The Long-Overdue Counterrevolution in Antitrust

Capitalism without competition is a blueprint for an aristocracy of inherited wealth, worse than Ye Olde England’s aristocracy of landed gentry. It’ll take us time to get there, but we Americans are on a glide path to that end. The trend is most obvious in so-called “tech,” meaning gigantic online businesses jet-propelled by software.

The so-called “Big-Five” of today—Alphabet (Google), Amazon, Apple, Meta (Facebook), and Microsoft—have a hand, directly or indirectly, in almost everything that happens in our nation. These five firms dominate or influence virtually all commercial activity in America, and much of what we Americans do with our free time. They skillfully avoid their own restraint and regulation by means of massive lobbying in Washington and their control of online information. How they manage information and lies may determine who wins the upcoming election and whether we can keep our Republic.

That’s why the current counterrevolution in antitrust law could help save our democracy. Antitrust’s primary goal and raison d’etre is keeping powerful capitalists from creating an unbreakable aristocracy of wealth and power. The law’s means to that end is simple: let free competition thrive. Let clever new businesses take down the old behemoths, in a continual process of growth, failure, and rebirth.

Don’t take my word for it. Take Thomas Jefferson’s and Thurgood Marshall’s. Jefferson was hypocritical, to say the least, in owning slaves but touting equality. But he was also the deepest thinker among our Founders and, apart from Ben Franklin, the only one who cherished science. He founded our first state university, the University of Virginia, and our first patent office.

Jefferson knew about the old English “Statute of Monopolies,” enacted in 1623. Not only had it outlawed monopolies. It had also given citizens the right to sue them for three times the amount of damages caused by their misdeeds.

This “treble damage” remedy was later adopted in our own antitrust laws. The treble remedy reflected the economic and social importance of suppressing unfair economic domination.

Jefferson wanted to include a similar prohibition in our Bill of Rights. In 1788, he wrote James Madison a famous letter to that effect. He argued that “it is better to . . . abolish standing armies in time of peace, and Monopolies, in all cases, than not to do it in any.”

But the correspondence soon turned to the related question of temporary monopolies to protect intellectual property, i.e., patents and copyrights. Madison convinced Jefferson that, as Jefferson put it, “ingenuity deserves a liberal encouragement.” So our Constitution contains an explicit provision, in Article I, Section 8, Clause 8, giving Congress power to grant patents and copyrights. But nothing in our Constitution, let alone in our precious Bill of Rights, outlaws monopolies or explicitly authorizes Congress to do so.

My apologies for the slang, but in this instance our Founders got it bass ackwards. England’s Statute of Monopolies had outlawed them in 1623. England’s first copyright law, the Statute of Anne, came nearly a century later, in 1710. It allowed copyrights as a limited exception to the general prohibition of monopolies. In our law, the narrow exception for intellectual property became the constitutional rule. We did not have a national prohibition against monopolies until Congress enacted the Sherman Antitrust Act in 1890, a century after our Founding.

So if slavery, the Senate’s gross mal-apportionment (getting radically worse with time), the electoral college, the minority-backed presidents it produces, and the filibuster don’t convince you that our Founders were all too human, and not divinely inspired, maybe this sad tale of antitrust law will tip the scales for you. Our Founders were indeed proponents of the Enlightenment, but their primitive take was far from the last word on the subject.

As Jefferson had dimly realized before he got distracted, unchecked private economic power can be as oppressive as unchecked political power. Thurgood Marshall also recognized this point. He’s best known for having been the first Black Supreme-Court Justice, and for his role (as an advocate) in the Brown v. Board of Education decision that (slowly) desegregated our public schools, beginning in 1954. But he was also smart enough to recognize the importance of antitrust law as an economic foundation for democracy and liberty.

Here’s what he wrote in 1972, in the case of US v. Topco Associates, Inc.:

“Antitrust laws in general, and the Sherman Act in particular, are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms. And the freedom guaranteed each and every business, no matter how small, is the freedom to compete—to assert with vigor, imagination, devotion, and ingenuity whatever economic muscle it can muster.”

To round out this longish introduction, I’ll quote perhaps the single highest authority on American antitrust law, Senator John Sherman of Ohio, the Senator for whom the Sherman Anti-Trust Act of 1890 is named. Here’s the peroration of his speech on the Senate floor, pushing his bill that became our first antitrust law:

“The popular mind is agitated with problems that may disturb social order, and among them all none is more threatening than the inequality of condition, of wealth, and opportunity that has grown within a single generation out of the concentration of capital into vast combinations to control production and trade and to break down competition. These combinations already defy or control powerful transportation corporations and reach State authorities. They reach out their Briarean arms to every part of our country. They are imported from abroad. Congress alone can deal with them, and if we are unwilling or unable there will soon be a trust for every production and a master to fix the price for every necessity of life.“

21 Cong. Rec. 429. (The unusual reference to “Briarean arms” apparently involved a meme, current at the time, of a fictional multi-armed monster similar to a Hindu god or goddess.)

