(Drivebycuriosity) - Did you ever hear of antitrust? Most people might not know it. The term seldom appeares in the headlines of the popular media and cannot be translated into other languages. But politicians and lawyers are obsessed with it and there are huge antitrust lawsuits against Google, Amazon, Meta and other big corporations, all based on the claim that the accused abuse monopoly power.
Crack Down On Big Business
Antitrust existed already in the Renaissance, if not earlier. Georg Steinmetz describes in his biography "The richest man who ever lived", the growing political pressure against Jacob Fugger, who acquired in the early 16th century an immense wealth as a shrewd investor and financier of Popes & Emperors (amazon ). Naturally Fugger`s outstanding success created envy & political resistance. His opponents, including unsuccessful competitors, debtors, political & religious reformers claimed that Fugger`s business was too big and the banker abused his monopoly power. The knight Ulrich von Hutten, a supporter of Martin Luther, turned Fugger into a public enemy and demanded the execution of Jacob Fugger & Nephews. Thomas Müntzer, a self-proclaimed mystic, lead a peasant revolution army in order to "throw away the profiteering evildoers", especially his arch-enemy Fugger. Martin Luther was more modest, but pleaded with the princes "to crack down on big business".
Antitrust got established in the USA with the Sherman Antitrust Act from 1890. Since then US politicians have been fighting against alleged monopolies. The governments punished corporations that were considered being too big and accused them crushing competition & harming consumers. In 1911 Standard Oil got split into 33 companies, even though their market share fell already from 85% to 60% before the antitrust legislation. President Theodore Roosevelt, who subscribed to "government knows best", promoted a public relations image of being a trust buster and sued 45 companies under the Sherman Act.
During the Reagan area in the 1980s politicians and regulators had a more sanguine approach, influenced by Milton Friedman and the Chicago School of Economics, who focused on consumer welfare (low prices, fast & reliable services) supported by the greater efficiency of big corporations (economies of scale). After 2020 the Reagan administration started a new antitrust movement. America`s huge antitrust agencies FTC (Federal Trade Commission) and the Antitrust Division of the US Department of Justice (DOJ) got controlled by zealots like Lina Khan and Jonathan Kanter. Both declared Big Business as evil and their agencies started crusades against Amazon, Meta & Google and other big companies for alleged monopolistic practices. These lawsuits continue till today, notwithstanding the political change in Washington DC.
Antitrust is based on the belief that the government has to fight against "unchecked corporation power". But does it really exist? History shows that whenever a firm has success, others - inventors, investors & entrepreneurs - follow and try to get a share from the pie. Who remembers MySpace? The company was once the leading social network and regarded as a monopolist ( theguardian). But then came Zuckerberg out of nowhere and destroyed MySpace`s "monopoly" by creating Facebook.
Inspired Copycats
When Jeff Bezos started Amazon in the year 1994 his online bookshop was a monopolist, but just for a very short time. Amazon`s success story inspired worldwide others, the copycats, to offer similar services.
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Today there are thousands of companies selling online, including giants like Walmart, Target, Best Buy & Costco, who all developed large online departments; and there also exist a lot online platforms like Overstock, Shopify, Wayfair, Etsy & Ebay, who all are successfully copying Amazon. They get joined by innovative newcomers, who are aggressively entering the highly competitive market, like TikTok`s online shop, the Chinese shopping app Temu and the online shopping platform Shein. And Amazon competes globally with Alibaba, Tencent (both China), Rakuten (Japan), MercadoLibre (Latin America) and others. Notwithstanding in September 2023 the FTC started a law suit against Amazon, claiming that the company is a monopoly and stifles emerging competition. The law suit is still running.
In 2020 the FTC also suit Meta (the mother of Facebook & Instagram) and claimed that the company illegally maintains a personal social networking monopoly and imposes anti-competitive conditions on developers. But recently a court dismissed the law suit and the monopoly claim. The judge noticed that Facebook & Instagram are competing with similar platforms like X (formerly Twitter), YouTube, Snapchat, BlueSky, LinkedIn and TikTok.
Endangered By AI
The Department of Justice (DOJ) started two main antitrust lawsuits against Google: one concerning its search engine and another concerning its digital advertising technology. The first lawsuit intends to break up Google`s alleged "monopoly" and wants to force the company to spin of their Chrome Browser. As a response Perplexity made an offer to purchase Google`s Chrome for $34.5 billions ( cnbc). Who is Perplexity? The company, founded in 2022, is a start up, an American privately held software company offering a web search engine that processes user queries and synthesizes responses (wikipedia).
Perplexity is a nice example for companies that suddenly come out of nowhere and attack the alleged monopolies. The fact that Perplexity, that exists only for 3 years, expected to get $34.5 billions from investors shows that there is a lot of money available to enter an attractive market and to challenge the leader.
The DOJ - and other monopoly callers - ignore that Google, who gets most of the revenues from advertisements on their platforms, is competing against Meta and other giants and is already losing market share to Amazon`s advertising business ( realclearmarket). The DOJ also ignores the fast rise of Artificial Intelligence. AI endangers Google Search primarily by fundamentally changing user behavior and threatening Google's core advertising-based business model. Instead of users clicking on links to find answers, AI provides synthesized, direct answers, reducing the need to visit external websites.
How To Kill 2 Monopolies With 1 Tool
Another example for competition out of nowhere and disruptive innovators is Substrate, a US startup, that has invented a new X-ray lithography tool; disrupting both ASML’s and TSMC’s effective monopolies ( semianalysis).
The FTC and DOJ ignore that the technological progress is accelerating and markets are changing faster and faster, disrupting monopolies. Their lawsuits are based on the belief that "Big is Bad", which was already used against Jacob Fugger. The Renaissance banker defended himself and declared, that companies like his benefited all level of society, producing jobs and wealth for all. Sure, self interest propelled them, he conceded. But they knew better than to cheat on their customers. Reputation was everything and the importance of credibility checked the urge to lie, gouge and steal.
Contemporary studies confirm him. Today`s giants grew so much and got huge because they are efficient - more efficient then their competitors - and their services are reliable. Their size reduces the average costs (economies of scale) which allows them to demand relatively low prices. A study by the Federal Reserve Board also shows that mega firms are driving technological progress because their size enables them to be more innovative than smaller firms ( edwardconard ). And Edwin S. Rockefeller claims in his book "The Antitrust Religion" that antitrust "has often served to shelter inefficient firms from lower prices and innovations" ( amazon).
There is of course the risk that firms break the law and cheat. But this a case for regular courts. Criminal cases do not require 2 huge antitrust agencies that have together about 1,300 employees, including legions of highly paid lawyers.
Conclusion: Antitrust costs a lot of tax payer money and - to make things worse - occupies ample management capacities. It is slowing decision processes - making business more complicated and costly. The victims are tax payers and consumers.
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