Professor at the Columbia Law School in New York and author of The Curse of Bigness: Antitrust in the New Gilded Age.
The U.S. Justice Department filed suit this week against one of the country’s most successful companies, Google, the long-time Silicon Valley darling. To a non-American, this might seem puzzling. Just why would the American government want to threaten one of its most valuable companies with a possible breakup?
Of course, it must be admitted that this is not the only puzzling thing to have happened in the United States over the past few years. Some might think the Google lawsuit is just another strange Trump project: The company, after all, is staffed by highly educated California Democrats who eat free kale salads in their company cafeteria.
But contrary to popular belief, not everything in the American universe is about President Donald Trump. This lawsuit, whose origins date to the Obama years, must be understood as a part of a century-long, unusual and almost uniquely American interaction between the U.S. federal government and its largest, most powerful companies.
The anti-monopoly laws in the U.S. play a strange but important role in American democracy. With origins in English anti-monopoly law, they serve as something of a final check on private power, which can grow to dimensions here that are quite alarming. In other words, the suit against Google forms part of a longer tradition of a federal government establishing who is really boss around here – beginning with the breakup of John Rockefeller’s Standard Oil and proceeding through the Microsoft antitrust suit.
Former president Theodore Roosevelt explained this point well when his Justice Department filed a suit in 1902 against John Pierpont (J.P.) Morgan, who was the greatest monopolizer of the gilded age. Mr. Roosevelt wrote that “the absolutely vital question” was whether “the government has the power to control the trusts.” As he had said earlier in a speech, the “immense power” of aggregated wealth “can be met only by the still greater power of the people as a whole.”
The U.S. antitrust law was passed in the late 19th century – Canada passed its own version, too – as the reaction to the rise of companies (“the trusts”) that were so large and so powerful that they began to rival nation states in their revenue, ambitions and influence. And that’s certainly what we’re seeing today.
It can be a little unnerving to realize that Walmart and Amazon, with a combined revenue of about US$800-billion, easily exceed the GDP of any individual Canadian province, and indeed make more than British Columbia and Quebec combined. Just four of the Big Tech firms (Apple, Microsoft, Google and Amazon) have a combined market value about double that of the combined value of every single company on the Toronto Stock Exchange.
Companies that big and powerful aren’t easily tamed. They are always at the edge of becoming ungovernable, or becoming the government themselves – the invisible government, for matters that concern them. This is especially true of Big Tech, since it both tends toward monopoly and also has such a particular influence over our lives. What entity really knows the most about you, and does the most to determine what you see and hear? I’m going to guess, at this point, that it isn’t the Canadian Senate.
But what, exactly, is Google accused of doing? First, of being a monopoly – few, other than Google’s lawyers, disagree with that. Second, of deliberately making it near-impossible to compete with, by paying Apple tens of billions of dollars to make them the default search engine, a de facto exclusive. It is, as these things go, a relatively straightforward lawsuit.
Its most important feature is that it tries to establish some kind of outer limit on what a huge company like Google can do to insulate itself from competition.
Google will fight hard, but it does face one extremely tough question: Why, if the product really is so good, did it need to pay Apple the billions to keep away competitors? In this respect, the company is like a highly talented athlete caught using performance-enhancing substances. Just how good would Google be without its special deals?
The Google lawsuit may also be just the beginning. It may very well be that Facebook faces its own complaint for its own alleged misdeeds. Apple could be added as Google’s co-conspirator and Amazon could face new regulatory legislation. If so, the next several years may very well consist of something close to a full-out power struggle between the U.S. government and the country’s most powerful tech companies.
As most people know, the U.S. Constitution is premised on the idea of controlling concentrated power through formal checks and balances (unlike the Canadian system, which hopes people will behave themselves). But that system has one enormous loophole: private power.
There is nothing in the Constitution that prevents the abuse of concentrated power by private companies. There are no built-in democratic checks. And so, if the U.S. federal government is to represent the people, it needs to be a jealous deity, and cannot tolerate something more powerful than itself.
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