tag:theconversation.com,2011:/us/topics/standard-oil-50697/articlesStandard Oil – The Conversation2021-12-08T23:51:24Ztag:theconversation.com,2011:article/1733952021-12-08T23:51:24Z2021-12-08T23:51:24ZA century of tragedy: How the car and gas industry knew about the health risks of leaded fuel but sold it for 100 years anyway<figure><img src="https://images.theconversation.com/files/436454/original/file-20211208-104971-1bl6u5i.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5227%2C3413&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">For decades, most gas sold in the U.S. contained a lead additive.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/rusty-petrol-pumps-on-a-gas-station-royalty-free-image/74166712?adppopup=true"> Per Magnus Persson via Getty Images</a></span></figcaption></figure><p>On the frosty morning of Dec. 9, 1921, in Dayton, Ohio, researchers at a General Motors lab poured a new fuel blend into one of their test engines. Immediately, the engine began running more quietly and putting out more power. </p>
<p>The new fuel was tetraethyl lead. With vast profits in sight – and very few public health regulations at the time – General Motors Co. rushed gasoline diluted with tetraethyl lead to market despite the known health risks of lead. They named it “Ethyl” gas.</p>
<p>It has been 100 years since that pivotal day in the development of leaded gasoline. As a <a href="https://scholar.google.com/citations?view_op=search_authors&mauthors=bill+kovarik&hl=en&oi=ao">historian of media and the environment</a>, I see this anniversary as a time to reflect on the role of public health advocates and environmental journalists in preventing profit-driven tragedy.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/436459/original/file-20211208-17-xev9b9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A black and white photo of a man in an old laboratory." src="https://images.theconversation.com/files/436459/original/file-20211208-17-xev9b9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/436459/original/file-20211208-17-xev9b9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=353&fit=crop&dpr=1 600w, https://images.theconversation.com/files/436459/original/file-20211208-17-xev9b9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=353&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/436459/original/file-20211208-17-xev9b9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=353&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/436459/original/file-20211208-17-xev9b9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=444&fit=crop&dpr=1 754w, https://images.theconversation.com/files/436459/original/file-20211208-17-xev9b9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=444&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/436459/original/file-20211208-17-xev9b9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=444&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Scientists working for General Motors discovered that tetraethyl lead could greatly improve the efficiency and longevity of engines in the 1920s.</span>
<span class="attribution"><span class="source">Courtesy of General Motors Institute</span></span>
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</figure>
<h2>Lead and death</h2>
<p>By the early 1920s, <a href="https://www.biologicaldiversity.org/campaigns/get_the_lead_out/pdfs/health/Needleman_1999.pdf">the hazards of lead were well known</a> – even Charles Dickens and Benjamin Franklin had written about the dangers of lead poisoning.</p>
<p>When GM began selling leaded gasoline, public health experts <a href="https://doi.org/10.1021/om030621b">questioned its decision</a>. One called lead a serious menace to public health, and another called concentrated tetraethyl lead a “<a href="https://doi.org/10.1021/om030245v">malicious and creeping</a>” poison. </p>
<p>General Motors and Standard Oil waved the warnings aside until disaster struck in October 1924. Two dozen workers at a refinery in Bayway, New Jersey, came down with severe lead poisoning from a poorly designed GM process. At first they became disoriented, then burst into insane fury and collapsed into hysterical laughter. Many had to be wrestled into straitjackets. <a href="https://www.nytimes.com/1924/10/27/archives/odd-gas-kills-one-makes-four-insane-stricken-at-work-in-standards.html">Six died, and the rest were hospitalized</a>. Around the same time, 11 more workers died and several dozen more were disabled at similar GM and DuPont plants across the U.S.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/436460/original/file-20211208-149721-820cnb.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A cartoon showing a man going insane after lead exposure." src="https://images.theconversation.com/files/436460/original/file-20211208-149721-820cnb.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/436460/original/file-20211208-149721-820cnb.