Perhaps more to the point of oligarchy was Sherman’s later remark about one of the big industrial combinations: “If the concerted powers of this combination are intrusted to a single man, it is a kingly prerogative, inconsistent with our form of government, and should be subject to the strong resistance of the State and national authorities . . . .” 21 Cong. Record at 2457.

Sherman was the father of our US antitrust law. His words make its primary purpose crystal clear. It’s not to promote one or another modern economic theory. It’s certainly not to promote “consumer welfare.” It’s to restrain the abusers of capital from accumulating and commanding excessive private wealth and overweening economic power that threatens democracy. It’s to provide a check and a balance on an aristocracy of wealth, similar to the checks and balances among our three branches of government.

The EU seems to have gotten these points better than we do. It named its counterpart to our “antitrust law” “competition law,” calling a spade a spade. (Our law’s odd title arose from the fact that most nineteenth-century abusers of economic power came in the legal form of “trusts.”) And the EU’s counterpart to our Sherman Act is subtitled “abuse of dominant position,” which more accurately describes the real target of our corresponding law.

Late in the last century, conservative economists, led by the late Milton Friedman (who died in 2006), created a powerful myth. Antitrust and competition law, they said, was designed to enhance “consumer welfare.”

What they meant, in essence, was lowering prices for consumers. No matter how they do it, the myth ran, corporations should have free rein to combine, grow bigger and push smaller firms around, as long as, at the end of the day, consumers see lower prices.

This myth gave the oligarchs yet another reason—besides “globalization,” and “free trade (allegedly) making everybody better off” — to sell our factories, jobs, and technology to China, whose low-paid workers and weak environmental protection facilitated low-cost manufacturing. It also led to giving our Big Five tech firms a virtual pass on the ground that most of their advertising-based online services come at the lowest possible price to the average user: free. It was almost as if Milton Friedman had anticipated the advent of the Internet after he had proposed his price-based theory.

But he and other so-called “conservative” economists ignored three things. The first was the history of our antitrust laws and the reasons Congress enacted them. Prices were mentioned, but only in the context of vast private concentrations of economic power fixing them, rather than free and competitive markets. The second thing was common sense: when privately run financial castles in the sand get bigger and bigger, they inevitably hurt more ordinary people when they fall. “Too big to fail” was not in 2008, and never will be, a measure of firms in a properly functioning capitalist economy. The third thing the myth ignored was cause and effect: when ordinary people get brutalized by a rising financial/industrial oligarchy, they try to get even, and the results are not pretty. See: the French Revolution; the Russian Revolutions (there were two!); and the apotheosis of Donald J. Trump.

As Justice Thurgood Marshall said, the purpose of our antitrust laws is to preserve and protect free competition. Period. It’s not to advance some abstract theory of economics from the University of Chicago, even if its proponent won a Nobel Prize in economics for something else. It was never about abstract economic theory; it was always about stemming the rise of excessively concentrated economic power.

Even in economic theory, competition has more than one face. Of course there is competition for customers, aka “consumers.” But there’s also competition for supplies and other “factors of production,” including land, energy and labor. Competition for labor may be the most important competition of all, if only because the vast majority of people in our democracy work for others, and many, if not most, ultimately work today for the oligarchs of capital.

When big corporations, including big “tech,” have to compete hard for labor, that improves workers’ position in life. It also improves democracy by giving workers a stake in the survival and improvement of our economy, our government and our way of life.

So free competition among businesses for workers, if not precisely the existence and power of labor unions, is among the primary purposes of American antitrust law and European competition law. That’s one reason why the recent decision of a Trump-appointed judge, striking down the FTC’s rule against non-compete agreements for ordinary employees, was not just a bad decision, but fundamentally, radically wrong. (The very statute that created the FTC includes a mandate to promote competition, and non-compete agreements by definition subvert it.) As a recent op-ed piece in the New York Times reports, the powers that be, including the Democratic Party and even a few individuals in the Republican Party, are beginning to recognize this big truth.

In precise economic parlance, the word “monopoly” connotes a sole or dominant position in a seller’s market. Another modern word, “monopsony,” connotes a dominant position in a buyer’s market. That’s the kind of power that allows Wal Mart to strangle many of its small suppliers by pressuring them relentlessly to lower their prices. It’s also the kind of power that the big growers, for example, in California’s Central Valley, exert over migrant farm laborers who do the hard work of planting and harvesting their crops.

Senator Sherman probably did not know the word “monopsony.” Maybe it didn’t exist in 1890. But his words, quoted above, leave no doubt that he pushed through his Sherman Act in part to restrain the power and abuses of monopsonists in markets for labor (including local and specialized markets), land, energy and supplies.

