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- #94 What is anti-trust?
#94 What is anti-trust?
And why did a judge rule that Google Search is an illegal monopoly?
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Earlier this week, a U.S. judge declared that Google (Search) is a monopoly in the biggest federal anti-trust case in decades.
Federal prosecutors alleged that Google illegally used its market power to prevent other companies from competing in the online search industry.
Three months after the 10-week trial ended, U.S. District Judge Amit Mehta published his 277-page ruling finding that Google Search is, in fact, a monopoly.
Key facts:
In his ruling, Judge Mehta noted that Google “enjoys an 89.2% share of the market for general search services, which increases to 94.9% on mobile devices.”
Google processes ~8.5 billion search queries per day, nearly double the daily volume from 12 years ago
Google paid out $26B+ to partner companies in 2021 to ensure that Google was the default search engine on smartphones and other devices
Google said that it will appeal the decision, but it faces a separate trial concerning its ad-technology business later this year.
Google founders Sergey Brin and Larry Page in 2004.
After a decade of astronomical growth and limited interest from regulators, federal agencies like the Federal Trade Commission (FTC) are finally turning their attention toward Big Tech.
The FTC has also launched lawsuits against Apple (for allegedly monopolizing the smartphone market) and Meta (for allegedly turning Instagram and WhatsApp into monopolies) on similar grounds in recent years.
This brings us to the topic of today’s Daily Concept: anti-trust laws.
This newsletter will also reflect on the nature of monopolies and how the government’s approach to managing corporate power has evolved throughout American history.
It will be illustrated with old-school political cartoons, like the one below from 1904 showing a smiling Teddy Roosevelt watching as one of his Cabinet secretaries enacts his trust-busting campaign.
History: In 1890, Congress passed the Sherman Antitrust Act to “protect trade and commerce against unlawful restraints and monopolies.”
The Act bans
anticompetitive agreements and
behavior that would monopolize or aim to monopolize a market
In a 1993 decision, the Supreme Court said:
“The purpose of the [Sherman] Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market.
The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself.”
At the time, American industry was dominated by large trusts and corporations like Andrew Carnegie’s U.S. Steel, American Tobacco, and Standard Oil.
These huge firms dominated and drove their respective industries, ruthlessly snuffing out competitors and building themselves into the engines of a rapidly-expanding American economic machine.
Monopolistic companies like these weren’t all bad. They played a major role in the economic development of the United States after the Civil War, laying the foundation for America to surpass economic powerhouse the United Kingdom in economic output by 1890.
And yet, a public backlash against these “trusts” — and the “robber barons” who led them — empowered the federal government to break up these monopolies into smaller regional companies in the early 1900s.
The leaders of these trusts and companies — and their allies in finance, like J.P. Morgan — were vilified by cartoonists and political writers of the day.
This 1913 political cartoon was mocking an answer given by financier J.P. Morgan at a Congressional hearing held on the influence of major banks in American political and economic life.
Anti-trust today: A new generation of lawyers and academics have argued that older ways of approaching anti-trust enforcement are incapable of dealing with new “platform monopolies” like Meta and Google.
They also argue that the Federal Trade Commission (FTC) has allowed too many mergers & acquisitions that help to consolidate industries around major companies — arguably at the expense of smaller competitors.
Counterpoint: Large firms say that these acquisitions make companies and industries more efficient, and that federal regulators shouldn’t get in the way of M&A.
Current FTC Commissioner Lina Khan, who is seen as an intellectual leader of this new anti-trust movement, came to prominence after publishing a 172-page law review paper entitled Amazon’s Antitrust Paradox in 2017.
In that book-length article, she argues that the case of Amazon illustrates how “the current framework in antitrust… is unequipped to capture the architecture of market power in the modern economy.”
In addition to aggressively pursuing anti-trust cases against Google, Meta, and Apple, Lina Khan’s FTC is also trying to block mergers & acquisitions in the technology sector that it sees as uncompetitive.
In 2022, the FTC sued to block Meta from acquiring a virtual-reality fitness company called Within.
The FTC claimed that Meta was “already a key player at each level of the virtual reality sector” and that the acquisition would further entrench Meta's monopoly status.
A judge ultimately dismissed the FTC’s case against Meta and the deal went through, but the FTC has continued to file lawsuits against Meta and other Big Tech companies despite setbacks like this.
The Man Controlling Trade statue built in 1942 outside of the FTC headquarters in Washington D.C.
The future of anti-trust: Lina Khan, who was appointed by Joe Biden, may not last as FTC Commissioner — even if Kamala Harris wins the presidency.
Some major Democratic donors like LinkedIn co-founder Reid Hoffman have called for a future Harris-Walz administration to replace Lina Khan with someone who is more business-friendly.
Maryland Governor and Harris ally Wes Moore told CNBC that a Harris administration might pursue different policies that require “different philosophies,” potentially hinting at a change in policy at the FTC if Harris wins the White House.
Trump himself hasn't spoken about Khan, but his vice presidential pick J.D. Vance has actually praised Khan, saying that she is “one of the few people in the Biden administration that I actually think is doing a pretty good job.”
Vance also said that he is concerned with the question of:
Regardless of who wins the election, it’s clear: anti-trust is back, and it may even be cool once again.
ART OF THE DAY:
The Menace of the Hour. 1899.