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=183&fit=crop&dpr=1 600w, https://images.theconversation.com/files/436460/original/file-20211208-149721-820cnb.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=183&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/436460/original/file-20211208-149721-820cnb.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=183&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/436460/original/file-20211208-149721-820cnb.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=230&fit=crop&dpr=1 754w, https://images.theconversation.com/files/436460/original/file-20211208-149721-820cnb.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=230&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/436460/original/file-20211208-149721-820cnb.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=230&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The news media began to criticize Standard Oil and raise concerns over Ethyl gas with articles and cartoons.</span>
<span class="attribution"><span class="source">New York Evening Journal via The Library of Congress</span></span>
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</figure>
<h2>Fighting the media</h2>
<p>The auto and gas industries’ attitude toward the media was hostile from the beginning. At Standard Oil’s first press conference about the 1924 Ethyl disaster, a spokesman claimed he had no idea what had happened while advising the media that “<a href="https://www.nytimes.com/1924/10/27/archives/odd-gas-kills-one-makes-four-insane-stricken-at-work-in-standards.html">Nothing ought to be said about this matter in the public interest</a>.”</p>
<p><a href="https://billkovarik.com/wp-content/uploads/2012/08/Ethyl.Controversy.Kovarik.dissertation.pdf">More facts emerged in the months after the event</a>, and by the spring of 1925, in-depth newspaper coverage started to appear, framing the issue as public health versus industrial progress. A New York World article asked Yale University gas warfare expert Yandell Henderson and GM’s tetraethyl lead researcher Thomas Midgley whether leaded gasoline would poison people. Midgley joked about public health concerns and falsely insisted that leaded gasoline was the only way to raise fuel power. To demonstrate the negative impacts of leaded fuel, Henderson estimated that 30 tons of lead would fall in a dusty rain on New York’s Fifth Avenue every year. </p>
<p>Industry officials were outraged over the coverage. A GM public relations history from 1948 called the New York World’s coverage “a campaign of publicity against the public sale of gasoline containing the company’s antiknock compound.” GM also claimed that the media labeled leaded gas “loony gas” when, in fact, it was <a href="https://billkovarik.com/wp-content/uploads/2012/08/Ethyl.Controversy.Kovarik.dissertation.pdf">the workers themselves who named it as such</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/436735/original/file-20211209-141178-1klcf7s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="An old advertisement for Ethyl brand gas." src="https://images.theconversation.com/files/436735/original/file-20211209-141178-1klcf7s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/436735/original/file-20211209-141178-1klcf7s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=800&fit=crop&dpr=1 600w, https://images.theconversation.com/files/436735/original/file-20211209-141178-1klcf7s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=800&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/436735/original/file-20211209-141178-1klcf7s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=800&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/436735/original/file-20211209-141178-1klcf7s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1005&fit=crop&dpr=1 754w, https://images.theconversation.com/files/436735/original/file-20211209-141178-1klcf7s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1005&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/436735/original/file-20211209-141178-1klcf7s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1005&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Leaded gas was marketed as Ethyl, a joint brand of Standard Oil and General Motors.</span>
<span class="attribution"><a class="source" href="http://hdl.loc.gov/loc.pnp/mrg.05719">John Margolies/Library of Congress</a></span>
</figcaption>
</figure>
<h2>Attempts at regulation</h2>
<p>In May 1925, the U.S. Public Health Service asked GM, Standard Oil and public health scientists to attend an open hearing on leaded gasoline in Washington. The issue, according to GM and Standard, involved refinery safety, not public health. Frank Howard of Standard Oil argued that tetraethyl lead was diluted at over 1,000 to 1 in gasoline and therefore posed no risk to the average person. </p>
