Let’s Bust Some 21st Century Trusts

By | 2017-06-02T18:30:05+00:00 September 5, 2017|
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During the Gilded Age, so-called “captains of industry” such as Andrew Carnegie, John D. Rockefeller, and J.P. Morgan led an industrial revolution that transformed the nation with technological innovation, creating for Americans unparalleled improvements in the average standard of living and amassing great personal fortunes in the process. The spectacular success—and enormous power—of these newly minted tycoons earned them the sobriquet “Robber Baron,” even as their ruthless business tactics, such as Rockefeller’s cartelization of the oil industry through trusts, fostered new laws to regulate anti-competitive business practices, notably the 1890 Sherman Act. These measures are called “antitrust” laws, an often-forgotten tribute to the dynastic Standard Oil Trust, which at its peak controlled the refining of 90 to 95 percent of all oil produced in the United States.

The Progressive Era was devoted in significant part to curbing the predatory conduct exhibited by large corporations, especially those with monopoly power, such as railroads. Railroad mogul William H. Vanderbilt—at the time the richest man on earth—typified the arrogance of some industrialists when he reportedly exclaimed, in 1882, “The public be damned.” Historians sometimes depict the Robber Barons as villains, but this ignores the tremendous contributions these entrepreneurs made to the creation of the world we take for granted in the 20th century: urban living with nationwide transportation and communication, skyscrapers, electricity, mass-produced goods, recorded music, the automobile, and the consumer economy.

Notwithstanding the considerable benefits of “Big Business,” there were also abuses, including price-fixing, restraint of trade, and political corruption. Laissez-faire economic theorists and devotees of classical liberalism tend to minimize these and the likelihood that businesses, when left to their own devices, will abuse their economic power; reasoning that free market dynamics—price competition and market entry—will suffice to constrain predatory conduct.

One cannot fairly review the history of the late 19th century, however, without acknowledging the truth of Lord Acton’s dictum: “All power tends to corrupt, and absolute power corrupts absolutely.” Among free market absolutists, this aphorism is generally applied only to political power, but the principle—based as it is upon human nature, and not merely the workings of politics—applies to all human activity. Concentrations of economic power also qualify, and whether due to artificial or “natural” barriers to entry, monopolies can and do exist.

Antitrust analysis associated with the University of Chicago (the “Chicago School” developed by Aaron Director, Robert Bork, and Richard Posner, among others) tends to be unconcerned with companies’ unilateral action and is skeptical of the existence of barriers to entry, believing that market dominance is ultimately an indication of economic efficiency. If the benchmark for government intervention is maximizing consumer welfare, the Chicago School asserted, then the only conduct deserving antitrust scrutiny is inter-firm (or “horizontal”) collusion.

I don’t wish to challenge the premises of the Chicago School’s antitrust theory (although others have), but the categorical assumptions that informed its analysis may need to be re-examined in light of the markedly different conditions evident in certain industries dominated—not just domestically, but globally—by a single firm.

Consider Silicon Valley, the cradle of the so-called “gig economy.”

The New Robber Barons
In terms of stock market value, the top five companies worldwide are the technology giants Apple, Alphabet (Google’s corporate parent), Microsoft, Facebook, and Amazon. In the technology industry, these firms—although hardly interchangeable—are the new Robber Barons.

Apple’s famously based its business model on a “closed platform,” compelling users to accede to its vertical integration of software, parts, apps, and iTunes inventory. Amazon, with sales exceeding its 12 largest online competitors combined, captures 46 percent of all online shopping.  Aggressive pricing—to the extent of consistently sacrificing profitability—and sharp competitive practices such as below-cost pricing of ebooks to promote its Kindle sales have enabled Amazon to swamp its competitors in an expanding array of product lines.

Regardless of profitability, investors value these firms primarily because of their sheer scale—market dominance within the relevant segments. Uber and Tesla, each with a market capitalization exceeding General Motors, have never earned even a single penny of profit, defying traditional models of valuation. Investors presumably anticipate that monopoly (or near-monopoly) status will eventually yield monopoly profits.

