Legal Scholar Tim Wu Says The US Must Enforce Antitrust Laws

from Wired

LAST WEEK, PRESIDENTIAL candidate Senator Elizabeth Warren (D-Massachusetts) announced an ambitious plan to break up big tech companies like Google, Facebook, and Amazon and block them from selling their own products on their platforms.

Warren called out Facebook’s acquisitions of Instagram and WhatsApp and Google’s acquisition of online advertising giant DoubleClick as examples of the deals she’d like to see reversed. But why were these companies allowed to grow so big—and these purchases allowed—in the first place?

In his book, The Curse of Bigness: Antitrust in the New Gilded Age, published in November, legal scholar Tim Wu explains how conservative views of antitrust laws first promoted by Robert Bork and the “Chicago School” in the 1970s became fully mainstream by the early 2000s. Today, judges evaluating antitrust claims tend not to look at how many competitors a company has, or how much influence it has over the economy, but simply at whether a company’s business practices have raised prices for consumers. That left companies like Google and Facebook, which offer their main services for free, largely free from oversight even as they acquired competitors and amassed enormous power over the information people see.

It wasn’t always so. Wu, a law professor at Columbia best known for coining the term “net neutrality,” details how presidents of both parties used the Sherman Antitrust Act of 1890, which outlawed monopolistic business practices, to split up the likes of Standard Oil and AT&T, and to block anticompetitive mergers. Wu points to more than a century of “trust busting” tradition to make the case that elected leaders have the legal power, and the responsibility, to break up monopolies that reduce competition, slow the pace of innovation, and damage the fabric of democracy.

WIRED spoke with Wu about how antitrust enforcement all but died in the US, and how leaders could bring it back. An edited transcript follows:

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6 Responses to Legal Scholar Tim Wu Says The US Must Enforce Antitrust Laws

  1. Jack F Comfort March 27, 2019 at 11:50 am #

    The online market is definitely somewhere we could see the rise of Monopolies. While they not be tangible companies they’re still cornering a market, hoping to become the only seller. While they aren’t a bank or coal company, companies like Facebook and Amazon are still buying smaller online sites and adding them to their conglomerate. The problem is, that if we were going to run the risk of breaking up these online superpowers we run the risk of less efficiency and confusion. The way a capitalistic society works is on the basis of competition, if we allow competition to fall away we don’t let capitalism flourish.

    • Edward S September 20, 2019 at 2:04 pm #

      I agree with some of your comments Jack however there is an inherent issue with eliminating so much competition that the conglomerates no longer need to be concerned about potential entrants. Although commonly antitrust is associated with price manipulation, particularly when monopolies look to raise prices the concern is that monopolies may look for other mechanisms to enhance profits that do not involve raising prices. This is the point Mr. Wu was trying to make in the Wired article when he mentions that companies like Google have amassed a large amount of power because they can control the flow of information without finding themselves in the discussion of antitrust

  2. Nicholas Meyerback March 28, 2019 at 9:25 pm #

    Legal Scholar Tim Wu is warning the public about how a reluctance to enforce antitrust laws is dangerous. The crux of his argument involves the conglomeration of modern day monopolies such as AT&T, Amazon and Apple. To fully grasp Wu’s stance, one must analyze the evolution of capitalism and monopolies in America.

    Previous to the 2008 recession, there were two major checks on free market capitalism. The industrial revolution of the late 19th century bred some ugly beasts in the form of coercive monopolies. Standard Oil and US Steel were notorious for questionable business practices such as price-fixing, wage restrictions and denial of health benefits. The economic policies that were in place at the time granted robber barons this oppressive power. American presidents preceding Theodore Roosevelt did little to impede Monopolies and failed to protect consumers and laborers. A conservative lassiez-faire approach, which dissuaded government intervention, was mutually agreed upon as the norm. Roosevelt responded with progressive action by aggressively enforcing the Sherman Antitrust act. By the end of his presidency, Roosevelt had filed antitrust suits against 44 of the largest monopolies of his era.

    The greatest threat to capitalism arrived with the great depression. Not surprisingly, American politics reverted back to favor a noninterventionist financial system during the roaring 1920s. However, when the prosperity of the twenties came to a crashing halt, it was time for change. Franklin Roosevelt responded with the creation of the American welfare state. FDR’s New Deal applied Keynesian economics to employ and provide basic necessities for the masses. FDR also implemented hundreds of new regulatory agencies to prevent what caused the depression. The immediate causes of the depression centered around the stock market crash and bank failures. Banking issues were partially fixed thanks to the FDIC. Sustained initiatives in the form of regulatory agencies are what truly made a momentous impact on the American economy going forward. In particular, the Securities Exchange Commission prevented manipulation of the stock market and reassured investors of the legitimacy of economic growth.

    Both Roosevelts acted in the best interest of the American public by directly and indirectly preventing dangerously expansive firms from gaining too much power. Tim Wu would argue that what we are seeing today, with the domination of tech firms, mirrors the consolidation of corporations that took place during the late industrial revolution. Google and Facebook rival Standard Oil with their cunning tactics to beat-out competition. The acquisition of competitors that pose a threat is no different than what Rockefeller and Carnegie did in their day. Wu stresses the need for a modern day Roosevelt to prevent modern trusts. If antitrust laws are not enforced, it is likely consumers and workers will suffer to the same degree as in the past.