Milton Friedman and his “Chicago School” of so-called “conservative” abstract thinkers forged a revolution in antitrust economics. Their near-capture of our politics and political imagination for two generations had John Sherman turning over in his grave.

More than that, it has had disastrous practical consequences. These include the offshoring of 60,000 American factories, the layoffs of their workers, the drying up of many midwestern factory towns, the so-called “populist” political “revolution” led by Donald Trump, the pervasive corruption of our society, the hollowing of our on-shore industrial and research base, and the existential threat to our democracy and national security that all this portends.

But now we are seeing the beginnings of a counterrevolution. Just as we, quite rightly, demand “Say their names!” of people unlawfully killed by racist police brutality, we ought to know the names of policymakers and thinkers leading it.

Lina Khan is Chair of the Federal Trade Commission (FTC), which has a statutory mandate to promote both free competition and consumer welfare. She’s pushing, against irrational resistance from Trump-appointed judges, the simple notion that “competition” is not limited to that for consumers’ money.

A professor teaching Antitrust Law at Columbia University School of Law, Tim Wu is the leader of the intellectual counterrevolution as applied to “big tech.” In particular, he’s the one who’s explained, in detail, how “big tech” has unlawfully suppressed competition on the buyers’ side, in labor markets, in suppliers’ markets and in inter-firm markets for such things as “apps” and other auxiliary software. He’s now a Special Assistant to President Biden for Technology and Competition Policy.

You needn’t literally say their names, because protests will not win this counterrevolution. It will be fought in our Executive Branch, in the FTC, in our courts, and in the halls of academia, just as was Milton Friedman’s revolution that laid us low. But you should know their names and the importance of the counterrevolution that they’re now leading.

It’s not just about money and economic power, as was the first antitrust revolution in our first Gilded Age. It’s also about control over information, politics and how we think. It’s even about how we bring up our kids. Will they become alienated, bullied and depressed social misfits staring obsessively at their mobile devices, and losing much-needed sleep to do so? Or will they grow as properly socialized children with normal in-person social and athletic lives, and maybe even a touch of empathy? The jury on that is very much still out.

Senator Sherman didn’t say so. But if he were alive today, he would surely extend his “Briarean arms” analogy to our media, and to their over-the-top political lies and deliberate or negligent disinformation campaigns. And once he had caught up by reading George Orwell, he would understand that only vigorous enforcement of his laws (and later competition laws like the Clayton Act, which specifically addresses mergers) could prevent the advent of Big Brother for real.

The so-called “Middle Ages” really were the Dark Ages. For a millennium after the Fall of Rome, a single institution—the all-powerful Catholic Church—dominated all of Western culture. True, it kept alive the ancient wisdom of the Greek philosophers, Jesus, and his disciples, plus the skills of writing and reading. But it quashed all further human and societal development. It told ordinary people, their leaders, and even the aristocracy and kings what to think. Science, democracy, equality, and the notion of human rights had to await the Protestant Reformation and the Enlightenment that followed.

If we let our “big tech” oligarchs perform a similar role in our third millennium, the results wouldn’t be similar. They’d likely be far more catastrophic. The Catholic Church’s domination of the Dark Ages led mostly to stasis, a dreary form of stability. In contrast, domination by our diverse and rival oligarchs would hardly enforce a single mode of thought. Just consider Elon Musk, who, like Bertrand Russell, thinks of eleven impossible things before breakfast.

Instead, domination by economic aristocrats would put our national and geopolitical divisions on steroids, while catapulting the oligarchs to a level of wealth, influence and dominance that even the medieval Catholic Church never achieved. All the while, the oligarchs, by controlling what we feel and think we know, would continue to divide us while augmenting their wealth and power and suppressing business rivals.

The world they proffer is looking a lot like what Orwell predicted in his prescient but premature novel 1984: a world divided into battling blocs, each ruled by a tyrant with absolute control over information and, most likely, nuclear weapons. What could possibly go wrong? As thing stand today, the only wild card would be massive global migration fueled by self-sustaining planetary heating.

If that prospect does not cheer you, then pay attention to Lina Khan and Tim Wu. Our species, let alone the world’s most powerful nation, does not need a new inherited oligarchy based on obscene wealth derived from software and information, instead of land. Few things can avoid such a dark future as reliably as zealous enforcement of our antitrust and the EU’s competition laws, but as their framers intended them, not as academic economists water them down. So if you want a brighter future for your kids and grandkids, as well as your country, Khan’s and Wu’s counterrevolution is one that you must help them win.

Endnote: Just for the record, I taught intellectual property (IP) law intensively and antitrust law (in full courses) occasionally in law schools from 1986 though 2010, or for 24 years. My point about our Founders getting the relationship between IP and antitrust law “bass ackwards” is discussed in greater detail, and with many more historical citations, in the first few pages of this law-review article on patent policy.

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