And how have the new Robber Barons been behaving with their sky-high market valuations, overwhelming market shares, and hoards of cash? In a word, poorly. If actions were words, they would be parroting Vanderbilt’s infamous declaration.

Amid great controversy, Google summarily fired an engineer, James Damore, for thoughtfully questioning the assumptions of the company’s diversity policies. More recently, Google appeared to direct the dismissal of a scholar from the New America Foundation, a progressive Washington think tank backed by Google, for praising fines levied against the company by European regulators for antitrust violations. These are the actions of an intolerant bully.

In our digital world, the Internet and websites have become the indispensable medium for both commerce and political expression, serving as the modern equivalent of the printing press, Yellow Pages, mail delivery, checking account, and public library—combined. Companies servicing the Internet—and especially search engines—are de facto public utilities, with an obligation to operate fairly, responsibly, and without viewpoint discrimination. Unfortunately, the new Robber Barons have fallen appallingly short of this ideal.

For example, social media platforms such as Facebook and Twitter have been accused of censoring users’ posts; Google (through its ad placement service) has bullied conservative websites to alter their content or face financial retribution; online payment facilitator PayPal and domain administrator GoDaddy have banished or withdrawn funding services for websites whose content they disapprove of; and Google has reportedly skewed search results to omit references objectionable to certain Islamic organizations.

Most ominously of all, as reported by Paula Bolyard in PJ Media, Google is working with a coalition of liberal groups—including the discredited Southern Poverty Law Center—to monitor conservative websites for “hate events.” In reality, they’re policing expression of views they find disagreeable, such as opposition to the LGBT agenda, criticism of radical Islam, or support for more stringent immigration controls. The goal is to blacklist “offensive” sites, smear them as “hate groups,” and ultimately to deny them access to digital advertisers, online donations, domain registrars, or similar tech support necessary for sites to function. In other words, Google is conspiring with Left-wing activists to suppress their political opponents.  

‘Regulate Them Into Submission’
With the unprecedented ability to control the content and operation of websites, a handful of tech companies wield greater power than governments do, with little transparency and no accountability. This astonishing concentration of power should concern all citizens, regardless of political persuasion. Yet, with a few exceptions, liberals have been strangely quiet. The reason is obvious: The Left has given the new Robber Barons a pass, because they share a Progressive political agenda, as reflected by Apple’s $1 million donation to the SPLC, and the hyper-partisan direction of the Washington Post since its purchase by Amazon founder and CEO Jeff Bezos.

Should conservatives, blinded by their allegiance to the free market, condone this partisan perfidy? Increasingly, commentators on the Right recommend treating Silicon Valley behemoths as the monopolies they are and, in Kurt Schlichter’s words, either break them up or “regulate them into submission.” President Theodore Roosevelt earned the nickname “trustbuster” for breaking up James J. Hill’s and J. P. Morgan’s notorious railroad monopoly, the Northern Securities Company. In the same vein, Attorney General Jeff Sessions should investigate the nefarious conduct of the new Robber Barons.

Silicon Valley’s leftist business leaders have a peculiar notion of “creative destruction”; rather than rendering prior paradigms obsolete, they apparently seek to eliminate free speech instead.

About the Author:

Mark Pulliam
Mark Pulliam is a lawyer and commentator who fled California and now lives in Austin, Texas. He is a contributing editor at the Library of Law and Liberty.
  • Mark Pulliam
    • Dinobot

      The difference between the Old Robber Barons vs the new Robber Barons is this. The former were Americans, through and through while the latter are Americans only when it’s politically convenient.

  • John1838

    Under President Obama, Big Business flourished aside Big Government. Dodd-Frank and several other acts and regulations destroyed or greatly crippled small and regional businesses, in effect, destroying or greatly crippling small-to-mid-sized towns all across the Heartland. We not only need to break up Big Business; we need to break up Big Government.

