Antitrust action for big tech now palatable

Regulatory move expected to get sober look in presidential race

A decade ago, when the greed and carelessness of the financial industry came close to destroying the U.S. economy, the overwhelming response by politicians and the public was: Meh. Almost instantly, all was forgiven and forgotten.

Now the tech industry — which, among other impressive innovations, provides the world’s knowledge on demand, lets people freely broadcast their diverse opinions and has made shopping as easy as pushing a button — has made some mistakes of its own. It has abused priva- cy, squeezed the competition and casually spread hate. And that’s just the beginning of the list.

Google, Facebook, Amazon and Apple might not get away as cleanly as Goldman Sachs and Citigroup. Sen. Elizabeth

Warren, who is seeking the Democratic presidential nomination, released proposals this month that would force tech breakups and impose severe restrictions on what remained. Another Democratic presidential candidate, Sen. Amy Klobuchar of Minnesota, covered more briefly some of the same ground, saying, “We have a major monopoly problem.”

At a moment when nearly everything in the U.S. seems wildly contentious, antitrust action against tech is getting a sober look. Antitrust is the nuclear bomb of regulatory policy, but the reaction to Warren’s and Klobuchar’s ideas was surprisingly receptive.

“We’ve got to break these guys apart,” Warren said in an interview on Face the Nation. The show could name only one critic of her proposal: Howard Schultz, the Starbucks mogul, who is flirting with an independent run for president to the deep disregard of voters.

“A billionaire, right?” Warren noted.

For decades, a politician who mentioned “antitrust” was essentially arguing for more government oversight, which has been dangerous territory at least since the Ronald Reagan administration. “Antitrust” was relegated to the shelf with “socialism” and “higher taxes for higher incomes.”

It didn’t help that what could be called “maximum antitrust” — when the Justice Department decides a company is abusing its monopoly power and should be broken up — has a mixed history. The government dropped such a case against IBM in 1982 after more than a decade. It settled its case against Microsoft in 2001. Only AT&T, which agreed in 1982 to dissolve itself into a long-distance company and the seven Baby Bells, could be considered an unqualified success from the government’s point of view.

The political landscape is shifting, however, at a speed that dumbfounds even antitrust experts. President Barack Obama thought of the tech companies in the way they think of themselves: as progressive, smart entrepreneurs who want what’s best for the U.S. His administration declined to pursue Google on antitrust charges and hired from the tech industry for top posts. Top staff members later went to work for the tech industry in top posts, too. It was a cosy relationship.

“Something has definitely changed,” said Geoffrey A. Manne, founder of the International Center for Law and Economics, a think tank in Portland, Ore. “Most voters are very fond of Amazon, Apple, Google and even Facebook. But I think there’s also a growing sense of skepticism about all these companies. The shine has come off.”

Manne, who has been a critic of the antitrust arguments against Google and has received funding from the search giant as well as from some of its competitors, including Comcast and AT&T, eviscerated Warren’s proposal with his colleague Alec Stapp in a recent blog post. They wrote that the senator’s plan to turn the top companies into heavily regulated “platform utilities” would make them as resistant to improvement as sewer systems or Amtrak. And yet, Manne conceded in an interview, increased regulation is an idea whose time may have come.

“There is a long history in America — just not a recent one — of using the power of the state to counteract the economic power of private enterprise,” he said. “We may be at that moment again.”

Daniel Crane, an antitrust expert at the University of Michigan, said Warren’s proposal might be a hard sell to voters. “The median consumer probably feels that she gets lots of free goodies from big tech and will worry about what it would mean to go after them,” he said.

“There is a long history in America … of using the power of the state to counteract the economic power of private enterprise.” GEOFFREY A. MANNE INTERNATIONAL CENTER FOR LAW AND ECONOMICS