In October 2020 a 16-month investigation into ‘Big Tech’ by Democrats in the US House of Representatives reached unambiguous conclusions. The sector’s leading companies – Amazon, Apple, Google and Facebook – originally thought of as Davids, have emerged as the Goliaths of the internet. The ‘scrappy, underdog startups that challenged the status quo’, the 449-page report asserted, ‘have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons’. Rather than advancing society toward new frontiers of freedom and prosperity, these companies have dragged the US back to the dreaded ‘Gilded Age’ of the late 19th century, an epoch associated with the corporate corruption and the untrammelled power of big business. Much like their predecessors, it is claimed, the new Goliaths have abused their market dominance. They have driven competitors out of business, bought out (rather than outperformed) potential rivals and bullied third-party users – app developers, independent retailers and small producers – which rely on their platforms. 

To address this, lawmakers have called on the Department of Justice to reduce the market power of the four technology giants. President Biden’s recent appointments signal a determination to pursue this agenda. As his judiciary and economic advisory teams are joined by ‘New Brandeisians’ such as Lina Khan and Tim Wu – law professors who have embraced the mantle of the historic anti-monopoly crusader Louis Brandeis – more aggressive action is in the making. 

The uninterrupted growth of tech monopolies is the result of legal thinking that gained traction in the 1970s. Legal theorists known as ‘the Chicago School’ reframed antitrust – the area of the law concerned with monopolies – around a narrow conception of ‘consumer welfare’. Forged by economists such as Robert Bork and Richard Posner, this doctrine focused exclusively on whether market power translated into higher prices for consumers. If prices remained low, free market advocates argued, this was evidence that big corporations benefited the public. No legal action was needed. Under this doctrine, a company such as Amazon would be allowed to expand its market share as long as its customers enjoyed better access to cheap goods. This economic prism inspired lax antitrust enforcement, even as mergers and acquisitions have made US capitalism ever more concentrated.

The report has prompted a broader conversation about business monopolies. It calls attention to the Chicago School’s misreading of the goals and significance of antitrust in US history. Antitrust law was never created to satisfy consumers. Nor was it about the inherent virtues of competitive markets. Antitrust had more to do with advancing the wellbeing of US producers (primarily farmers and small manufacturers), not consumers, and with efforts to counter inequalities of power in a democratic society. At root, antitrust has always been about the supremacy of the state over markets and the government’s ability to discipline private corporations on behalf of public priorities.

Railroad revolution

Rooted in a longer history of opposition to special privilege in US law, the controversies surrounding antitrust came to the fore in the context of the railroad revolution of the late 19th century. Railroad mileage in the US doubled in the 1870s and then doubled again in the 1880s. Much like the tech monopolies of today, railroad corporations came to dominate the means of commerce and communication. The goal of anti monopolists was not to dismantle this infrastructure or break it up into its constituent parts, but to gain more effective democratic control over it. What outraged anti-monopolists above all was the preferential freight rates railroads offered to large volume shippers over smaller ones and to shippers from major transportation hubs over minor ones.

Antitrust became a focal point of political conflict. Whereas anti-monopolists assailed corporate practices as discriminatory and injurious, many experts viewed monopolies as heralds of economic progress. Economists such as Arthur Hadley and commentators such as Charles Francis Adams Jr explained to the public that corporate policies were rational and efficient. They argued that immutable economic ‘laws’ made differentiated rate structures, as dictated by the railroads, necessary and desirable. Voters – particularly rural constituencies in the Midwest – rejected this rationale and struck back. Most notably, in 1874, the frontier states of Iowa, Illinois, Wisconsin and Minnesota enacted what became known as ‘Granger Laws’ – named after the foremost farmers’ organisation of the day – creating state railroad commissions. These were empowered to oversee the industry and seize control over the setting of freight charges.

In ways still relevant, Granger legislation did not simply protect farmers against extortionate shipping rates with the aim of giving them cheap access to markets. It also challenged the power of railroad companies, by virtue of their control over essential infrastructure, to dictate the terms of economic engagement for all. The defenders of railroad monopolies argued that government oversight amounted to irrational confiscation of private property, with potentially disastrous consequences. Nevertheless, in 1876, in a triumph for anti-monopolists, the Supreme Court upheld these laws in the decision of Munn v. Illinois. The ruling sanctioned government regulation of private corporations whose overwhelming power over economic life ‘clothed them with the public interest’.

