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Today’s Issue:

Who You Gonna Call? Trustbusters.

By Matt Peterson

The New York Times reported on Friday that Facebook is planning to integrate its main messaging apps, Instagram, WhatsApp, and Facebook Messenger. Facebook’s critics immediately said that the company merely wants to exploit its monopoly over a suite of social-media services. The plan “makes antitrust harder,” the tech scholar Zeynep Tufekci wrote.       

That’s no small feat: Antitrust action is already difficult in the United States. The value of corporate mergers hit a record under President Barack Obama, despite his modest antitrust agenda. President Donald Trump has shown little interest in restraining corporate power, and his economic populism has already led to major shifts in U.S. trade policy. If antitrust pressure from the left begins to target the massive firms that have come to dominate the U.S. economy, that force, along with changes in trade, could radically alter the course of Americans’ economic and political lives.

“Are big businessmen crooks?” asked The Atlantic in the early 1960s, a time when the federal government zealously pursued antitrust cases. Tim Wu, a Columbia University law professor and the author of The Curse of Bigness: Antitrust in the New Gilded Age, saw that moment as the beginning of a shift. “There was a monstrous backlash, which has led us to where we are today, where the antitrust laws are quiet, if not dead,” Wu told me.

Here are three key takeaways from my conversation with Wu. You can listen to the whole interview on the Masthead podcast feed.

1. Some CEOs may truly believe in monopoly, but they’re not really the problem. What’s truly dangerous, according to Wu, is the fetishization of consumer prices. That value system, he said, “sets as its highest diamond in the sky the idea that prices on consumer goods will be low.” The legal scholar Robert Bork spread an interpretation of antitrust laws that held monopoly to be unobjectionable so long as it didn’t raise prices for regular consumers. “The problem is—and it's oh-so-obvious—but people are more than consumers,” Wu said. “In some ways we do live in a consumption paradise. It's astonishing what you can buy for relatively cheap amounts of money. But it turns out there's other sides to us as citizens and as humans that are neglected.”

Bork’s antitrust philosophy led to a belief that tech firms that offer services for free should grow without government intervention, Wu argued. Meanwhile, American officials led the creation of a global trade system that let companies spread their supply chains through countries where labor was cheap. China’s entry into the World Trade Organization profoundly lowered prices for many manufactured goods in the United States. Researchers from the Federal Reserve recently estimated those savings to be in the range of hundreds of billions of dollars a year. But President Trump built an entire trade agenda on the argument that those savings aren’t enough to justify the changes to American workers’ lives. The president is betting most Americans won’t mind that his tariffs will make Chinese imports cost more if he can show that he’s standing up for forgotten workers.

In 1961, Hazard wrote that the big businessmen who ran afoul of antitrust law were like drinkers arrested under Prohibition; they weren’t the real criminals. That sense of over-enforcement, along with the spread of Bork’s consumer-welfare ideology, deadened antitrust application in the decades since. The U.S. has gone from ban on monopolies to a near-free-for-all, to the point where the PayPal co-founder Peter Thiel can declare, “Monopoly is the condition of every successful business.”

2. Disregard for antitrust has been bipartisan. President George W. Bush’s Justice Department settled the last major U.S. antitrust case, against Microsoft, shortly after he took office. Then, in the wake of the 2008 financial crisis, Obama’s economic team had no particular lust for corporate breakups. Wu worked on Obama’s competition policy as a member of the National Economic Council in 2016. “The first term of the Obama administration was basically dominated by Clinton people from the ’90s. Basically they wanted to keep the show going,” Wu said. They had no intention of making major economic adjustments beyond the recovery. (That was changing toward the end of Obama’s second term, he said.) This thinking led, in part, to the financial firms that nearly took down the global economy ending Obama’s term bigger than they had been before the recession. The Obama administration made a political choice to allow the firms to stay large as part of the post-2008 rescue effort, the economic historian Adam Tooze has argued. Vast financial institutions had become essential to the American economy,  despite their destabilizing tendencies.  

Today’s trustbusters look not to Bork but to Louis Brandeis, a former Supreme Court justice. Brandeis took a particularly dim view of corporate concentration in the financial sector, the constitutional scholar Jeffrey Rosen wrote in The New Republic. “The idea of ‘too big to fail’ is the perverse culmination of Brandeis’s dystopian view of high finance. His main concern was not, as his critics suggest, the economic inefficiency of large firms, but the oligarchic influence they wielded over the American financial and political system, which allowed them to shield themselves from accountability for their own greed and recklessness.” The armies of lobbyists that delayed the implementation of Dodd-Frank financial regulations illustrate Brandeis’s worries about the political dangers of economic concentration. “In the wake of the crash of 2008, Brandeis’s insistence that businesses meet moral standards as well as economic ones seems more urgent than ever,” Rosen wrote.

3. Facebook is low-hanging fruit. “I would not be surprised to see someone ride against Facebook,” Wu said. The company’s long string of acquisitions of social platforms such as Instagram and WhatsApp put it at risk of antitrust enforcement. But even breaking up Facebook wouldn’t necessarily return the country to the trust-busting days of the 1960s, Wu said: “That's just a symbol—an important symbol—of getting control over mergers again.” If the government were to return to a serious antitrust posture, it would likely take on other sectors, such as pharmaceuticals.

“I think a major thing is to watch the Democratic Party flip on China,” Wu said. “That’ll be a big sign because for most of the last 20 years, the left and the center-left have been, China's our friend, and we need [them] to develop, and they'll become another thriving democracy. And I think more and more people are just giving up on that idea.” A shift may already be under way. In 2016, Hillary Clinton abandoned Obama’s China-focused trade strategy. Heading into 2020, Senator Sherrod Brown of Ohio, who is considering a bid for the presidency, has defended Trump’s attacks on China. As more economic populists enter the race, the political window on a suite of issues may shift. Facebook, in other words, might be just the beginning.

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