Daniel Hertzberg for the Boston Globe


Antitrust law never envisioned massive tech companies like Google

The Internet has become so important to modern life that it’s hard to imagine it working much differently from the way it does. If you want to know something, you “Google it,” for free, presumably knowing you’ll be served targeted advertising. But today’s online world isn’t only a product of technological progress; it’s also the result of any number of legal cases and policy decisions that could easily have gone another way.

Imagine a world where, in the early 2000s, Microsoft programmed Internet Explorer, then the dominant browser, so that users who typed in “Google” would be sent to MSN Search or see a warning message about Google’s privacy policy and an invitation to use Microsoft’s product instead. In 2018, this is hard to imagine — that’s not the way the Internet works! But it could have been: At one point the idea was the subject of “informal conjectures” at Microsoft, The New York Times recently reported.

“Microsoft could have killed Google in the cradle,” says prominent Silicon Valley antitrust lawyer Gary Reback. Back in the 1990s, Reback spent years helping to convince the Justice Department to file charges against Microsoft, which was then using its dominance of the personal-computer software market to give Internet Explorer an advantage over other browsers. If not for the scrutiny Microsoft faced in antitrust cases in both the United States and Europe, Reback says — if the government hadn’t stepped in to stop the company from disadvantaging competitors — Google might never have become popular enough to be a verb.


Or, for that matter, the subject of its own antitrust controversy. Google has grown so fast, partly by buying more than 200 companies, that it has a level of power that policymakers and scholars are only now starting to understand. Over the last few years, Google has been accused of disadvantaging its own competition by using its search engine to steer users toward its other businesses — to its own local listings instead of Yelp’s, for example. Last June, the European Commission fined the company $2.7 billion for this. Google is appealing the decision.

Google has as much as 90 percent of the search market, and says its algorithms are designed to get users the right information as fast as possible. But it’s far more than a search engine, of course. The company controls the most popular online video site (YouTube, which is also the second biggest web site overall, by some measures), the most popular mapping app (Google Maps), and the most popular Web browser (Chrome, which has more than 60 percent of the market). It also owns the most popular mobile operating system, Android, and five of the 10 most popular smartphone apps of 2017. Along with Facebook, it dominates the online advertising business. Other divisions of its parent company, Alphabet Inc., sell Internet access, develop self-driving cars, and invest in life-extension technology.

US antitrust law was originally developed in the Progressive Era to ensure that sprawling companies with so much market power couldn’t use it to choke off competition. Since the 1980s, though, courts have decided antitrust cases mostly based on how the behavior in question would affect consumers — and especially whether it leads to higher prices. That makes it difficult to deal with Google, since most of its products are free to use.

Recently, though, there have been signs that antitrust law may shift in a more aggressive direction: The Justice Department tried, albeit unsuccessfully, to stop AT&T’s purchase of Time Warner. And a nascent movement led by the Open Markets Institute, a small but influential Washington-based think tank, is trying to reverse several decades of court decisions in order to bring the law back to its Progressive Era roots. Some of those involved call it the “New Brandeis” movement, after Supreme Court justice Louis Brandeis, an outspoken opponent of monopolies.

Rather than focus on consumer pricing, or even consumers at all, these New Brandeis thinkers want to preserve competition itself. Some of them are even pressing to separate the divisions of companies that own infrastructure, real or virtual, from those that use it — so an Internet store that dominates online commerce wouldn’t be able to sell so many of its own goods, and a company that dominates search couldn’t consistently point users to a suite of sites it also owns. That would mean fundamentally changing the way the Internet works. It could even mean breaking up Google.


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For the last couple of decades, American antitrust policy has been a bit of a policy backwater, of interest mostly to academics and economists. “In law school, when I told people I was interested in antitrust, their eyes would glaze over,” says Lina Khan, the Open Markets Institute’s director of legal policy. Now, according to a January New York Law Journal headline, “Antitrust is Cool Again.” That shows how quickly things are changing: Khan, 29, just graduated from Yale Law School last year.

Khan, who plans to clerk for a federal appellate judge, has already provided a good share of the intellectual fuel for the nascent New Brandeis movement. In January 2017 she published a 24,000-word article in the Yale Law Journal about “Amazon’s Antitrust Paradox” that’s been cited in The New York Times, The Wall Street Journal, and dozens of other mainstream publications. In it, Khan argues that the current antitrust standard doesn’t deal well with companies like Amazon, which can price goods below cost in order to build market share, then expand into an array of adjacent businesses and build an online infrastructure their rivals depend on that gives them access to the data their transactions generate.

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Khan got interested in the concentration of economic power as an undergrad at Williams College, where she became “captivated” by the financial crisis. In 2011, she went to work for Open Markets executive director Barry Lynn, a former journalist who had devoted himself to sounding the alarm about the growing concentration of corporate power, initially in the 2010 book “Cornered: The New Monopoly Capitalism and the Economics of Destruction.” Khan, who was born in London and raised there and in suburban Westchester County, N.Y., began her career working for Lynn and writing reported features about business and regulation for the Washington Monthly. Her academic articles are so compelling because she combines factual reporting with historically grounded legal arguments. (“It’s easy to forget,” she mentions offhand, “but antitrust was the key issue in the 1912 election.”)

