According to President Joe Biden, “the heart of American capitalism is a simple idea: open and fair competition.” Competition leads to innovation because businesses constantly try to improve their prices or services to attract customers. In 1890, antitrust law was formally established to ensure fair trade and prevent the formation of monopolies that use their market position to take advantage of consumers (Saylor Academy, 2012). However, the original antitrust laws could not have foreseen the creation of digital markets and new antitrust legislation must be passed.
In the 1870s and 1880s, various corporations were combined into one trust and effectively controlled entire industries: the Cotton Trust, Whiskey Trust, and Oil Trust (Saylor Academy, 2012). Consumers were outraged as monopolies led to excessive prices and inferior quality. In 1890, the Sherman Act outlawed monopolies and granted the federal government power to regulate trade (Saylor Academy, 2012). The Clayton Act was passed in 1914 and forbade the acquisition of competition, predatory pricing, and exclusive contracts (Saylor Academy, 2012). The Federal Trade Commission (FTC) was established as an independent agency to enforce antitrust law (Saylor Academy, 2012).
Standard Oil, American Tobacco, Paramount, and AT&T have all been targets for antitrust cases, but most FTC measures have had “little effect” (Hazlett, 2020, p.7). Despite this failure, these hundred-year-old legislative measures still form the basics of federal antitrust law today.
The landscape of business will be vastly different in 2021. The Information Revolution has radically changed human lives in just thirty years. Ninety-three percent of American adults today use the internet (Pew Research Center, 2021). Most of the users’ online interactions are mediated by only four companies. As of September 2021, Apple, Microsoft, Amazon, Alphabet (Google), and Facebook are the most valuable publicly traded companies in the U.S. (Szmigiera, 2021). Firstly, they act as both “operators for the marketplace and sellers of their products and services in competition with rival sellers,” creating extremely high entry barriers for third-party sellers (Colangelo, n.d.). For example, Apple sells smartphones, develops a digital marketplace for smartphone applications, and sells services such as Apple Music in competition with third-party companies like Spotify. Apple is incentivized to undermine Spotify and promote its application, and no anti-competition regulation exists to prevent it. Secondly, technological behemoths buy out smaller companies to maintain market power and create “digital ecosystems” (Newman, 2019, p. 1508). Google is known as a search engine but has also expanded into owning a mobile operating system (Android), a digital assistant, a video hosting service (Youtube), and driverless cars (Newman, 2019). In light of Big Tech’s methodic attempts to edge out the competition, American voters have been pushing for antitrust legislation regulating digital platforms.
In June, it was reported that five bills were proposed to the Judiciary Committee to encourage digital competition. “Ending Platform Monopolies Act” outlaws platforms with over fifty million monthly American users from owning and promoting a business that presents a conflict of interest (Feiner, 2021). This bill would make it illegal for Amazon to sell its products on its marketplace. “Platform Competition and Opportunity Act” shifts the burden of proof to companies to prove that their merger is lawful (Feiner, 2021). If Facebook decides to buy Snapchat, it will have to prove the merger will not lessen competition and pay higher fees to help fund the FCC. These measures were generally seen as promising, but the wording of the bills was frustratingly ambiguous and open to exploitation by technology companies (MacCarthy, 2021). If these pro-competition bills become law, it still will not mean that digital hegemony has been successfully resolved.
In conclusion, antitrust laws are fundamental to American capitalism that ensure fair competition and innovation and protect consumer interests. An increasing number of Americans spend their time and money online, but no antitrust measures exist to regulate the digital market. Apple, Facebook, Amazon, Microsoft, and Google have become the rulers of the internet. Congress is passing legislation to promote market competition, but this is merely the first step in combatting digital monopolies. Future lawmakers must also target consumer privacy, data collection, and digital echo chambers.
References
Biden, Joe. (2021). Remarks by President Biden at the signing of an executive order promoting competition in the American economy[Speeches and remarks].
Colangelo, G. (n.b.). Evaluating the case for regulation of digital platforms in the US and the EU. Stanford Law School.
Feiner, L. (2021). Lawmakers unveil major bipartisan antitrust reforms that could reshape Amazon, Apple, Facebook and Google.CNBC.
Hazlett, T.W. (2020). U.S. antitrust policy in the age of Amazon, Google, Microsoft, Apple, Netflix and Facebook.
MacCarthy, M. (2021). The House pro-competition bills are a good start to mitigating unfair platform practices.The Brookings Institution.
Newman, J.M. (2019). Antitrust in digital markets. Vanderbilt Law Review, 72(5), 1497-1561.
Pew Research Center (2021).Internet/Broadband fact sheet.
Saylor Academy. (2012). History and basic framework of antitrust laws in the United States.
Szmigiera, M. (2021). Biggest companies in the world by market capitalization 2021.Statista.