Author丨Hanxing
A history of antitrust struggles in the United States is also the history of the growth of tech giants
In the 21st century, the protagonists of the battle with the U.S. antitrust law have gradually transformed from traditional energy and consumer companies to technology giants.
Microsoft, Meta, Amazon, Google, and Apple are getting bigger and bigger in the process of fighting the antitrust law.
In the era of innovation-driven tech giants, the 134-year-old antitrust law may also need to keep pace with the times.
Both Google and Apple are targeted by the U.S. Department of Justice.
On May 3, the U.S. Department of Justice and 38 states concluded their trial of serious monopoly charges against Google. Google is believed to cement its market dominance by signing exclusive contracts with mobile phone manufacturers and browser companies to ensure that its search engine becomes the default.
The U.S. Department of Justice also said at a hearing last month that if Google hadn't monopolized the search engine market, other technological innovations such as ChatGPT might have been able to emerge years ago.
On March 21, the U.S. Department of Justice and 16 states filed a lawsuit in federal court in New Jersey, accusing Apple of using its control over hardware and software to monopolize the mobile phone market, harming consumers, developers and competitors. On the same day, Apple's stock price fell by more than 4%, and its market value evaporated by about 800 billion yuan overnight.
If Google and Apple lose their lawsuits, both companies face a forced spin-off in the worst-case scenario, which would be the largest corporate carve-out in the United States in four decades.
Warren Buffett was once asked the question: What is the best company? His answer: a monopoly with high pricing power.
Warren Buffett and his partner Munger have repeatedly mentioned their aversion to competition and their preference for "monopolies". Coca-Cola and Apple, which have undergone antitrust investigations, are two representative companies that Buffett has invested in.
While bringing huge returns to investors, giants are often targeted by antitrust laws.
In the 134 years since the birth of the U.S. antitrust law, it has spun off the "oil king" Rockefeller's Standard Oil Company, spun off AT&T, the largest telephone communications company in the United States, and forced the former PC giant IBM to open up its operating system and processors.
However, after entering the 21st century, the protagonists of the struggle with the anti-monopoly law have gradually transformed from traditional energy and consumer companies to technology giants. At the same time, with the rise of the efficiency-oriented Chicago School of Economics, intellectual property protection and antitrust law collided fiercely, and technology giants such as Microsoft, Meta, Amazon, Google, and Apple began to gain the upper hand in the process of fighting with antitrust law, and grew bigger and bigger.
A history of the antitrust struggle in the United States, but also the history of the growth of tech giants.
01 The trillion giants that are being targeted
Among the most high-profile "U.S. stock seven", except for Nvidia, which has only taken advantage of the AI trend in the past year, and Tesla, which has fallen out of the top 10 of the S&P 500, the remaining five have dealt with antitrust laws, without exception.
In 1994, Netscape launched Navigator, a paid browser that at one point captured 75 percent of the market. In order to seize a place in the rapidly emerging Internet market, Microsoft immediately launched the Internet Explorer browser, which is not only free for consumers to use, but also bundled with the overwhelming Windows 95/98 system. This has led to a rapid decline in Netscape Browser's market share.
In September 1996, the Department of Justice began an investigation into the sale of Windows 95 bundled with Internet Explorer, and in 1998 formally filed an antitrust lawsuit against Microsoft.
In April 2000, Microsoft was convicted of violating antitrust laws. Two months later, U.S. District Court Judge Jackson ruled in the first instance to split Microsoft, requiring Microsoft to split into two companies, one for Windows personal computer operating systems, and the other for Office and other application software and web services including Internet Explorer.
Microsoft, which is facing the crisis of a spin-off, first filed a request for a stay of execution, and then took a different approach, claiming that the trial judge had violated judicial process by leaking the case to the media during the trial. Finally, the case reversed more than a year later. In September 2001, the Department of Justice announced that it would no longer seek to penalize Microsoft through a partition and to settle with it.
