Apple, Amazon, And Google: Are They Monopolies? The Government Thinks So.
The Story of the Most Critical Anti-Trust Action in a Generation.
Few organizations throughout history have exceeded the modern American mega-corporation when it comes to gathering money, power, and influence. The question becomes: are these companies so dominant that they can be considered a “monopoly?”
The term “monopoly” is tricky. In the United States, we like to define it in the legal sense. Something is a “monopoly” if the law says it’s a “monopoly.” We rely on a 134-year-old law called the Sherman Antitrust Act.
According to the Sherman Act, a monopoly is achieved when one company is so dominant that it can control the price and availability of a product or service. It doesn’t need 100% control, just enough to set price and availability. During the debate around the Sherman Antitrust Act, Senator George Hoar of Massachusetts put it this way:
“[a person] who merely by superior skill and intelligence…got the whole business because nobody could do it as well as he could was not a monopolist…”
In other words, if you’re very good at what you do, then “wa la” the American Courts will NOT consider you a monopolist. Essentially, you’re free and clear to do whatever you want. While that may have been an adequate definition in the industrial age, it is far less so in today’s information age.
Today’s economy is littered with companies that are monopolies in everything but the strict legal sense, primarily because of the George Hoar loophole. For instance, America has only one company, Boeing, which makes commercial airplanes. There are just two fully integrated oil companies (able to drill, refine, and market): Chevron and Exxon Mobile. The one dominant e-commerce company is Amazon.
In modern technology companies, we find the most egregious example of a monopoly. Google/Alphabet has the lion’s share of all search volumes; Apple has a dominant position in smartphone sales; Microsoft has the premier position in business software; and, of course, Amazon is the number one online retailer.
Each of these companies has drawn the ire of the United States Justice Department. Three companies, Apple, Google/Alphabet, and Amazon, are currently facing major legal battles with Justice focused on Sherman Anti Trust violations.
These cases will take years to adjudicate and involve literally hundreds of attorneys. Two of the cases, Amazon and Google/Alphabet, began with the Trump Administration and have been passed on to the Biden Administration — this means that at least two Attorney Generals have been involved in the government’s case.
Although the intricacies involved are too complex to deal with, there are specific highlights we can see.
Like almost all lawsuits, these begin with the question of fact: do these companies have such a dominant position in the market that they could be considered a monopoly? They do have the dominant position, as the DOJ will argue.
But the counter becomes: Is this dominant position so tenuous that it could be lost at any time? It is not an easy answer. Should the judge rule that Apple, Google, or Amazon face sufficient competition that they could be toppled from their number one position, then the case against them would be thrown out.
Based on this fact alone, most legal scholars feel the case against Apple is the weakest. Apple faces several substantial competitors, especially Android phones.
The cases against Google and Amazon are more substantial if, for no other reason, they have maintained their dominance for a long time with few significant competitors.
Influence
The second part of these lawsuits is particularly relevant: Are the tech companies using undue influence? The question goes back 23 years to the U.S. Department of Justice Case against Microsoft.
Microsoft has the dominant position in software, with Microsoft operating systems on most Personal Computers. Apple Computers, of course, use IOS. Microsoft was bundling their web browser, Internet Explorer, with their operating system. Internet Explorer came as a complete package when a customer purchased Microsoft’s MS-DOS.
The DOJ argued that Microsoft used its dominant position in software to exclude other browser companies unfairly. Ironically, Google was/is the most crucial competitor in this field and is now the subject of a DOJ Antitrust Case.
The Microsoft Case raises the fundamental issue of influence. Did Microsoft use its dominant position in software to influence customers to use Internet Explorer unfairly? Herein lies the chief problem for today’s Tech Monopolists: Are they using unfair influence, not just in business-related issues but in fields far removed?
Such is the scope and range of all of these companies that they can shape the public landscape. To create a favorable impression of whatever issue they wish to present. Their capability goes far beyond merely providing a product or service. These dominant tech companies can frame public opinion. In the case of Microsoft, it showed Internet Explorer as the quick-and-easy option. The Justice Department demonstrated that most consumers followed Microsoft’s direction and installed Internet Explorer as their web browser.
Regrettably, there was no final decision in the courts. Although the U.S. District Court ruled that Microsoft violated Section 2 of the Sherman Act, this was partially overturned by the U.S. Appeals Court for the D.C. Circuit. Later, Microsoft and Justice reached an out-of-court settlement in which Microsoft altered some of its services. I believe that Internet Explorer’s default position was modified. The bottom line is that the issue of “Influence” still needs to be determined in the Courts.
Like many of you, I’d like to see the courts decide this principal issue: What is Google, Amazon, and Apple’s influence on not just what brands to purchase but also what news and information we see and, ultimately, what candidates we vote for? How does Big Tech influence the world we see?
Of course, that desire is far beyond what we’ll probably see in these court cases. The courts will most likely produce a narrow decision based on contract law, far from the sweeping issue of general influence.
Finally, Shane Greenstein, a professor at the Harvard Business School, makes an interesting point. Apple, Google, and Amazon are all placing their reputations on the line. Who knows what “business practices” will be revealed as the court proceedings unfold?
American public opinion is notoriously fickle and could easily change if some unscrupulous corporate strategies are revealed. An adverse public reaction could have far more impact on these companies than a narrowly worded court decision.
Follow me here on Medium for more Stories from the ValueSide.