  • archer52

    Agreed. But here’s the problem. As long as Google, which was started with government seed money, and Amazon, which servers house over half of the CIA data, are not somehow separated FROM government it will not change.

    Not to mention Google stores every move a person makes, so which politicians want their world to be “leaked” for everyone to see.

    Worse, people do not care. I read Facebook, which literally tracks and sells everything you do, has 2 billion customers, out of 2.2 billion potential customers. That’s 100% saturation.

    Orwell’s 1984 is here. It took the guise of tech nerds.

    Who knew?

  • Groty1

    This is not my area. I may have this wrong. But my impression is that the government could not break up Microsoft’s monopoly under existing law because they could not show how consumers suffered economic harm from Microsoft’s monopoly. That’s because despite Microsoft’s monopoly, personal computer prices fell sharply with each new generation of personal computer while computing power and new features rose almost as sharply. How were consumers hurt?

    If my impression about what happened with Microsoft is reasonably accurate, and existing anti-Trust laws are mostly concerned about things like price gouging and unfair economic competition, Congress may need to enact new laws. I’m not a lawyer. Just spit-balling.

    • soviet_dissident

      Microsoft had nothing to do with hardware. The issue was largely around packaging Internet Explorer for free with their operating system, thus thwarting competition from rival browsers such as Netscape (when this stuff still came on CDs). It was a totally stupid case—not long after, the internet gave consumers the ability to download Chrome, Firefox (the new Netscape), Opera, etc. Of course, the previous anti-trust case against IBM gave Microsoft and the current crop of oligarchs a huge shot-in-the-arm early on.

      But that’s not the point. The current companies are so much more powerful and wealthy, and control such a gargantuan amount of information that they put those of Web 1.0 to shame. The tech oligarchs don’t believe in freedom speech and actively shut down the speech of conservatives and libertarians (see the article). So, to hell with them: let them be subject to statism, since they all give huge money and support to the Left. I’m through defending the rights of those to practice freedom in their business regarding very sensitive and very personal data when they abuse this stewardship for political gain.

    • Peta Johnson

      The case law on antitrust is sufficiently diverse that almost any circuit court of appeals could sustain a DOJ injunctive suit. Private remedies for damages might be harder. Remember – Bill Gates moved left to head off an antitrust case.
      The litigation would take 7 or 8 years.

  • soviet_dissident

    The straw that broke the camel’s back for me was Apple giving money to the SPLC. I am also not quick to forget Zuckerberg sucking up to Obama or trying to buy all the land next to his homes to keep the peasants out. Or Sheryl Sandberg telling women to “lean in” and paying her female interns paltry wages. They are detestable hypocrites. We need to fuck these people, hard. They would do even worse to us.

    Let’s also not forget that the original industrialists had massive physical plants which employed tens of thousands. By comparison, these internet companies employ but a sliver of the population—mostly male and mostly white or East Asian. Because diversity is our strength and shut up fascist.

  • Peta Johnson

    Antitrust is a blunt instrument, but there is no available alternative. The initial source of this market power is mostly overly wide copyright protection of computer programs. Any other business ( excepting Hollywood) gets only truly time limited monopoly rights. There are now no effective time limits to copyright and there are no requirements of novelty and utility.
    Further, there is no interconnexion requirement. Railroads are required to shift through other lines’ freight – not so Google. Accordingly, they capture all the value of the network effects.

  • mckyj57

    The reason they lean left is that as long as they appear to further the left’s interests, they will be safe. The right in general would not pursue anti-trust legislation despite considerable provocation. But the moment Google et al appears to move right at all — in fact, just be evenhanded — the progressives would bring out the bullhorn for antitrust. This is the lesson the Microsoft and AT&T case brought us, and is the reason that big companies make sure to hew to the lefty line on social issues.

    Sad.

  • Oh, my: Yet another religious fanatic who believes in “economic power:” i.e., by offering a product or service for sale to anyone who has the means to purchase it, a company exerts a coercive force upon the “public!” Clearly, some canards will never die.