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Trustbusting is very much on the US agenda these days. After years of sabre-rattling about abusive monopolies, American enforcers are facing off against Big Tech with a string of court cases that could reshape the US corporate landscape.
The Department of Justice has put on evidence in its most significant antitrust trial in 25 years, a lawsuit alleging that Google used illegal deals to dominate internet search. That’s just the beginning. Google is also facing separate claims about monopolistic ad technology. The Federal Trade Commission is chugging towards trial in its effort to force Meta to sell Instagram and WhatsApp, and it recently filed an expansive lawsuit against Amazon over its ecommerce power. Apple is said to be in the crosshairs of a looming DoJ antitrust case.
The companies deny illegal behaviour, and several of the cases are years away from trial. But the growing litany of lawsuits invites an important question. If enforcers do manage to prove that one or several companies have illegally squashed competition, what should happen then?
There are basically three options: fines, break-ups or finding another way to make Big Tech act differently. Though the first two are simpler, the third is looking like the smartest choice.
Large monetary penalties sound impressive, but experience in financial services suggests that they have only limited impact on future behaviour. The tech groups’ sheer size also makes it hard to imagine a game-changing penalty. The EU has already hit Google with two of the largest competition penalties it has ever issued. But this €8bn price tag is dwarfed by the $120bn in cash its parent Alphabet had on hand in September.
Forced divestitures can also capture the imagination: Theodore Roosevelt still stands as the paragon of trustbusting for his 1900s crusade against Standard Oil. But that strategy does not necessarily open the field to new competitors. After the courts broke up Standard Oil and later the telephone monopoly AT&T, the constituent parts eventually reassembled into corporate empires of their own.
There is also a sword of Damocles hanging over today’s enforcers in the form of pro-business judges on the higher courts. If the US government convinces a trial judge to impose radical remedies, Google, Meta or whoever is the target will almost certainly appeal. That’s what Microsoft did in 1999 when a district court ordered its break up for abusing its dominance in computer operating systems. It won a reprieve from the appeals court, and the case eventually settled on terms much more favourable to the company.
In the US, the ultimate threat comes from the conservative majority on the Supreme Court. Several justices have already made clear that they are itching to prune back the powers of government bureaucracy. A monopoly case could easily become the vehicle for such a clampdown if the more centrist justices are troubled by a ruling that they see as regulatory over-reach.
So the onus is on the antitrust enforcers and the lower courts to find meaningful ways to increase competition in sectors such as social media, online advertising and ecommerce without sparking a judicial backlash that undoes whatever change has been accomplished.
One possible solution could be court rulings or settlements that require companies to act in ways that fosters competition. Such “behavioural remedies” have often come up when companies try to win approval of large mergers. One big reason Microsoft was able to fend off last year’s FTC challenge to its $75bn acquisition of video game group Activision was its pledge to continue licensing the top-selling Call of Duty franchise to rivals of its Xbox console.
Such remedies are hard to design and even harder to enforce. Jonathan Kanter, who heads the DoJ’s antitrust efforts, put it this way in a speech — “Experience”, he said, “shows that it is often impossible to . . . anticipate the complex incentives that drive corporate decision-making”.
But it must be possible to impose remedies with teeth. When companies promise to sell their services to rivals at a “fair price”, mandatory arbitration would help make sure that is true. Companies should also be forced to hire outside monitors and submit to audits to prove that they have changed, measures that banking regulators have used with some success.
All this may be getting ahead of the evidence, but if today’s trustbusters want to do more than grab headlines, they need to have a plan ready to go.
Follow Brooke Masters with myFT and on X
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