<p>Public health scientists <a href="https://billkovarik.com/wp-content/uploads/2012/08/Ethyl.Controversy.Kovarik.dissertation.pdf">challenged the need for leaded gasoline</a>. Alice Hamilton, a physician at Harvard, said, “There are thousands of things better than lead to put in gasoline.” And she was right. There were plenty of well-known alternatives at the time, and some were even patented by GM. But no one in the press knew how to find that information, and the Public Health Service, under pressure from the auto and oil industries, canceled a second day of public hearings that would have discussed safer gasoline additives like ethanol, iron carbonyl and catalytic reforming. </p>
<p>By 1926, the Public Health Service announced that they had “no good reason” to prohibit leaded gasoline, even though <a href="https://billkovarik.com/wp-content/uploads/2012/08/Ethyl.Controversy.Kovarik.dissertation.pdf">internal memos complained that their research</a> was “half baked.”</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/436456/original/file-20211208-68670-1nmlwhl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A graph showing that blood lead levels closely follow lead emissions from cars." src="https://images.theconversation.com/files/436456/original/file-20211208-68670-1nmlwhl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/436456/original/file-20211208-68670-1nmlwhl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=404&fit=crop&dpr=1 600w, https://images.theconversation.com/files/436456/original/file-20211208-68670-1nmlwhl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=404&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/436456/original/file-20211208-68670-1nmlwhl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=404&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/436456/original/file-20211208-68670-1nmlwhl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=508&fit=crop&dpr=1 754w, https://images.theconversation.com/files/436456/original/file-20211208-68670-1nmlwhl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=508&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/436456/original/file-20211208-68670-1nmlwhl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=508&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">As leaded gasoline fell out of use, lead levels in people’s blood fell as well.</span>
<span class="attribution"><a class="source" href="https://www.epa.gov/lead">U.S. EPA</a></span>
</figcaption>
</figure>
<h2>The rise and fall of leaded gasoline</h2>
<p>Leaded gasoline went on to dominate fuel markets worldwide. Researchers have estimated that decades of burning leaded gasoline caused <a href="https://news.un.org/en/story/2011/10/393292-phase-out-leaded-petrol-brings-huge-health-and-cost-benefits-un-backed-study">millions of premature deaths, enormous declines in IQ levels</a> and many other associated social problems.</p>
<p>In the 1960s and 1970s, the public health case against leaded gasoline reemerged. A California Institute of Technology geochemist, Clair Cameron Patterson, was finding it difficult to measure lead isotopes in his laboratory because lead from gasoline was everywhere and his samples were constantly being contaminated. Patterson created the first “clean room” to carry on his isotope work, but he also published a 1965 paper, “<a href="https://doi.org/10.1080/00039896.1965.10664229">Contaminated and Natural Lead Environments of Man</a>,” and said that “the average resident of the U.S. is being subjected to severe chronic lead insult.”</p>
<p>In parallel, by the 1970s, the U.S. Environmental Protection Agency decided that leaded gasoline had to be phased out eventually because it clogged catalytic converters on cars and led to more air pollution. Leaded gasoline manufacturers objected, but the objections were <a href="https://casetext.com/case/ethyl-corp-v-epa">overruled by an appeals court</a>. </p>
<p>The public health concerns continued to build in the 1970s and 1980s when University of Pittsburgh pediatrician Herbert Needleman ran studies linking high levels of lead in children with low IQ and other developmental problems. Both Patterson and Needleman faced strong partisan attacks from the lead industry, which <a href="http://www.beacon.org/Toxic-Truth-P662.aspx">claimed that their research was fraudulent</a>. </p>
<p>Both were eventually vindicated when, in 1996, the U.S. officially banned the sale of leaded gasoline for public health reasons. Europe was next in the 2000s, followed by developing nations after that. In August 2021, the last country in the world to sell leaded gas, Algeria, <a href="https://www.nationalgeographic.com/environment/article/finally-the-end-of-leaded-gas">banned it</a>.</p>
<p>A century of leaded gasoline has taken millions of lives and to this day leaves the soil in many cities from <a href="https://doi.org/10.1073/pnas.1906092116">New Orleans</a> to <a href="https://doi.org/10.1073/pnas.2102791118">London</a> toxic.</p>
<p>The leaded gasoline story provides a practical example of how industry’s profit-driven decisions – when unsuccessfully challenged and regulated – can cause serious and long-term harm. It takes individual public health leaders and strong media coverage of health and environmental issues to counter these risks. </p>