Khan and her colleagues at Open Markets think the current antitrust standard lets big corporations dominate the industries they’re in. “We’ve been living through an experiment, and the results are all around us,” says Khan, who rejoined Lynn’s organization after Yale. There are four major US airlines and three major drugstore chains, and mega-retailers like Walmart and Amazon have the power to dictate terms to their suppliers.


“Rather than focus on consumer welfare, or any metric,” Khan says, “antitrust needs to focus on competition.” Like other progressive antitrust scholars, Khan — who’s spoken about her ideas with progressive icons Elizabeth Warren and Bernie Sanders — believes the law needs to serve as a referee to ensure fair competition, not promote lower prices or any other specific outcome.

These New Brandeis ideas represent a significant departure from the current state of US law, but they would have sounded familiar to the Progressive Era creators of antitrust law. The Sherman Antitrust Act was passed in 1890, to preserve a free market at a time when railroads and banks were consolidating. “If we will not endure a king as a political power, we should not endure a king over the production, transportation, and sale of any of the necessaries of life,” said Senator John Sherman, the law’s main author. In 1911, the Supreme Court broke up Standard Oil, which had come to dominate the US energy business through its control of pipelines and railroads. As recently as the 1980s, the breakup of AT&T’s telephone monopoly opened up the telecommunications market.

By then, the shift to more relaxed antitrust enforcement was already well underway. In his 1978 book “The Antitrust Paradox,” scholar and judge Robert Bork argued that the tough antitrust policy of the time stood in the way of economic efficiency. He insisted that the Sherman Act demanded a focus on consumer welfare, as expressed through lower prices.

The Supreme Court soon adopted Bork’s approach, which has dominated US legal thinking ever since. Until recently, even Democrats didn’t pay much attention to antitrust issues. The Federal Trade Commission closed its investigation of Google in 2013 after the company agreed to fairly minor changes, although an internal report later shared accidentally with The Wall Street Journal recommended taking action in court. As recently as 2015, President Obama implied that European Union regulators were hounding US technology companies because theirs couldn’t compete.

The Open Markets Institute is essentially waging a counter-revolution against Bork’s views. “People say that our ideas are radical, but those are the radical ideas,” says Lynn. “We want to get back to the original Jeffersonian ideas behind antitrust laws.” It’s likely to be a long fight.

Khan argues in “Amazon’s Antitrust Paradox” — note the riff on Bork’s title — that the current economic models of antitrust don’t capture the market power of online platforms that pursue growth over profit in order to become intermediaries their rivals depend on. She pursues this line of thinking further in a forthcoming Columbia Law Review article, “The Separation of Platforms and Commerce,” which looks at how competition law dealt with other infrastructure businesses and argues that “gatekeeper platforms” limit competition online. She argues that the integration of some platforms gives them “the ability not only to block access, discriminate, and leverage in the traditional sense, but also to enjoy systemic information advantages that let them extort value from other businesses.”

Her conclusion: Dominant companies shouldn’t compete directly in commerce with other firms on their own platforms. This would mean that Amazon could sell its own goods, or run a platform for third-party sellers, but not both. The same logic suggests that Google should be broken up, at least to the point that its search business would be separated from some of the other sites to which it refers traffic.

This idea seems radical — even to lawyers advocating antitrust enforcement against Google — since the modern media and technology business is built on an idea of synergy that took hold in the 1990s. But even many lawyers who don’t agree with Khan or Open Markets admire the way they’ve brought vitality to what had become a staid debate. “I think it’s refreshing that people on the left are taking a serious interest in antitrust,” Reback says.

When it comes to addressing the power of telecom companies, many Internet policy experts favor some form of net neutrality, since it would prevent broadband giants like Comcast and Verizon from “picking winners,” by making some sites load faster or slower. By the same logic, shouldn’t Google’s search engine also be prevented from picking winners — that is, promoting its own sites over rivals’?

Google says it hasn’t changed its algorithm in order to disadvantage competitors. (The European Commission found otherwise.) “Our responsibility is to deliver the best results possible to our users, not specific placements for sites within our results,” a company spokesperson said in a statement. Google can argue that the changes to its search serve users — seeing Google Flights when you’re looking for air travel is certainly convenient. But such thinking would give the company an open door to use its dominance in search to expand into any number of businesses.

“Networks are so important that the government needs to preserve openness and neutrality,” says Khan, who speaks in the full paragraphs of a law professor but with the energy of a young activist. “I think of structural separations as achieving the same ends of net neutrality — we don’t want the private entity that controls the infrastructure to pick winners and losers. There are certain core conflicts of interest that need to be addressed through a breakup.”

