By Steven Hill, American Purpose, July 21, 2023
The White House has advanced new efforts to rein in monopolistic companies, but years of lax enforcement have created persistent hurdles.
Amidst the loud headlines that have been capturing the nation’s attention, the Biden Administration has been quietly dusting off a long-neglected economic strategy: antitrust enforcement. President Joe Biden has assembled an ambitious team at the Federal Trade Commission (FTC) and the Justice Department that has been engineering a new, robust anti-monopoly policy aimed at reining in Big Tech and other large American companies.
So far its accomplishments have been modest. But the overall direction has aligned the United States more closely with enforcement approaches used in the EU, which aim to open up markets currently dominated by U.S. giants. The shape of competition for the fast-emerging market for artificial intelligence is also in play.
The global tone of antitrust policy and regulation was established by the United States decades ago. The Reagan Administration started scaling back enforcement, inspired by what has become known as the Chicago School. That economic and legal philosophy prioritized a narrow definition of “monopoly” based on consumer welfare and economic efficiency, instead of trying to limit raw market power and economic dominance. This has resulted in giant monopoly companies that, like large oceans, create their own weather patterns that rattle everything in their path.
The fact that both the Democratic and Republican parties were captured by this philosophy has resulted in very little enforcement action against monopolies or mergers, despite big corporations buying up their competitors and consolidating markets in industry after industry. In recent decades this has led to the loss of millions of good jobs, significant wage losses, hindrances to new business start-ups, and outsized price increases in the airline, food, pharmaceutical, and other industries. More and more observers are concerned over the extraordinary market power that America’s biggest companies wield, along with the reach of their tentacles across industries, and how that is impacting the functioning of democracy itself.
A new breed of legal scholars and regulators has pushed back against the Chicago School. The emerging philosophy argues that recent anticompetitive risks posed by tech giants like Google, Meta/Facebook, Amazon, Microsoft, and Apple, as well as concentrated corporate power in a range of industries (airline, railroads, publishing, banks, broadband, and prescriptions drugs), require government refereeing and innovative solutions. This vision has been embraced by the Biden Administration as the basis for its competition policy.
New Sheriffs in Town
“Capitalism without competition is not capitalism,” said President Biden in his State of the Union Address on February 7, 2023. Biden urged Congress to pass legislation “to strengthen antitrust enforcement and prevent big online platforms from giving their own products an unfair advantage.” Biden’s call to action was the first time a President had mentioned “antitrust” in a State of the Union since President Jimmy Carter in 1979.
Already Biden has signed a sweeping “Executive Order on Promoting Competition in the American Economy,” which includes seventy-two action items that require more than a dozen federal agencies to more closely scrutinize and take action against corporate mergers. The administration also has appointed a team of enforcement-minded leaders to head the main antitrust agencies: lawyer Lina Khan as chair of the FTC, and lawyer Jonathan Kanter as head of the Justice Department’s Antitrust Division. So far Khan’s and Kanter’s tenures have included a string of moves to stop alleged violations of anti-monopoly laws, including:
- Filing a lawsuit against Facebook to break it up for wielding monopoly power by acquiring Instagram and WhatsApp (a merger that the Obama Administration previously had approved);
- Rescinding a long-standing policy that limited the FTC’s ability to challenge unfair methods of competition;
- Suing Amazon for duping customers into signing up for its Prime service by using “manipulative, coercive, or deceptive” website tactics known as “dark patterns,” and then making it difficult to cancel the subscription;
- Issuing an order that requires nine tech companies—including Amazon, Facebook, Google, and TikTok—to provide data on how they collect and use information from their users.
Many of these seemingly small steps have undone decades-old policies and practices, replacing them with aggressive approaches that add more oversight to alleged corporate abuses.