<p>[<em>You’re smart and curious about the world. So are The Conversation’s authors and editors.</em> <a href="https://memberservices.theconversation.com/newsletters/?source=inline-youresmart">You can read us daily by subscribing to our newsletter</a>.]</p><img src="https://counter.theconversation.com/content/173395/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bill Kovarik does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Burning leaded gasoline releases toxic lead into the environment, and for 100 years people around the world have been dealing with the health effects. How did a century of toxic fuel come to be?Bill Kovarik, Professor of Communication, Radford UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1485252020-10-22T18:58:54Z2020-10-22T18:58:54ZVital Signs: Google’s huge market share doesn’t automatically make it a monopoly<figure><img src="https://images.theconversation.com/files/364639/original/file-20201021-13-wfh5gm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">shutterstock</span> </figcaption></figure><p>This week the United States Department of Justice (DoJ) filed <a href="https://int.nyt.com/data/documenttools/doj-google-suit/c21c1a2b24b81aa1/full.pdf">a lawsuit accusing Google</a> of using “anticompetitive tactics to maintain and extend its monopolies in the markets” for search and advertising.</p>
<p>It is the most significant antitrust case since the US government took on Microsoft in 1998 for using its dominant position as the provider of the Windows operating system to force PC makers to bundle its Internet Explorer web browser. </p>
<p>That case was fought out in US courts for years before Microsoft agreed to settle in 2001. This case will no doubt be heavily litigated, and likewise take years to conclude. But it’s not too soon to consider the basic economics.</p>
<p>The bottom line is more complicated than one might think. Yes, Google has a huge share of the search-engine market – 92% globally <a href="https://gs.statcounter.com/search-engine-market-share">according to statcounter.com</a>, compared with 2.8% for Microsoft’s Bing, 1.6% for Yahoo! and 0.5% for DuckDuckGo. </p>
<p>But does that give Google a lot of “market power” – the ability to charge high price or produce low-quality products? Probably not. </p>
<p>To judge if a company like Google is really a monopolist, it is crucial to understand the difference between ordinary markets (like those for clothes, cars, or breakfast cereal) and technology markets (like those for internet search, social media, or ride sharing).</p>
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Read more:
<a href="https://theconversation.com/the-us-is-taking-on-google-in-a-huge-antitrust-case-it-could-change-the-face-of-online-search-148519">The US is taking on Google in a huge antitrust case. It could change the face of online search</a>
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<h2>Markets with ‘network externalities’</h2>
<p>Any introductory economics textbook will tell you a large market share is smoking-gun evidence of market power; and that with market power comes the ability to shut out competitors, charge high prices and even get away with producing low-quality products.</p>
<p>Economists of all stripes agree that regulating monopolies and making markets more competitive benefits consumers, through lower prices and better products.</p>
<p>Indeed, this was the motivation behind the so-called “trust-busting” movement in the US in the early 20th century. The most famous scalp was John D. Rockefeller’s Standard Oil, which the US Supreme Court ordered in 1911 be broken up into 34 separate companies. (The break-up made Rockefeller <a href="https://www.forbes.com/sites/carlodonnell/2014/07/11/the-rockefellers-the-legacy-of-historys-richest-man/#54c4d3f23c26">the world’s richest man</a>). </p>
<p>But internet search isn’t like oil. Neither is social media, ride sharing or platforms like Amazon. These are what economists call “markets with network externalities”. That is, when more consumers use the product, it becomes more valuable for other consumers.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/lawmakers-keen-to-break-up-big-tech-like-amazon-and-google-need-to-realize-the-world-has-changed-a-lot-since-microsoft-and-standard-oil-143517">Lawmakers keen to break up 'big tech' like Amazon and Google need to realize the world has changed a lot since Microsoft and Standard Oil</a>
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<p>Facebook is useful because it connects one with lots of other users. A thousand little, disconnected social media platforms would be much less useful. Amazon connects lots of sellers with million of consumers. This is hugely valuable for both. Google connects lots of consumers with advertisers and information. Again, this is valuable to both sides of the market.</p>