Oil!

The firestorm over John D. Rockefeller’s Standard Oil, which grew to control 90 per cent of the US market for refined petroleum, shared many of the same features. Again, consumer welfare was not a factor. Under Rockefeller’s control, the price of oil declined by more than 50 per cent. Scholars have long debated the secret to his success. Favourable accounts, including that of the business historian Alfred D. Chandler, have cast him as a business visionary, emphasising his efficient oil refining facilities and superior management methods. They have narrated business consolidation as a necessary evolutionary step, driven by new technologies. More critical assessments, from the economists Elizabeth Granitz and Benjamin Klein, have shown that it was Rockefeller’s aggressive acquisition of business rivals that explained his ascendance.

Facing challenges in his home state of Ohio, where the courts threatened to revoke Standard Oil’s corporate charter, Rockefeller reincorporated under the less stringent statutes of New Jersey. The law finally caught up with him in the US Supreme Court in 1911, when he was ordered to dissolve his behemoth into 35 separate companies. Armed with the Sherman Antitrust Act, passed by Congress in 1890, the Court noted Standard Oil’s ‘mastery’ over the marketplace. Never questioning the efficiency of the company’s operations, the Chief Justice Edward D. White zeroed in on ‘an intent and purpose … to drive others from the field and to exclude them from their right to trade’.  

Roosevelt v. Wilson

The presidential election of 1912 brought the debate to a climax. Theodore Roosevelt, during his previous terms in office between 1901 and 1909, had been the first president to make use of the Sherman Act and gained an exaggerated reputation as a ‘trustbuster’. Roosevelt never seriously challenged what he saw as an inevitable trend toward industrial concentration. His use of antitrust aimed merely to remove the worst forms of corruption and abuse. Running as a reformer in 1912, his antitrust agenda, known as the ‘New Nationalism’, allowed corporate consolidation to resume, as long as it was under the supervision of the Federal executive.

Woodrow Wilson’s Democratic ticket was more ambitious. His ‘New Freedom’, shaped by the party’s strong base in the agrarian west and the south, aspired to disperse economic power. Democrats advocated a vigorously enforced version of the Sherman Act, with fines and jail terms for violators. Wilson’s triumph led to the passing of the Clayton Act (reinforcing the Sherman Act) and the formation of the Federal Trade Commission.

The corporate economy shook but did not collapse. The campaign against Standard Oil was followed by prosecutions of American Tobacco and the chemical producer DuPont. The Department of Justice sued the aluminium producer Alcoa and US Steel in cases that continued into the 1920s. The effect of these confrontations was not to dismantle corporate structures but to bring such entities under the disciplining authority of government. Under the threat of antitrust proceedings, for example, regulators compelled corporations such as Bell Telephone Laboratories, with large portfolios of patents, to license out their intellectual property at fair rates, or even at no cost at all. Corporations were forced to share knowledge with competitors in ways that facilitated innovation.

US history demonstrates the broadly beneficial political and developmental effects of antitrust policies, marking them as among the most crucial instruments of American statecraft. Over time, antitrust gave public authorities leverage over corporate forces, brought democratic politics to bear on the marketplace, facilitated the creation and dissemination of new technologies and nurtured the emergence of a more diverse and geographically dispersed economic base. Today’s anti-monopoly debates bear striking resemblance to these earlier battles. Like railroad and oil monopolies of the past, the four tech leviathans are not simply leaders in the production of particular goods. They are, rather, controllers of strategic resources and infrastructure at the core of our social, political and economic life. As in the past, these firms can be expected to celebrate their ability to deliver good services at cheap prices, which to a large extent would be accurate. They will also explain that their power is derived from new technologies such as the internet: to fight them would be to do battle against progress itself. But, as American lawmakers understood long ago, the power to police entry into the market and pick winners and losers, foster certain sectors of the economy over others, or decide where to funnel money, are deeply political prerogatives that more properly belong to the state. Antitrust has proven to be one critical way to make sure they remain so.

Noam Maggor is Senior Lecturer in American History at Queen Mary, University of London.