In January 2023, the Justice Department and eight states filed a suit aiming to break up Google’s lucrative online advertising business, a major intervention since advertising revenue makes up 80 percent of Google’s business. On March 7, the Justice Department filed a legal complaint opposing the merger of JetBlue and Spirit Airlines. The federal government has not opposed an airline merger since the 1980s, despite the fact that profits per passenger in the United States are three times that of Europe. Other industries being targeted include some of the biggest players in pharmaceuticals, book publishing, and charging networks for electric vehicles.
Combined, Kanter’s Justice Department and Khan’s FTC have launched a surge of lawsuits, including cases that may not win in court, in order to send a powerful signal to these companies that new sheriffs are in town. The tactic appears to be working: Amazon recently agreed to pay $25 million to settle FTC claims that its Alexa home surveillance devices had illegally collected children’s data. And even though a federal appeals court denied the FTC’s challenge to Microsoft’s $69 billion takeover of gaming company Activision Blizzard, the aggressive legal maneuver is credited with pushing Microsoft to make concessions to alleviate monopoly concerns.
Meanwhile, states and private actors, encouraged by the Biden Administration, are also using the courts. Among the important legal actions filed by state attorneys general is California v. Amazon. The suit alleges that Amazon prevents sellers from lowering their prices at other retailers, which keeps prices artificially high. Texas, Colorado, and Utah have pending cases against Google.
Other federal agencies are pushing what they view as a complementary pro-labor agenda. Recently a regional director of the National Labor Relations Board (NLRB) ruled that Google is a “joint employer” and therefore legally required to negotiate with its YouTube contract workers if they form a union. Google has tried to argue it is not the employer of contracted staff, but the NLRB so far has rejected that rationale.
Big Tech is not taking any of this lying down. Google, Meta, Apple, and others have hired legions of lawyers and lobbyists to fight antitrust legislation and lawsuits. They have even hired former federal government attorneys and insiders to do it.
The EU as Defender of Capitalism and Competition?
Modern antitrust laws were invented in America. For decades the influential Chicago School promulgated a deregulatory philosophy that became dominant all over the world—that includes in Europe. Nevertheless, in the complete absence of U.S. leadership, the European Union’s “better than nothing” regulatory approach has in recent times provided the only global authority addressing anticompetitive activity. One recent study of antitrust statutes from 125 countries found that they had adopted domestic antitrust laws closer to those of the EU than of the United States.
Despite its recent cave-in to Microsoft over its attempt to gobble up gaming company Activision Blizzard, the EU has tried for years to keep U.S. companies in check with its antitrust enforcement. The European Commission (EC) fined Google nearly $10 billion for breaching EU antitrust laws, and fined Meta/Facebook $725 million over the Cambridge Analytica scandal and another $414 million for other privacy violations. The EC is also threatening Apple with billions in fines for blocking competing financial services on the iPhone in favor of its own service, Apple Pay. However, for companies that raked in net profits in 2022 of $95 billion (Apple), $23 billion (Meta/Facebook), and $60 billion (Google), the reality is that these “small” fines are just part of the cost of doing business.
The Biden Administration views its historic pivot on antitrust policy as a once-in-a-generation chance to show Rooseveltian (Teddy, not FDR) leadership. If it is successful in its goals, it will reverse decades of narrowly conservative antitrust law, and prevent predatory companies from monopolizing markets, buying up smaller competitors, stifling innovation, and exerting outsized political influence.
But it remains to be seen if the Biden Administration can maintain and even extend its efforts. With Democrats holding a bare majority in the Senate, and a hostile Republican caucus that reflexively blocks Democratic initiatives, Biden and the Democrats have few legislative successes to show for their efforts. While these recent interventions reflect the biggest changes in U.S. anti-monopoly and pro-labor policy in decades, if this new approach is to survive after Biden’s presidency, it needs to be locked into new laws to prevent victories from being overturned by future courts or presidential executive orders.
Steven Hill is former policy director at the Center for Humane Technology and author of seven books, including Raw Deal: How the Uber Economy and Runaway Capitalism Are Screwing American Workers.