<p>Because network externalities mean — all else being equal — the bigger the market share the more valuable the company’s product is to consumers, we tend to see one dominant company and a few smaller ones in such markets.</p>
<p>Just because tech companies have a big share of the market now, however, doesn’t mean they are destined to keep it. </p>
<p>Remember Netscape? In the mid-1990s <a href="https://www.visualcapitalist.com/internet-browser-market-share/">it had a 80% share</a> in the browser market, before losing it to Microsoft’s Internet Explorer.</p>
<figure class="align-center ">
<img alt="Netscape Navigator Version 1.11" src="https://images.theconversation.com/files/364637/original/file-20201021-17-hka99r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/364637/original/file-20201021-17-hka99r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/364637/original/file-20201021-17-hka99r.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/364637/original/file-20201021-17-hka99r.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/364637/original/file-20201021-17-hka99r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/364637/original/file-20201021-17-hka99r.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/364637/original/file-20201021-17-hka99r.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Netscape Navigator version 1.11.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/oimax/2141263830">OiMax/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
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<p>But Internet Explorer’s dominance, peaking at 95% share in the early 2000s, didn’t last either. It now claims barely <a href="https://gs.statcounter.com/search-engine-market-share">1% of the browser market</a>.</p>
<p>This is why companies in markets with network externalities are never asleep. Uber and Facebook are constantly running experiments to innovate their products, as are other companies like Amazon and, you guessed it, Google.</p>
<h2>Influencers and defaults</h2>
<p>An important part of the Department of Justice’s suit against Google is that it allegedly pays Apple as much as <a href="https://www.wsj.com/articles/googles-exclusive-search-deals-with-apple-at-heart-of-u-s-lawsuit-11603221146?mod=hp_lead_pos1">US$11 billion a year</a> to be the default search engine on the Safari browser on every iPhone. </p>
<p>This is a bit like paying for a social media influencer to plug your product — with a twist. Making something the default doesn’t mean the user has to use it, but the small effort to choose an alternative means most don’t bother.</p>
<p>But if it really wasn’t a good product and didn’t deliver good search results, wouldn’t consumers (a) remove it and (b) be less likely to buy iPhones?</p>
<p>There’s a big difference between something being a default and there being no choice. Articulating this difference may end up being an important part of how the Google litigation plays out.</p>
<p>Indeed, Microsoft making Internet Explorer the default browser in Windows <a href="https://www.extremetech.com/computing/196170-microsoft-is-finally-allowed-to-once-again-set-ie-as-the-default-browser-in-windows">has been an ongoing source of back and forth</a> with US and European competition authorities.</p>
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<strong>
Read more:
<a href="https://theconversation.com/twitter-is-banning-political-ads-but-the-real-battle-for-democracy-is-with-facebook-and-google-126260">Twitter is banning political ads – but the real battle for democracy is with Facebook and Google</a>
</strong>
</em>
</p>
<hr>
<h2>Ultimately misguided</h2>
<p>As with the suits against Standard Oil and Microsoft, the case against Google will be decided by the courts, perhaps ending with the US Supreme Court. The outcome will be instructive as to whether other tech companies like Amazon, Facebook or Uber will also wind up in the firing line.</p>
<p>Ironically, at a time of extreme polarisation in US politics, breaking up big tech companies is popular on the left and the right. </p>
<p>But we should remember that consumers are huge beneficiaries from these tech companies. Think about how much it used to cost to take and print photographs. A <a href="https://www.pc.gov.au/research/completed/growing-digital-economy/growing-digital-economy.pdf">2018 International Monetary Fund report</a> cites research suggesting US consumers would need more than US$25,000 a year to compensate for the loss of free services from tech companies. </p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/364672/original/file-20201021-15-1pduiy.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/364672/original/file-20201021-15-1pduiy.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/364672/original/file-20201021-15-1pduiy.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=380&fit=crop&dpr=1 600w, https://images.theconversation.com/files/364672/original/file-20201021-15-1pduiy.