  3. Joseph Oates March 29, 2019 at 7:28 pm #

    Wired article, Legal Scholar Tim Wu Says The US Must Enforce Antitrust Laws, is about how we are allowing for monopolies to form in the current age after years of trying to tear them down to protect the common man. Klint Finley talks about the most common issue currently with this idea, and that is with social media like Facebook, and mega giant search engine Google. These two on top of the largest online seller in Amazon are the biggest forms of Monopoly that are currently forming in our time thanks to the way the Antitrust Laws are worded. Google to me is not trying to be a monopoly in the way they handle themselves. As they have not eaten up any smaller search engines that have been formed in the past. Besides Google, only bring has the ability to go against them. However they are lacking the ability to compete with Google. Facebook has been hunting though to make sure that they are the only online social media for the public to use. After eating up Instagram, and Whatsapp, they have turned into the only main social media holder. They do not sell to others, but they dictate what is allowed to be said. This can be dangerous as your freedom of speech is blocked from being able to say what they truly want to say. Amazon is the worst of the three however. As they are able to bring in those that are trying to sell to others. This would allow Amazon the ability to pick and choose who can sell to others, or even change prices to help make their profits. Amazon as well has their hands in many different business like Whole Foods, movie companies, and computer companies. This would allow them to give different prices to those different companies under them.
    Having been working in the communication industry. I have seen many companies come and go as they build up in a cell network. However the major four cell companies have eaten up those that try to become their own companies. These four oligopolies have made this industry impossible to enter. This has caused the ability for the consumer to not have the ability to find a good price and shop around for a cell service. Finally though two of these major four companies have tried to come together to form one large company to compete against the other two. Finally the government has stepped in to finally block a merger. Sprint and T-Mobile tried to merge under one company has been blocked as of today . This would have brought the United States two mergers away from the public only having one option for a company. Tim Wu was asked about the AT&T and Time warner merger and how that was aloud to happen. His thoughts were that the problem was in the current judges that will allow for a block of a merger. Just as courts are able to make judgement on how they see the law. The supreme court needs to have those that against mergers to help protect those that it would affect the most, the consumer.

  4. Jamila Cuentas March 29, 2019 at 7:45 pm #

    In my knowledge, the antitrust laws are aimed at maintaining competition as the driving forces of the US economy. I agree with professor Wu, it is time to change how the antitrust laws are being used in the U.S., in which it should be equal in both Republicans and Democrats. As professor Wu mentioned in the article, “One problem is the priorities of not just the Republican Party but the Democratic Party. The Democrats get a turn now and then; the problem is that antitrust hasn’t been given any weight. Antitrust hasn’t been a Democratic priority at all, and I think that has to change”. It is to my understanding, this point in society we still have to provide more than a century of “trust busting” tradition to make a point that elected leaders today have the legal power, and the responsibility to break up monopolies that reduce competition, slow the pace of innovation, and damage the fabric of democracy. An important piece of information that was agreeable by professor Wu in the article was him assuring us the changed where people are arguing that the Sherman Act only allows the government to stop companies from charging consumers too much money was assuming that the market and businesses are supreme over people.

  5. Edward S September 14, 2019 at 3:09 pm #

    Wu’s assertion that judges today “tend not to look at how many competitors a company has, or how much influence it has over the economy, but simply at whether a company’s business practice have raised prices for consumers” is interesting because internet service providers have long fallen under the inspection of whether or not some of their activities will lead to certain types of price manipulations, specifically the consequences of allowing companies to potentially throttle internet service provider subscribers with the intention of increasing profits.
    While the FCC has stated that rolling back the net neutrality rules would not harm consumers due to enforcement coming from the FTC, these claims have been somewhat diminished considering comments coming from Joseph Simons who is the chairman of the FTC who said that “blocking, throttling, or paid prioritization would not be per se antitrust violations” (Bode, 2019). Simons views aspects such as paid prioritization as being similar to other legal types of offerings such as discount store cards or discount movie tickets. In addition Simons has stated that the FTC would only probably step in during situations wherein businesses were not being transparent about their actions. Specifically, the FTC would step in involving cases where ISPs were engaging in throttling/paid prioritization but not informing their users about these activities through disclosures. The central issue however with comparing paid prioritization to a discount is that it is synonymous with the contention that has been made in regards to the U.S. oligopolies which is if businesses are allowed to engage in paid prioritization then the content providers for example with bigger pockets will be able to afford to pay more money to enhance the speed of the delivery of their services. Upcoming content providers will then be at a monetary disadvantage compared to their wealthier competitors. Regulations are slippery concerning net neutrality because it is unclear whether ISPs should fall under Title 1 or Title 2 regulation where ultimately if ISPs can fall under Title 2 regulation would place them under stronger regulation which occurred under Obama era regulations. Defining the limits of tech giants however will become an increasingly greater challenge as it is becoming clearer that older federal laws such as the Communications Act have become archaic in a modern telecommunications industry.

    Bode, F. 2019. The FTC Makes it Clear it Can’t, Won’t Protect Net Neutrality.Retrieved from
    https://www.vice.com/en_us/article/8xyyzb/the-ftc-makes-it-clear-it-cant-wont-protect-net-neutrality

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