Trustbusters go after Big Tech like never before
Larry Edelman
Let’s take a short ride in the time machine.
On Jan. 1, 1984, after settling a lengthy fight with the Justice Department, the old AT&T spun off its local phone companies and set itself loose to battle mci in long-distance service and ibm and others in computers.
The bell system was a textbook monopoly, though one the government had permitted for decades. it had a near-lock on phone service. it made much of the telecom equipment used in its network. And it made it hard for competitors to connect to that network.
The breakup of AT&T was intended to drive down costs and spur innovation. in many ways it succeeded: Longdistance became an essentially free addon to wireless plans. products and services we couldn’t imagine 40 years ago — the internet, smartphones, social networks, online shopping, and music and video streaming — changed our lives and the way we do business.
but the ensuing tech revolution yielded not one but a slew of companies with fearsome market power. A few exceptions aside, one administration after another took a laissez-faire approach as new giants cemented their control over their respective corners of the digital economy.
Now, back in the present, scrutiny that began under Donald Trump has resulted in a barrage of legal challenges to big Tech by aggressive biden administration trustbusters.
Will it be possible to rein them in? the news: Last week the Justice Department filed an antitrust complaint against Apple, alleging that the company abused its market power by making it impractical for iphone users to switch to rival products. it cited five areas of anticompetitive behavior: smart watches, digital wallets, cloud-based gaming, messaging apps, and “super apps” that bundle different programs.
“Apple would meet competitive threats by imposing a series of shapeshifting rules and restrictions ... that would allow Apple to extract higher fees, thwart innovation, offer a less secure or degraded user experience, and throttle competitive alternatives,” the government alleged.
The company denied the claims. “if successful, [the lawsuit] would hinder our ability to create the kind of technology people expect from Apple — where hardware, software, and services intersect,” it said.
Apple users are familiar with this “walled garden” of inextricably linked products. more than once, i’ve considered giving a cheaper Android phone or
microsoft tablet a try, only to realize that straying beyond Apple’s walls would mean all but starting over with my apps, contacts, photos, and group text chats. “well played, Apple,” i’d mutter, without wondering if the company might not be just smart, but also breaking the law.
Why it matters: the government, along with 16 states, is attacking Apple’s overarching strategy — one that has made it the country’s most profitable company and second-most valuable. Assessments of the strength of the case vary, but it comes down to a fundamental question: “Can the antitrust laws force a company to redesign its product to make it more compatible with competitors’ products?” Colin kass, an antitrust lawyer at Proskauer Rose, told the new York times.
the Apple fight shares similarities with the Justice department’s lawsuit against microsoft in the late 1990s. the government alleged that microsoft had a monopoly over personal computer software, and abused its power by making it hard for users to choose any web browser other than microsoft Explorer. A federal judge endorsed a Justice department proposal to split microsoft into two companies. An appeals court overruled the decision, and microsoft settled the case in 2002 under terms that were considered a slap on the wrist.
The big picture: the Apple lawsuit is just the most recent antitrust salvo targeted at Big tech.
the Federal trade Commission and 17 states sued Amazon in September, alleging the ecommerce giant “uses a set of interlocking anticompetitive and unfair strategies to ... stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon.”
in december 2020 the FtC, joined by 46 states, filed a complaint alleging that Facebook, now meta, engaged in “a systematic strategy ... to eliminate threats to its monopoly.” the lawsuit zeroed in on the social media company’s acquisitions of photo-sharing platform instagram in 2012 and mobile messaging app whatsApp in 2014, and seeks to have them unwound.
the Justice department has hit google twice: in 2020, for illegally monopolizing search and search advertising, and in 2023, for doing the same in the market for online advertising.
in each instance the four companies have rejected the allegations. Expect the cases to drag on for several years at least.
And that’s just in the United States. on monday, European Union regulators said they will investigate whether Apple, google, and meta are complying with the new digital markets Act. the law, which took full effect earlier this month, aims to ensure that large online platforms behave in a fair way online.
Final thought: the US government’s Big tech cases are far from slam-dunks. Remember: it’s not illegal to have a market monopoly. it’s specific behavior — such as predatory pricing or requiring the purchase of one product in order to buy another — that can violate antitrust laws. the Justice department and
FtC carry the burden of proving that what the companies say are legitimate business tactics are actually illegal.
they may succeed. But even if they do, the remedies imposed may look more like microsoft’s slap on the wrist than the At&t breakup.