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=380&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/364672/original/file-20201021-15-1pduiy.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=380&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/364672/original/file-20201021-15-1pduiy.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=477&fit=crop&dpr=1 754w, https://images.theconversation.com/files/364672/original/file-20201021-15-1pduiy.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=477&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/364672/original/file-20201021-15-1pduiy.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=477&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.imf.org/en/Publications/Policy-Papers/Issues/2018/04/03/022818-measuring-the-digital-economy">International Monetary Fund, Measuring the Digital Economy, 2018</a></span>
</figcaption>
</figure>
<hr>
<p>That’s a lot.</p>
<p>What is crucial for competition regulators around the world to note is that the markets in which big technology companies operate are not like other markets. Because of network externalities they tend to have big “in” firms (with a large market share) and smaller “out” firms (with small market shares but providing competitive discipline).</p>
<p>That doesn’t mean these markets aren’t competitive. It means the “in” companies have a lot to lose by being leapfrogged by a small competitor. Which is why they work so hard to innovate and keep prices low.</p><img src="https://counter.theconversation.com/content/148525/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Holden does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Just because a tech company has a big share of the market doesn’t mean it has the power to keep it.Richard Holden, Professor of Economics, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1435172020-07-28T21:31:03Z2020-07-28T21:31:03ZLawmakers keen to break up ‘big tech’ like Amazon and Google need to realize the world has changed a lot since Microsoft and Standard Oil<figure><img src="https://images.theconversation.com/files/350020/original/file-20200728-13-10an37w.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3250%2C2096&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">House lawmakers grilled these four CEOs on July 29.</span> <span class="attribution"><span class="source">AP Photo</span></span></figcaption></figure><p>Big tech is back in the spotlight. </p>
<p>The chief executives of Amazon, Apple, Facebook and Google <a href="https://www.nytimes.com/2020/07/28/technology/amazon-apple-facebook-google-antitrust-hearing.html?action=click&module=Top%20Stories&pgtype=Homepage">testified before Congress</a> on July 29 to defend their market dominance from accusations they’re stifling rivals. Lawmakers and regulators are increasingly talking about <a href="https://www.wsj.com/articles/justice-department-is-preparing-antitrust-investigation-of-google-11559348795">antitrust action</a> and possibly breaking the companies up into smaller pieces. </p>
<p>I study the effects of <a href="https://sites.tufts.edu/digitalplanet">digital technologies on lives</a> and livelihoods across 90 countries. I believe <a href="https://www.politico.com/2020-election/candidates-views-on-the-issues/technology/tech-competition-antitrust/">advocates</a> of breaking up big technology companies, as well as <a href="https://www.weforum.org/agenda/2019/07/these-are-some-of-the-best-quotes-about-technology-monopolies-in-2019/">opponents</a>, are both falling prey to some serious myths and misconceptions. </p>
<h2>Myth 1: Comparing Google with Standard Oil</h2>
<p>Arguments for and against antitrust action <a href="https://www.nytimes.com/1998/10/19/business/microsoft-trial-precedents-previous-antitrust-cases-leave-room-for-both-sides.html">often use earlier cases</a> as reference points.</p>
<p>The massive <a href="https://theconversation.com/for-tech-giants-a-cautionary-tale-from-19th-century-railroads-on-the-limits-of-competition-91616">19th-century monopoly Standard Oil</a>, for example, has been referred to as the “<a href="https://www.nytimes.com/2018/02/20/magazine/the-case-against-google.html">Google of its day</a>.” There are also people who are recalling the 1990s <a href="https://www.nytimes.com/2018/05/18/opinion/microsoft-antitrust-case.html">antitrust case against Microsoft</a>. </p>
<p>Those cases may seem similar to today’s situation, but this era is different in one crucial way: the global technology marketplace. </p>
<p>Currently, there are two “big tech” clusters. One is in the U.S., dominated by <a href="https://theconversation.com/big-tech-isnt-one-big-monopoly-its-5-companies-all-in-different-businesses-92791">Google, Amazon, Facebook and Apple</a>. The other is in China, dominated by <a href="https://singularityhub.com/2018/08/17/baidu-alibaba-and-tencent-the-rise-of-chinas-tech-giants/">Baidu, Alibaba, Tencent, Huawei</a> and <a href="https://www.nytimes.com/2020/07/26/technology/tiktok-china-ban-model.html">TikTok</a>-maker ByteDance. </p>
