Friday, May 24, 2024

Antitrust and “King Time”

The Department of Justice’s latest antitrust lawsuit against Google is predicated on correcting what many see as the damage that a few, big technology-based companies are inflicting on our country.

Antitrusters have long worried that two forces – competition strangled by monopolistic retailers, and the national discussion curated by information elites – are pushing American society ever deeper into intellectual uniformity and economic exploitation. The result is a two-fold crisis that weakens both the body and the soul of the nation.

Consider how information can be curated by a small number of powerful corporations.

“Accurate news is not merely a prime necessity in a representative democracy,” one incisive observer of the media scene wrote, “it is the prime necessity.” But it takes “immense capital resources” to manage a modern media enterprise, so modern media has become a “natural monopoly.” And with this monopoly, comes the ability of an elite few to misuse corporate ownership to manage “the function of interpreting the news” – even when the views of these elites oppose and repress the prevailing beliefs of the American people.

If anything, the situation is worse in retail, the economic heart of what should be an open, competitive, free-market system.

One large retailer famously pioneered a disruptive marketing technology to get around brick-and-mortar stores to worm its way into virtually every home in the nation. The result? The suffocation of competition and the collapse of small stores around the country. One congressman noted that plutocrat retailers are “sapping the civic life of local communities” and “draining off their earnings to his coffers.”

Now for the jujitsu, which you, dear reader, probably saw coming: This problem of news monopolization was spelled out by Gerald W. Johnson, who took to the pages of The Atlantic Monthly in 1950 to warn of the pernicious influence of daily newspapers in one-newspaper towns. The other quote comes from Rep. Wright Patman, who in the 1930s sponsored the Robinson-Patman Act to protect local stores from predatory chains like A&P and Sears, Roebuck & Co.

These retail companies were the Amazons of their time. Sears eclipsed the limited supply of local general stores with free catalogs, 500 pages stuffed with everything from stoves to sweaters to shovels. The Sears catalog, like Amazon today, had everything consumers could imagine – and much they couldn’t. Sears’ published prices undercut the flexible negotiating strategies of local stores.

As Shakespeare wrote, however, time is our king, both parent and grave. Today, no one worries about the depredations of Sears, which declared bankruptcy in December, or of the Cleveland Plain Dealer, the daily version of which is a website, like so many other newspapers that once lorded over the advertising world. Today, we could list all the one-newspaper cities in America, but what would be the point?

Now King Time is beginning to act on the big actors of our today – Alphabet/Google, Meta/Facebook, Amazon, and Apple. These big tech companies are different than past retailers or newspapers. They are partly valuable because of the tautology of network effects – everyone uses Google, so everyone uses Google.

Not so much anymore. Alphabet and Meta, once raking in more than half of all online revenue, are rapidly losing market share to Amazon, as well as to Netflix, TikTok, Walmart, Kroger, Disney, and others. Google is also facing the prospect of severe disruption from ChatGPT, the AI wunderkind that promises to revolutionize search. Google recently laid off 12,000 workers and Amazon 18,000. Alphabet’s sales missed analysts’ estimates several times recently. Similar competitive threats beset the other major tech companies, from Spotify to Microsoft.

I don’t count them out. These big tech companies may rebound. If they do, it will only be because they find some new way to bring fresh value to consumers. If they don’t, there will be new market entrants for antitrust scolds to complain about.

None of this, however, will deter the Department of Justice, which like a hapless Monty Python knight always arrives late – and to the wrong battle. In 1982, DOJ threw in the towel on its 13-year antitrust suit against IBM just as Apple and a host of other new market entrants began to steal IBM’s lunch. Now Biden’s progressive antitrusters at DOJ are intent on reviving the vague standards of the Robinson-Patman law, long considered archaic and unenforceable, and joining it to other antitrust actions to launch more monopoly suits against challenged tech companies.

One saving grace is that Biden’s antitrust enforcers – from DOJ’s antitrust division to its ideological soulmates at the Federal Trade Commission – have a near-perfect record of striking out in court. Danger to consumers and innovation remains. Such a barrage of government action threatens to freeze in place the ability of companies to agilely respond to disruption. This, too, is a form of disruption, but not the good kind.

This article was originally published by RealClearPolitics and made available via RealClearWire.