Skip to main content

The Coming Age Of Trust-Busting Remains Techs Biggest Risk

The Valley better watch its back.

Virginia Senator Mark Warner was anointed the most consequential critic of the tech industry by the New York Times in October, but the titans of Silicon Valley were likely relieved when they read a white paper released this week by Warner, which detailed policies he is considering proposing to blunt “the harmful impacts” of information technology products offered by Google, Facebook, Amazon, and others.

silicon valley ping pong fire

It’s not as if the white paper doesn’t consider some fairly consequential reforms, among them, adopting a version of Europe’s new privacy-protection regime. But the tone of the document betrays Warner’s preternatural caution in regulating an industry that made him fabulously wealthy. He raises the prospect of ideas like a new information-technology fiduciary standard to be applied to companies that store and profit from user data, only to shoot it down in the next sentence, arguing that such a standard “may inhibit the range of services consumers can access, while driving online business models toward more uniform options.”

If Mark Warner is supposed to be the wolf at Silicon Valley’s door, then perhaps fear of regulatory risk is overblown. But while the media is focused on what Congress is saying about new tech regulations, Congress has never been the real threat here. It wasn’t Congress that dragged Microsoft into court in the 1990s, or broke up AT&T in the 1980s, or shattered John Rockefeller’s oil empire in the early 20th century. What the tech industry and its shareholders really need to worry about is that the consumer welfare standard—which has circumscribed the Executive Branch’s ability and willingness to fight monopoly power—is a standard that was invented with little underlying justification from the antitrust laws actually on the books. And in an era of growing skepticism of Silicon Valley, when political agendas are severely constrained by a gridlocked Congress, there is every reason to believe that trust-busting will be back in vogue in Washington in the near future and that firms like Google, Facebook, and Amazon will be the prime targets.

In 1979, the Supreme Court adopted a standard for interpreting the two major pillars of U.S. anti-monopoly law—1890’s Sherman Antitrust Act and the 1914 Clayton Antitrust Act—that says what the drafters of those laws really intended to protect was not competition per se but “consumer welfare.” Former Solicitor General Robert Bork was the progenitor of this idea, which he put forward in his 1978 book The Antitrust Paradox.

The book was a sensation in the legal community, and Bork’s “consumer welfare” standard was enthusiastically adopted by it as a means of making sense of two vague laws that were written in a bygone age, by legislators with very rudimentary understanding of economics. Bork argued that the drafters of the laws meant for them to prevent mergers or combinations that resulted in higher prices for the consumer, and not to protect competition whatever the cost. The “paradox” in Bork’s book was that antitrust jurisprudence had led to higher prices for consumers because in many cases it protected inefficient businesses from being driven out of business by more efficient rivals.

Adopting the consumer welfare standard gave both the government and the courts a simple formula to follow for enforcing vague antitrust laws that gave little guidance as to what a “trust” actually is. It also was congenial to an emerging conservative movement that took a more militant stand against government intervention into the economy, and that sought to free American businesses from constraints that prevented effective competition against increasingly powerful foreign rivals.

But forty years later, a variety of forces are mounting to finally confront the fact that Robert Bork’s interpretation of U.S. antitrust law relied on selective and misleading readings of the Congressional Record. The most important factor that will lead to this reckoning is Congressional gridlock driven by political polarization. Neither party has the power to push through any significant legislative agenda on its own, and political polarization has made it toxic for lawmakers to even consider working with politicians on the other side of the aisle.

This has left first President Obama, and now President Trump, scrambling for ways to appear like they are advancing the agendas of their respective bases. How long will it be until a president notices the massive, dormant powers that have been granted to the executive branch by antitrust legislation? Even the Trump Administration, which has bent over backward to give big business everything it wants, has seen fit to take a tough stance on monopoly power, with its challenge of the recent AT&T-Time Warner merger, even deciding to appeal a federal district court decision in favor of the combination.

The appetite on the left for a reimagining of antitrust jurisprudence is even more vast, and it’s not difficult to imagine a Democratic presidential nominee calling for the breakup of Google, Amazon, or Facebook as part of his pitch to voters. It would both generate a lot of free publicity and advance his reputation as someone unafraid to stand up to big business. All a President Bernie Sanders or Elizabeth Warren would have to do to advance this new tough-on-monopoly-power agenda is appoint folks at the Justice Department willing to carry it out.

The courts will be Big Tech’s last line of defense, and in the short run, it may be a very effective one indeed. The consumer welfare standard has been applied to antitrust law for forty years now, and the Supreme Court’s deference to precedent plus its Trump-ensured conservative bent will protect Silicon Valley from the trust-busting feds. But this isn’t a slam dunk, given that the most recently appointed conservative judge, Neil Gorsuch, has a record of skepticism towards the consumer welfare standard.

This isn’t to say that a breakup of Facebook, Google, or Amazon would be the right policy, just that it is an extremely plausible policy for presidents in coming years to advance. These companies no longer have natural defenders on Capitol Hill, and both the left and the right are demanding that politicians ignore precedents that are obstacles in the way of enacting policies they deem important. Most of the time, gridlock is great for American business, as a paralyzed Congress is one that can’t meddle in the affairs of the private sector. But Congress wasn’t gridlocked in 1890 and 1914, and the laws written in those years provide future presidents with vast powers to beat back monopolies. As the titans of Silicon Valley grow ever bigger and more powerful, it’s only a matter of time before somebody uses it.

Christopher Matthews is a writer who splits his time between New York City and Accra, Ghana, with an interest in the intersection of markets, the economy, and public policy. He previously held staff positions at Axios, Fortune Magazine, and Time Magazine, and has been published in Forbes and Debtwire.


F China

President Trump Might Just Get The Chinese Economic Collapse He’s Hoping For

When it comes to Gyna, POTUS better be careful what he's wishing for...


To Clip Bezos' Wings, Trump Would Have To Be Better At His Job

You can't just jealously resent the world's richest man into oblivion.


The Wasted Economic Recovery

Are we in the golden hour? And did we already blow it?


Silicon Valley Is Begging For Wall Street-Style Regulation

ie Cosmetic and lame rules loosely enforced that provide a placebo effect for an industry that Washington doesn't full grasp.


The Disappearance Of The American Workingman

Resting on our employment-level laurels is tantamount to slouching towards recession.

Twinkie Trump

Why Trump Will Never Shrink The Trade Deficit

No, it has nothing to do with his tiny, tiny hands.