US government’s antitrust focus has waxed and waned over the years
The subject of antitrust policy has come to the forefront in recent months, as the US government seeks a breakup of Alphabet (NASDAQ: GOOGL) in two separate court cases.
One focuses on its domination among Internet search engines and the other on its commanding position in the digital advertising world. Meta (NASDAQ: META) also has been taken to court on antitrust allegations relating to its purchases of WhatsApp and Instagram.
The history of US antitrust policy encompasses a waxing and waning of government concern about individual companies’ concentration of power. Often it’s a reflection of the state of the economy – a strong economy is associated with less worry about antitrust issues.
There was no substantive national regulation of monopoly practices until the late 19th century. The growth of the railroad and oil industries, accompanied by vicious stifling of competition, sparked concern about the issue.
A rapacious Rockefeller
Standard Oil, led by John Rockefeller, was the poster child for abusive trusts, as monopolies were called back in the day. He grew the company in the 1870s and 1880s with economic threats against competitors and clandestine rebate deals with railroads, creating a monopoly in the oil industry.
That helped lead Congress to pass the Sherman Antitrust Act in 1890, which still stands as the primary law against monopolies. The Supreme Court broke up Standard Oil in 1911. Presidents Theodore Roosevelt (1901-1909), William Howard Taft (1909-1913) and Woodrow Wilson (1913-21) were the biggest trust busters in US history.
The progressive movement arose during that period, a reaction to the extreme income inequality of the late 19th century. In 1914, Congress passed another antitrust law that’s still in use today, The Clayton Act.
But World War 1, the depression of the 1930s, World War II and the surge of economic prosperity in the 1950s-60s drew attention away from the issue of corporate concentration. By the 1960s, dominant business conglomerates were seen as a good thing. Still, the Justice Department filed a famous antitrust case against IBM (NYSE: IBM) in 1969, but it was dismissed in 1982.
AT&T in the ‘80s, Microsoft in the ‘90s
But when the economy went south in the 1970s, antitrust became a concern again. In 1982, telephone monopoly AT&T’s Bell Operating System agreed to break up into seven regional companies, or “baby Bells.” But in an illustration of antitrust policy’s cyclicality, there are now just three dominant phone companies: AT&T (NYSE: T), Verizon (NYSE: VZ) and T-Mobile (NASDAQ: TMUS).
The explosive rise of the technology industry in the 1990s again brought concern about monopolies. The Justice Department and 19 states took on Microsoft (NASDAQ: MSFT) in 1998 for its dominance of computer software operating systems, particularly Internet browsers. The company negotiated a settlement that restrained some of its behavior but didn’t include a breakup.
Another surge of economic prosperity from 2000 on took attention away from antitrust once more. The technology industry turned into something of an oligarchy, led by Alphabet, Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Meta Platforms and Microsoft. For much of the last 20 years, the government has seemed much more like a partner of these companies than a regulator.
But the more fragile economy of the last few years and conservatives’ concern that they are being shut out of social media have led to a push against the tech monoliths such as Alphabet.
What will come out of it is hard to know. The issues will probably end up in the Supreme Court, and there’s no clear indication of the justices’ view on concentration of power among tech companies.
