"Trust-Busting" Causes More Problems Than It Solves

  • Source: FEE.org
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The Sherman Antitrust Act of 1890 started out as a provision to protect consumers from nefarious monopolies, but it has quickly evolved into a strong-arm tactic used to scare companies into submission. There have been many subsequent laws implemented since the Sherman Act at both the state and federal level—commonly referred to as the United States Antitrust Laws—with the sole purpose of regulating the market to ensure fair competition.

But with President Trump’s threat to use antitrust laws against Amazon and other tech giants in an interview with Axios on November 6, it’s now clearer than ever that our antitrust laws are antiquated and useless. Beyond that, they’re often merely a ploy the government uses to cover up the cronyism that leads to the creation of monopolistic giants in the first place. Still, during this conversation with Axios, Trump claimed that companies like Amazon, Google, and Facebook are monopolies and threatened to use antitrust laws to break them up, asserting that his administration is “...looking at [antitrust] very seriously…:”

The Monopoly That Isn't

But are these companies even monopolies? Let’s look at Amazon, for instance. According to Jodi Seth, Amazon’s Head of Policy Communications, Amazon only controls 5 percent of the US retail market and only 1 percent of the global economy. While Amazon is certainly a large company and has experienced rapid success, they are hardly a monopoly. A monopoly has complete control over a service or good and is able to prevent other businesses from competing. Amazon does not fit into this description—and neither do Facebook or Google, for that matter.

While Facebook and Google both bring in large sums of annual revenue, they do not have a hold on the market. Competitors exist—whether it’s Twitter taking users from Facebook or Bing as an alternative to Google’s search engine. Many falsely equate monetary success with monopoly behavior, but it’s simply not true. A monopoly isn’t about dollars, it’s about exclusive control.

The mischaracterization of tech giants as monopolies is not unique to President Trump, as ever since the implementation of the Sherman Act there has been great confusion over what actually constitutes a monopoly and monopolistic behavior. This confusion eventually led to further antitrust laws.

Despite what was written into law, the government used antitrust legislation to choose between good businesses and bad businesses. For example, the tobacco industry was deemed a bad business despite their fair pricing. This interference would thus create monopolies in industries that might not have ever become one in the first place (Think AT&T and the US Postal Service). What was meant to protect the economy was used as nothing more than a virtue signal.

The Industrial Technological Revolution

When the Sherman Act was first introduced, America was experiencing rapid economic growth on one hand and striking poverty on the other. It makes sense why—at the time—antitrust legislation would be comforting. It was meant to protect people from big businesses that create concentrated wealth and take away opportunities from the poor. But history has taught us that this was only true in theory. We are now in an entirely different period of history where technological advances are creating opportunities for all Americans like never before. One might even go so far as to claim we are in a technological revolution.

Despite these rapid changes that have strengthened our economy, many argue there are still economic disparities. Does this mean we should use legislation to prohibit economic growth overall? According to President Trump and other “trust-busters,” the answer is yes.

While Trump’s motives may be different, using antitrust laws to regulate big businesses actually harms the economy by taking down businesses that employ thousands of people and interfering with the free market. Microsoft was a victim of exactly this. In 1998, the Department of Justice (DOJ) sued Microsoft after accusing the company of being a monopoly in an effort to get consumers to use their products. The DOJ argued that by giving away their software for free through bundling, Microsoft was prohibiting consumer choice and thereby preventing other companies from competing.

Many looked down on this practice; however, it does not qualify as monopoly behavior. Microsoft did not use coercion with their consumers, nor did they prevent consumers from going anywhere else—they simply gave products out for free. Clearly, consumers weren’t exactly suffering under this “monopoly behavior.” Despite this, the DOJ won the lawsuit, and Microsoft took a major financial hit. The government used antitrust legislation to put Microsoft in its place instead of allowing consumers to determine who should get their business.

Unfortunately, Trump’s approach is no different. Instead of thinking about ways to increase competition against tech giants, Trump is relying on intimidation and threats.

Not all tech giants are monopolies, and their existence alone does not warrant government interference. It’s true that there are many issues with tech platforms that we must deal with as a society. However, history has proven time and time again that often, “trust-busting” creates more problems than solutions. For decades now, antitrust laws have been tools for the government to control the market as they see fit and have produced no real results for consumers. The Trump administration should not look for ways to control highly successful businesses. Rather, our government should allow the market to sort itself out. After all, the customer knows best.
Source: FEE.org