At the end of 2020, Facebook, which had not changed its name to Meta, was sued by the US Federal Trade Commission (FTC). The FTC argues that Facebook's acquisitions of Instagram and WhatsApp in 2012 and 2014 cemented its monopoly position in the social network, which not only harmed market competition, but also harmed the interests of advertisers.
As a result, the FTC wants to seek a permanent injunction in federal court that would require Facebook to divest Instagram and WhatsApp, prohibit Facebook from imposing anti-competitive conditions on software developers, and restrict Facebook's future mergers and acquisitions. But the complaint was dismissed by a court in June 2021, citing the FTC's failure to prove that Facebook has monopoly power in the social networking market.
After Facebook, Amazon will be sued by the FTC for antitrust in 2023, saying that it uses a series of behaviors such as low prices and forcing sellers to use Amazon's self-operated fulfillment services to prevent competitors from developing. Amazon has moved consumers as a shield, claiming that this move is to allow consumers to enjoy better platform services.
Around the same time, Google also faced a number of antitrust lawsuits, involving multiple businesses such as search and advertising. The prosecution argues that Google is using its monopoly position to violate the market principles of fair competition. Google has used a similar approach to Amazon, saying that its high market share is the result of natural choice by consumers, and that Google is not restricting partners from using other search services.
Apple, a giant that has recently been targeted by antitrust laws, has been under continuous investigation for five years.
Since 2019, the U.S. Department of Justice has been investigating third-party software management policies on Apple's hardware devices, as well as the binding of hardware to the iOS system. Due to budget and other reasons, the survey was only fully launched in 2022. On March 21 this year, the Justice Department accused Apple of abusing its dominant position in the smartphone market by closing the exclusive software and hardware ecosystem to increase consumer stickiness to Apple products in an 88-page indictment.
In the past 30 years, none of the five trillion-dollar giants of technology and Internet, which have been in the limelight, have been able to escape the anti-monopoly radar.
02 Grow bigger and bigger in grappling
One surprising result is that the tech giants targeted by the antitrust law have neither been spun off nor forced to disclose their technology, but have gone from strength to strength.
The three-year-long antitrust trial did not cause substantial harm to Microsoft.
In 2002, the market share of Internet Explorer once exceeded 95%. According to a report by CICC, antitrust has not untied Microsoft's Internet Explorer browser and operating system, and has not shaken Microsoft's position in the PC market, with a market capitalization of more than $1.6 trillion at the end of 2020. From 2000 to 2020, Microsoft's market capitalization increased by 6.2 times, which is higher than the 4.2 times of the Nasdaq index.
This antitrust trial, which spanned the turn of the century, finally ended in a resounding victory for Microsoft, and also exposed the limitations of the antitrust law in the era.
On the day Facebook's antitrust lawsuit was dismissed, the company's stock price rose 4%, and its market value exceeded one trillion dollars for the first time, becoming the fifth U.S. listed company with a market value of more than one trillion after Google, Microsoft, Apple, and Amazon.
The two lawsuits between Amazon and Google have yet to be finalized, but at least in the capital markets where they voted with their feet, the two tech giants have not been substantially affected.
Why does the anti-monopoly law, which has more than 100 years of history, repeatedly have the upper hand in the game with technology giants?
For a traditional company, it is relatively simple and straightforward to measure whether it constitutes a monopoly, and its revenue and sales share of the entire market can be referenced. Social networks are an emerging market, with both regular users and advertisers as their source of revenue, so it is difficult to measure market share by a unified standard, and there is no way to talk about a monopoly position.
Facebook seized on this to refute the FTC's lawsuit, saying that the FTC was not aware of the dynamic, competitive nature of the high-tech industry.
Tan Yuan, an associate professor at the Law School of the University of Chinese Academy of Social Sciences, told Snow Leopard Finance that the American society generally believes that the digital industry is highly dynamic and competitive, so it is difficult for tech giants to be recognized as having a dominant market position. Coupled with U.S. technology policy and other considerations, there is still great uncertainty about the antitrust of U.S. technology giants.