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Is antitrust law really so broken? Even skeptics of the big tech platforms worry that changing the current antitrust standard could lead to chaos until courts established a new one. “Some people say we need to rethink the law, but we could get a lot more out of the law we have,” says Reback, who represents companies that are pushing for antitrust action against Google.

Khan and other New Brandeis thinkers see market concentration as a question of economic power that inevitably leads to political influence. They found evidence for this close to home: In August, Lynn was forced out of the New America Foundation, which receives funding from Google, after he praised the EU’s decision to fine the company. He immediately set up the Open Markets Institute with most of the same staff. Although the organization has no formal focus on technology issues, Lynn sees them as the most urgent. “Wal-Mart is a huge problem,” he says, “but Google, Facebook, and Amazon represent an immediate threat to our democracy.”

To libertarians who believe in the Bork standard, such thinking is just “hipster antitrust,” a disparaging nickname for New Brandeis thinking popularized by Joshua Wright, the executive director of the Global Antitrust Institute at George Mason University’s Antonin Scalia Law School. (There’s even a parody twitter account, @WokeAntitrust, which Khan is hip enough to find amusing.) To Wright, Open Markets’ approach represents a return to the bad old days of the 1960s, “when antitrust was used as a cure-all for societal woes ranging from economic inequality to protecting small businesses,” he says. “It is fundamentally a movement to reject economic analysis as a way of guiding an evidence-based policy approach.”

Antitrust skeptics argue that the scale and power of Google and other technology companies doesn’t mean they’re doing anything wrong — quite the opposite, since they’re so popular with consumers. Others say that the New Brandeis movement has come to see antitrust enforcement as a way to tackle issues, like privacy, that should be addressed by legislation. Many also believe that disruptive innovation will always preserve competition more effectively than the government. (The Justice Department’s case against Microsoft didn’t result in significant sanctions in the end, and many technology executives believe it didn’t accomplish much.) Does Google’s search engine really give it so much power now that so many consumers access the Internet on smartphones driven by apps? Is it really fair to compare the company to Standard Oil, which controlled its own physical infrastructure? And isn’t Google’s search engine still vulnerable to the next great innovation, like Apple’s Siri or Amazon’s Alexa?

Maybe. But Google and other technology giants buy up a lot of potential competitors. And the way that consumer technology companies market convenience seems to reinforce their dominance. Ask Alexa to play a song and, under the default setting, it will go to Amazon’s music service unless the user specifies otherwise. (That setting can be changed so it automatically plays music from another service.) What makes the issue especially thorny is that this kind of simplicity also makes technology more valuable to consumers. Does Amazon program Alexa this way to make it easier to use or to give its own products an advantage? The answer is yes.

For more than a decade, Google has shaped the way online commerce works in similar — but often subtle — ways. Until October, for example, the company prioritized search results for newspapers and other publications that allowed users to read an initial article without paying, under a program called “first click free.” Newspapers faced pressure to make their paywalls work a certain way, or get listed lower in Google’s search results.

Likewise in February, Google launched an ad blocker in Chrome that filtered out some of the more annoying kinds of online ads. Search results that consumers can access for free may be more useful, and it’s hard to find defenders of intrusive pop-up ads. Still, it’s clear that Google is guiding the Internet economy according to its own preferences. What company wants to sell ads in a format that the most popular web browser will block?

The growing influence of Google and other tech giants fuels further consolidation. Companies that have to negotiate with them inevitably want to bulk up to get more leverage themselves — which was one reason AT&T gave for its proposed purchase of Time Warner — but that inevitably gives a few big companies even more power.

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The most immediate question about the future of US antitrust law isn’t how the theoretical debate gets resolved — it’s how long it remains theoretical. The tech giants are facing pressure, and not just from the left. Last month Treasury Secretary Steven Mnuchin suggested that the Justice Department should look into the power of companies like Google. Missouri’s Republican attorney general opened an investigation into Google last fall. The Federal Trade Commission has been urged to reopen its inquiry. Meanwhile, the European Commission is pursuing two other inquiries into how the company uses its Android and AdSearch platforms.

Any antitrust case brought in the United States — and this is a question of if, rather than when — could take a very long time to produce a fairly modest outcome. But just the decision to open a case could give Google an incentive to create some space for competition. It could also be one of the only ways to limit the power of Internet giants at a time when Congress is too divided to get much done. “People like me see antitrust as law enforcement, not regulation,” Reback says. “It’s the free-market alternative to regulation.”

For a long time, tech platforms didn’t face much regulatory scrutiny, since they presented themselves — often accurately — as disruptors of established businesses. But the fact that technological change is both inevitable and desirable doesn’t mean that the Internet was preordained to work as it currently does. Right now, the role of referee isn’t played by antitrust law but by giant technology platforms — even as they also compete on the field.

“This story is told as a technology story, but it’s also a market power story — these companies are pioneers, so people tend to conflate them with the technology,” Khan says. “But when they talk about airlines, they know that air service is a huge boon, but airlines still need to be regulated in some ways. This is partially about imagining alternatives.”

Clarification: This article has been updated to clarify a description of the Federal Trade Commission’s internal report.