerogative, inconsistent with our form of government.”
Wu’s “small book about bigness,” as he described it, struck an instant chord. Within a week of publication, leading columnists for The New York Times and Bloomberg were calling for the breakup of Facebook, citing his book. Wu seemed to have done to the Chicago School what Hans Christian Andersen’s little boy did to the emperor-with-no-clothes.
But Wu didn’t found this movement. It was kick-started nearly three years earlier, when a then-27-year-old Yale Law School student, Lina Khan, published a tour-de-force law review article about Amazon. Her piece was an indictment of both Amazon’s alleged abuses and of the misguided Chicago School assumptions that, in her view, were allowing those abuses to thrive. (Now on leave from her academic fellowship at Columbia Law School, Khan is counsel to the House antitrust subcommittee, which is conducting a probe into — you guessed it — Google, Facebook, Amazon, and Apple.)