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Big Tech And Antitrust

Jun 9, 2019
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LULU GARCIA-NAVARRO, HOST:

The federal government is taking a closer look at big tech and whether some of the nation's leading technology companies are stifling competition. The Justice Department and the Federal Trade Commission have reportedly agreed to split up antitrust oversight of the Big Four. That's Google, Apple, Amazon and Facebook. And last week the House Judiciary Committee said it's launching its own antitrust investigation into big tech companies with the first hearing set for Tuesday. The U.S. government has long played a role in deciding how powerful a business can get without being unfair, and we asked Jacob Goldstein from NPR's Planet Money podcast to come explain some of that history.

Hey there.

JACOB GOLDSTEIN, BYLINE: Hey.

GARCIA-NAVARRO: All right. Where do you want to start?

GOLDSTEIN: So, you know, there's this just really basic idea about antitrust that I find really interesting. And that's this. Competition is at the heart of why a market economy is good for ordinary people. Competition is why companies are always trying to make things better or cheaper or safer. So, you know, that's great for us. But if you're a company, competition is terrible. You know, you're...

GARCIA-NAVARRO: They'd love to be a monopoly.

GOLDSTEIN: Sure, right? I mean, you're selling your thing, and somebody sets up next to you and starts selling it for cheaper. That's terrible for you. Right? So a company wants to either fix prices with other companies or just, you know, buy up its competition so it doesn't have to compete.

GARCIA-NAVARRO: Right. And that's where antitrust regulation comes in to try and find a balance there.

GOLDSTEIN: Yes. And this is a balance we've been trying to find for a long time. You know, maybe the most famous antitrust case of all is more than a hundred years old now. That's the Standard Oil case. Standard Oil had become this giant company. Controlled, like, 90% of the refining business, largely by buying up its rivals and then just bullying lots of other companies out of business. So the Supreme Court ruled in that case that Standard Oil had to break itself up into a bunch of little companies. And that decision was a big deal because it was this early moment when the government really asserted its right to intervene in the market in the name of competition.

And then what you see after that, sort of decade after decade, this goes on. And by the middle of the 20th century, the government is being really aggressive intervening in the market.

GARCIA-NAVARRO: So give me an example of that.

GOLDSTEIN: Well, so there's this one case from the 1960s that's, like, a perfect example.

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UNIDENTIFIED PERSON: Number 18, Utah Pie Company, petitioner, versus Continental Baking Company.

GOLDSTEIN: There was this company called Utah Pie. As the name suggests, they made pies, and they were in Utah.

GARCIA-NAVARRO: (Laughter).

GOLDSTEIN: And they sold their pies frozen in local grocery stores. Was a good business. And then what happened was a few big national pie companies started coming into Utah and selling their own frozen pies in the grocery stores. Utah Pie did keep selling pies in lots of stores, made a profit most years. But still they argued that those big companies were using their size unfairly, that the companies were selling their pies too cheaply in Utah. There was an antitrust case, went all the way to the Supreme Court. And the Supreme Court found that the big pie companies had violated antitrust law. They found in favor of the little local pie company.

GARCIA-NAVARRO: But that's not how antitrust law still works, is it?

GOLDSTEIN: No. No, it would be really unlikely to get a verdict like that now. What happened was, there was this really, like, a revolution in the way people thought about antitrust. That happened starting in the '70s. And it largely was driven by one guy, a lawyer - later, a judge - named Robert Bork.

GARCIA-NAVARRO: And Robert Bork, of course - the man who Ronald Reagan nominated to the Supreme Court but did not get confirmed by the Senate.

GOLDSTEIN: Yes, that Robert Bork. You know, he looked back at the Utah Pie case and a bunch of other cases from that era and said, these cases are all wrong. The Supreme Court decision in that case, it wasn't protecting competition. It was protecting a company that didn't want to compete. He said, what we should be asking in every antitrust case is, what does it mean for consumers? Is a company doing something that means consumers get less stuff or pay higher prices?

And that is really still the essential question in the law. I mean, just last year, there was this Supreme Court case, an antitrust case against American Express. And, like, a minute into oral arguments, Justice Neil Gorsuch broke in with this question.

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NEIL GORSUCH: We're not here to protect competitors. Right, Mr. Murphy?

ERIC MURPHY: Correct.

GORSUCH: Or necessarily even merchants. The antitrust laws are aimed at protecting consumers. You'd agree with that?

MURPHY: Correct. Although, in this...

GORSUCH: OK. So my question is, do you have any evidence that on a net basis consumers pay more? And I don't believe you have.

GOLDSTEIN: The court, by the way, in that case found that American Express had not violated antitrust law.

GARCIA-NAVARRO: So what does all this mean for how we should think about antitrust law and the big tech companies?

GOLDSTEIN: Well, so there is, you know, a range of opinions about that. On one end of the spectrum, you have people who say everything is just fine. Kind of in the middle, interestingly, there are people who say even if you sort of have the Bork worldview, you can argue that the government should be more aggressive. In particular, they look at Facebook's acquisition of Instagram a few years back. A bunch of experts I talked to said you could argue reasonably that that was bad for consumers because it gives them less choice between social network companies. Those people say it would be reasonable for the government to go back and scrutinize that merger and possibly consider making Facebook spin off Instagram.

GARCIA-NAVARRO: But aren't we in a new era, especially when you're talking about tech companies?

GOLDSTEIN: Yes. That is a common argument. I mean, you know, the Bork worldview looks a lot at prices. And a lot of the services tech companies provide are free to consumers. So that makes it hard. Other people argue that we should go back to the sort of pre-Bork world where there were just more rules about what companies could and could not do. So one example is Senator Elizabeth Warren. As part of her presidential campaign, she has argued that Amazon should not be able to both run this giant marketplace with lots of buyers and sellers and sell stuff on that marketplace. So, you know, if that were a new rule, that would obviously be a big deal for Amazon. But it would also be a really significant departure from the way antitrust has worked in America for a long time now.

GARCIA-NAVARRO: That's Jacob Goldstein of NPR's Planet Money podcast. They published a three-part series on antitrust in America back in February. You can find it in the Planet Money podcast feed.

Jacob, thank you so much.

GOLDSTEIN: I love talking about antitrust. Transcript provided by NPR, Copyright NPR.