BIG TECH & THE MYTHS OF MONOPOLY.

From Ottawa’s official Communications Future panel to the Federal Trade Commission in Washington to Bernie Sanders, momentum is building to take down the FAANGs for their monopolistic/oligopolistic behaviour and for threatening democracy. Next week, the EU’s competition and digital regulators are scheduled to unveil proposals to control Facebook, Amazon and the rest of the global enterprises that make up Big Tech.

We’ve seen all this before. Whenever corporations develop new ideas, structures and technologies that boost growth and productivity, thereby radically improving consumer welfare, activists, corporate lobbyists and politicians on the left and right rise up in opposition.

The motivations of the opponents vary, but their claims rarely deviate from a couple of false premises. Anti-big populism is one common thread that runs through the long history of political attempts to curb big business. At the extreme end of the big-is-bad movement in the United States is a band of antitrust activists and journalists such as Matt Stoller, whose 2019 book Goliath: The 100-year War Between Monopoly Power and Democracy. Stoller is a fellow at the Open Markets Institute, a Washington journalistic think-tank whose motto is that the United States, and therefore Canada and Europe and elsewhere, are burdened with “unprecedented levels of corporate concentration and monopoly power.” Stoller’s book is, predictably from its title, a relentless portrayal of competitive American corporations as historical rapacious monopolists.

Stoller backs Sanders’ bid for the Democratic leadership, their views clearly aligned. Sanders has claimed Facebook has “incredible power over the economy, over the political life of this country in a very dangerous sense.” He also told a Washington Post Live event that Amazon is “moving very rapidly to be a monopoly.”

Such a claim is classic antitrust populist nonsense, of the kind that can be traced back more than a century to the U.S. antitrust crusade against Standard Oil. The oil company grew and expanded via acquisition, business strategy and technological innovation, activities that were deemed anticompetitive. Standard Oil was found guilty because it engaged in behaviour that “operated to destroy the ‘potentiality’ of competition.”

In his classic book The Myths of Antitrust, Dominick Armentano outlines how the court that ordered the breakup of Standard Oil in the early 1900s in fact ignored the consumer and economic benefits of Standard Oil’s rise to scale: “Prices fell, costs fell, outputs expanded, product quality improved, and hundreds of firms … produced and sold products in competition with Standard Oil.” In fact, Armentano noted recently that Standard Oil essentially created the oil industry through successful innovation and market strategies.

Antitrust cases through history follow a similar pattern. Big companies that emerged from small ventures via mergers, increasing efficiency and the introduction of new technologies and business models, are singled out as “monopolies” or “oligopolies.” Populist political attacks follow, and attempts are launched to break them up or punish them via fines and restrictions. The U.S. Justice Department went after IBM in the 1970s, accusing the at-the-time computer giant with monopolizing “interstate trade and commerce in general-purpose digital computers.” That looks comical now, since the core IBM product, personal computers, was about to face a barrage of new products and technologies from other companies. The case dragged through the courts for years. In the end, however, IBM succumbed to the force more powerful than antitrust lawyers: competition.

Microsoft also underwent an antitrust attack in the 1980s, another instance in which regulators tackled a tech giant for its behaviour rather than its beneficial impact on consumers. “The spectre of the IBM catastrophe hovers over all public monopolization cases,” writes William H. Page in The Microsoft Case, a book that describes the botched arguments of government lawyers who ignored the company’s contribution and value. One court ordered a Microsoft breakup, which economist Nicholas Economides said “would have been a disaster.” Fortunately, it never happened.

Microsoft remains a tech giant today, but along with the other members of the Big Tech club has yet to meet the real threats that inevitably will emerge out of the competitive environment. As history shows, today’s dominant stock market leaders are not guaranteed to be there in 20 years.

Nor did they get to their positions by monopolization. Facebook, Google, Amazon and the others are the product of completion that serves consumers, delivering a range of products, services and entertainments that were unimagined two decades ago.

The monopoly claims are fictions. What, exactly, is Bernie Sanders talking about when he says Amazon is “moving very rapidly to become a monopoly?” The company has an estimated 40 per cent share of the U.S. electronic commerce market — as one might expect from a relatively new company that literally invented the e-commerce market. You don’t break up a company that created a new industry because it created a new industry. Amazon’s share is also uncertain, as it faces new competition all the time. More importantly, its share of total retailing is relatively small. One commentator noted that the company is big in e-commerce, but not so much in the overall retail world. It competes with Macy’s, Walmart and Barnes & Noble. On that basis, Amazon’s real market share of U.S. retailing is closer to six per cent, which is two-thirds the size of Walmart.

None of the FAANGs are monopolies or even oligopolies. They are all part of a spectacular new tech revolution that has increased economic growth and vastly expanded consumer welfare.

Corporate history shows that today’s dominant companies are likely to lose market share and cease to dominate as competition from newcomers increases, not through antitrust and other regulatory interventions.