“Competition is a sin, that’s why we proceed to eliminate it” was one of the great mantras of JD Rockefeller that many already attribute to the great technological titans of the United States.
In the last decade, Google, Amazon, Facebook and Apple have revolutionized the Internet and influenced the daily lives of billions of people around the world as colossi such as Standard Oil or the American Telegraph and Telephone Company, better known as AT&T, did in the past. .
But while these companies are responsible for momentous technological advances as well as the massive creation of jobs and wealth, they have also been the target of criticism and retaliation in relation to their privacy practices, the spread of disinformation, their alleged political bias, and their anti-competitive behavior. .
For some time now, the United States Government has awakened from its slumber trying to restart the antitrust movement that culminated in the 1970s to once again appease the dominance of the imperialist dyes in Silicon Valley.
The Department of Justice, endorsed by dozens of states and the Federal Trade Commission, have already filed a series of lawsuits against Google and Facebook. In parallel, legislators seek to strengthen an archaic legislative framework that broadens the reach of antitrust laws and increases resources for their enforcement.
At press time, according to The Wall Street Journal, House of Representatives lawmakers were ready to propose bipartisan legislation that could require Amazon and other companies to spin off into two companies or divest themselves of their private label businesses.
Another bill would also limit the ability of large technology companies to take advantage of their online platforms to favor their own products and services over those of the competition.
Tech companies have a ‘must’ with privacy and anti-competitiveness
In short, the country’s own history has a long history of references as well as deep roots based on its resistance to the most powerful monopolies of the moment. This is proven by the American Revolution itself, which was instigated, among other factors, by the Boston Tea Party in response to the abusive concentration of the East India Company in the colonies.
Precisely, throughout the 19th century and the first bars of the 20th century, when the US began to register its first wave of business consolidation with the appearance of some of the largest conglomerates in its history, the reaction of the “people’s lawyer”, a position in hands of Louis Brandeis, did not wait. In 1906, Standard Oil, Rockefeller’s dominant force in the world oil market, became the first major antitrust case on this side of the Atlantic.
Despite having other precedents, such as the dissolution of Northern Securities in 1904 or the actions against the meat company, Swift & Co, a year later, the litigation against Standard Oil was erected as an effort to combat the practice of predatory prices. , one of the concepts of the first antitrust theory that prompted the passage of the Sherman Antitrust Act in 1890.
American history stands as a precedent against monopoly
This theory warns that a market leader tends to cut prices to drive competitors out of the business and subsequently raise prices to enjoy the benefits of the monopoly. That is why the case formally known as Standard Oil Co. of New Jersey v. United States, is often invoked to justify the potential scrapping of Amazon, Apple, Google and Facebook.
In 1911 the New Jersey company was ordered to divest its major holdings, 33 companies in all. However, during the following decades many of these companies were merged again and today they are known as ExxonMobil, Chevron, Amoco and BP, among others.
Similar cases, such as the one against US Steel in 1917, did not culminate in decommissioning, but led to the creation of regulatory and legislative frameworks, such as the Interstate Commerce Act as well as the emergence of new federal agencies to enforce regulations on working conditions, wages and business practices, which led to the Federal Trade Commission (FTC).
The objective of the legislative application in the USA is the protection of the consumer
Currently, antitrust legislation in the US rests on three fundamental foundations: the Sherman Act of 1890, the Clayton Act of 1914 and the Federal Trade Commission Act also passed that same year. This legislative trio seeks to protect competition in the market for the benefit of consumers.
The first prohibits monopolies and contracts that unjustly restrict trade. The Clayton Act stops mergers and acquisitions that substantially reduce competition or create a monopoly. Finally, the Federal Trade Commission Act attacks “unfair methods of competition” and “unfair or deceptive acts or practices.”
The interpretation and resolution of these laws has generally been left to the judiciary. US magistrates have largely defined antitrust violations on the basis of consumer welfare. Therefore, the goal of law enforcement has historically been consumer protection, not prevention of business oversize. This differs in Europe, where regulators often focus more on preserving a healthy level of competition.
While some antitrust lawsuits have responded to direct efforts to embrace the market, as in the case of American Tobacco, which was also forced to dismantle its assets and spin off into multiple entities that would later become RJ Reynolds, Liggett & Myers and Lorillard, others are due to the exorbitant success of its products.
This is demonstrated by the heyday of photography and Kodak cameras. The company came to control 96% of the US market and in 1921 the federal government argued that its policy of buying competitors and forcing retailers to sign exclusivity agreements was deceptive.
Kodak went to court for buying competition and negotiating with retailers
The courts agreed with him and ordered Kodak to abandon this practice and stop selling private label films. In the 1930s, Kodak released Kodachrome, the world’s first color film. Subsequently, a 1954 decree forced the company to license its processing technique to third parties. This opened the market to competitors like Fuji and Agfa.
The antitrust ups and downs
To understand the current moment of antitrust and what could be to come, it could be said that US antitrust policy has suffered ups and downs over four cycles. The first, between 1900 and 1920, fulfilled its promise by dissolving Standard Oil and moving forward with the development of new legislation.
Since the 1970s, IBM, AT&T and Microsoft have faced their monopolistic actions
During the next two decades, antitrust activity was relatively low, since it was preferred to increase cooperation between the different industries and the government (respecting the competition codes during the first years of the New Deal).
Later, from the early 1940s to the late 1970s, antitrust activism came to represent the Magna Carta of free enterprise: it was seen as the key to preserving economic and political freedom. However, antitrust policy and its enforcement declined during its most recent cycle (from the late 1970s to mid-2010) with the rise of the Chicago School of Economics.
From the 1970s to date, three companies have faced major antitrust action. The IBM case, filed in 1969, took 13 years to resolve, closing in 1982 without any formal action.
Because it controlled almost 70% of the computer market, IBM was seen by many as a monopoly and an overpowered company. Hence the US Department of Justice filed an antitrust suit to chop it up. Although this lawsuit was not the only antitrust action against the company between 1960 and 1980, it was the most influential.
IBM argued that in the 20 years before the lawsuit was filed, its share of revenue among the top 100 companies in the IT industry went from nearly 60% to 40%. Over the six years that the trial lasted, which began in 1975, 974 witnesses were called. The judgment declared that the claim was unfounded. That said, the company’s annual sales growth rate during that period fell to 5% from 14%.
For its part, the AT&T case, started in 1974, took eight years to resolve and culminated in a rupture, after previous frustrated attempts such as the one that occurred in 1913, after the company absorbed its main competitor, Western Union.
In this way, the company was divided into seven independent regional telephone companies, dubbed “Baby Bells” among which were US West, Ameritech, Nynex and BellSouth. Although AT&T remained in control of its long distance business for the duration of the legal process, AT & T’s growth rate fell from 10% to 4%.
The resolution of the case against Microsoft was faster. The lawsuit against him was filed in 1998 and ended with a consent decree, but not a break. In the spotlight was his practice of including Internet Explorer (IE) as the head browser of his Windows operating system.
The United States Court of Appeals for the District of Columbia Circuit found that Microsoft had violated antitrust laws. However, when this happened the Clinton Administration that initially led the case was no longer in office and the Bush Administration was less willing to force a split.