It can also be seen from the anti-monopoly cases of Amazon, Google and Facebook that compared with traditional enterprises, the business composition of technology and Internet giants is more complex, which also means that their monopoly positioning in a certain market is difficult to define.
In addition, CICC's research shows that in the past 40 years, U.S. antitrust law has preferred efficiency and fairness over the former.
Yuan Quan, a lawyer at Beijing Gaopeng (Nanjing) Law Firm, told Snow Leopard Finance that another major contradiction in antitrust litigation against tech giants is the contradiction between intellectual property protection and anti-monopoly law.
After entering the era of technology and Internet, the importance of intellectual property protection has increased significantly. Simply splitting a company, or forcing it to disclose its technology, is contrary to the original purpose of IP protection and undermines a company's ability to innovate.
All kinds of constraints make the seemingly powerful antitrust law seem helpless in the face of tech giants.
03 Is the antitrust law outdated?
At the beginning of its existence, the United States experienced a golden age of antitrust law.
In 1890, the U.S. Congress passed the Protection of Trade and Commerce from Unlawful Restraint and Monopoly Act, referred to as the "Sherman Antitrust Act". This is the world's oldest antitrust law and is also known as the "mother of global antitrust law".
The period from 1900 to 1920 was the first golden age of antitrust law.
In 1911, the U.S. Supreme Court ruled that Standard Oil, controlled by the Rockefeller family, was a monopoly and split it into 34 regional oil companies, and the oil empire collapsed overnight. The reason is that the company controlled about 91 percent of oil production and 85 percent of oil sales in the United States through multiple acquisitions in 1904.
In the same year, U.S. Tobacco was split into four companies by antitrust laws. A year later, the financial oligarchy Morgan & Co. was split into Morgan Stanley and J.P. Morgan under the influence of antitrust laws.
During this period, the theoretical basis of antitrust law was Brandedisism, which emphasized that excessive concentration of market structures would have a negative impact on democratic politics and the gap between rich and poor. Therefore, through a simple and crude spin-off, it broke the monopoly position of the giants, created a relatively fair market competition environment, and also gave the latecomers room for upward growth.
The most representative of these is the IBM antitrust case.
In 1969, the U.S. government characterized IBM's behavior of providing discounted prices to customers as predatory pricing, and considered its vertical integration from hardware and software to support departments to be essentially a monopolistic expansion. The protracted antitrust lawsuit lasted 13 years. Eventually, in 1982, IBM avoided being spun off at the expense of opening up its personal computer operating system and processors to the outside world.
It is also because of this incident that companies such as Microsoft, Apple, HP, and Dell were able to grow into a new generation of technology giants in the future. The tech giants that are wrestling with antitrust laws today were the beneficiaries of the bill.
But by the '80s, the Chicago School of Economics was beginning to emerge in the United States. This school of thought believes that the purpose of antitrust is to prevent the loss of economic efficiency, and the increase in market concentration does not necessarily lead to the loss of efficiency. Under the influence of the Chicago School of Economics' philosophy of efficiency first and free market, the golden age of antitrust law came to an end.
In fact, whether there really is a monopoly in the technology sector is a highly controversial topic in itself.
Warren Buffett, who believes in "monopoly", first proposed the concept of "moat" in 1993. He believes that a good company with sustainable competitiveness has a deep moat. When the moat is too wide to be crossed, the company has the ability to monopolize the market.
But Tesla CEO Elon Musk believes that the concept of a moat is outdated. "If your only barrier against an invading enemy is a moat, you won't last long, what really matters is the pace of innovation, which is the core element of staying competitive."
In the era of innovation-driven tech giants, the 134-year-old antitrust law may also need to keep pace with the times.
Source: Snow Leopard Finance Agency
编辑：Sharon