American Antitrust and Its Pertinent Past

Ryan Heshmati

January 27, 2023

Fast Facts:

  • Corporations are intertwined in daily American life, responsible for employees’ livelihoods and shareholders’ returns.

  • Monopolies are seen as anti-competitive and negative influences on economies. Politicians and government entities are tasked with ensuring prevention, identification, and regulation of monopolies.

  • Recently, progressive lawmakers have levied concerns regarding large technology companies as potentially qualifying as monopolies.

  • In the early 20th century, Standard Oil Company is broken up into tens of smaller companies in response to concerns about its market domination.

  • More recently, the 1980s saw the breakup of AT&T into several companies, which Ernesto Falcon of the Electronic Frontier Foundation criticizes as their own “regional monopolies.”

The culture of the United States idealizes market domination. As young as elementary school, games like Monopoly, whose precursor was, ironically, created by Elizabeth Magie to showcase her view of the failures of the American economic system, encourage competition and total market domination. Many lawmakers are now voicing concerns about potential monopolies in America’s largest technology companies. Last year, Elizabeth Warren, a Democratic senator from Massachusetts, tweeted, “giant monopolies have too much power over our economy... we need big, structural change to level the playing field.”

Amazon, which receives criticism for its tax management practices, is one company of particular concern for many. PYMNTS found Amazon was behind over fifty-six percent of American eCommerce sales in 2021. Facebook’s seventy-three percent market share of American social media visits, according to Statista’s S. Dixon makes it another technology company of concern. As a result of their large market shares, many, like Elizabeth Warren, have called for their breaking up. It is imperative to first look at past actions to understand the potential implications of corporate breakups.

In the 20th century, there were corporate breakups in the interest of protecting competitive markets, and therefore consumers. In 1911, the massive Standard Oil Company, which undeniably dominated its industry at the time, was broken into thirty-four companies due to a lost antitrust lawsuit. The efficacy of protecting consumers in this breakup is disputed, with Will Reinhart of the American Action Forum noting several studies have found no beneficial impact on actual consumers when looking at prices.

Reinhart also wrote regarding AT&T’s early 1980s breakup, which one might look at more positively. After a long antitrust battle, the Department of Justice eventually succeeded. Considering the efficacy of the breakup, Reinhart points out that both consumer savings in long-distance and local call rates decreased by the end of the 1980s, indicating success. Even with AT&T though, he feels it is worth keeping in mind, as a result of increased usage, “ …the total household expenditures for telecom remained effectively the same.” With this consideration, even the success of AT&T’s breakup is questionable.

With the shaky history of past antitrust battles and breakups, it is worth considering if such a time-consuming and costly fight is worth undertaking. Perhaps the invisible hand economist Adam Smith asserts is at work. Meta, formerly Facebook, once a concern of lawmakers as uncontrollably growing, has fallen on hard times. Recently, the company has reported disappointing earnings and lost half a trillion dollars in market capitalization. Whether markets will find a way to work themselves out and prevent monopolization is a contentious issue, but so is the efficacy of corporate breakups.