<p>This global market is subject to very different political and policy pressures than regulators faced when dealing with Standard Oil and Microsoft. For example, the Chinese government <a href="https://www.scmp.com/tech/china-tech/article/2120913/china-recruits-baidu-alibaba-and-tencent-ai-national-team">has blocked most</a> of the U.S. companies from entering its market. And the <a href="https://www.bloomberg.com/news/articles/2018-06-27/alibaba-pulls-back-in-u-s-amid-trump-crackdown-on-chinese-investment">U.S. government has done likewise</a>, blacklisting some Chinese outfits over perceived national security threats while discouraging others.</p>
<p>Since the COVID-19 outbreak, the Chinese government <a href="https://www.amnesty.org/en/latest/news/2020/04/how-china-used-technology-to-combat-covid-19-and-tighten-its-grip-on-citizens/">has doubled down</a> on championing its own technology companies.</p>
<p>U.S. companies’ size and data accumulation capabilities give the country economic and political influence around the globe. If the U.S. technology giants are broken up, the result would be a vastly uneven global playing field, pitting fragmented U.S. companies against consolidated state-protected Chinese firms.</p>
<h2>Myth 2: Antitrust is about money</h2>
<p>There are two main views of antitrust action among legal experts. </p>
<p>One focuses on consumer welfare, which has been the prevailing approach federal lawyers have taken <a href="https://www.jstor.org/stable/724991">since the 1960s</a>. The other suggests that regulators should look at the <a href="https://www.yalelawjournal.org/note/amazons-antitrust-paradox">underlying structure of the market</a> and potential for <a href="https://www.pbwt.com/antitrust-update-blog/a-brief-overview-of-the-new-brandeis-school-of-antitrust-law">powerful players to exploit</a> their positions.</p>
<p>Those two sides seem to agree that price plays a key role. People who argue against breaking up the tech giants point out that Facebook and Google provide services that are <a href="https://slate.com/technology/2019/06/facebook-big-tech-antitrust-breakup-mistake.html">free to the consumer</a>, and that Amazon’s marketplace power drives its products’ costs down. On the other side, though, are those who say that <a href="https://www.yalelawjournal.org/note/amazons-antitrust-paradox">having low or no prices</a> is evidence that these companies are artificially lowering consumer costs to draw users into company-controlled systems that are <a href="https://techcrunch.com/2019/02/04/why-no-one-really-quits-google-or-facebook/">hard to leave</a>.</p>
<p>Both sides are missing the fact that the monetary price is less relevant as a measure of what users pay in the technology industry than it is in other types of business. Users <a href="https://theconversation.com/how-much-is-your-data-worth-to-tech-companies-lawmakers-want-to-tell-you-but-its-not-that-easy-to-calculate-119716">pay for digital products with their data</a>, rather than just money.</p>
<p>Regulators shouldn’t focus only on the monetary costs to the users. Rather, they should ask whether users are being asked for more data than is strictly necessary, whether information is being collected in <a href="https://theconversation.com/7-in-10-smartphone-apps-share-your-data-with-third-party-services-72404">intrusive or abusive ways</a> and whether customers are <a href="https://www.axios.com/mark-warner-josh-hawley-dashboard-tech-data-4ee575b4-1706-4d05-83ce-d62621e28ee1.html">getting good value in exchange for their data</a>.</p>
<h2>Myth 3: Trust-busting is all or nothing</h2>
<p>There aren’t just two ways for this debate to end, with either a breakup of one or more technology giants or simply leaving things as they are for the market to develop further. </p>
<p>In my view, the best outcome is right in the middle. The errant company is sued to make necessary changes but isn’t broken up. The very fact that the government filed a lawsuit leads to progress with other companies. That is exactly what happened in past cases against the Bell System, IBM and Microsoft. </p>
<p>In the 1956 federal consent decree against the <a href="https://www.beatriceco.com/bti/porticus/bell/bellsystem_history.html">Bell System</a> telephone company, for example, which settled a seven-year legal saga, the company wasn’t split up. Instead, Bell was required to <a href="https://economics.yale.edu/sites/default/files/how_antitrust_enforcement.pdf">license all its patents royalty-free</a> to other businesses. This meant that some of the most profound technological innovations in history – including the <a href="https://www.computerhistory.org/atchm/who-invented-the-transistor/">transistor</a>, the <a href="https://www.popsci.com/article/science/invention-solar-cell/">solar cell</a> and the <a href="https://www.photonics.com/Articles/A_History_of_the_Laser_1960_-_2019/a42279">laser</a> – became widely available, yielding computers, solar power and other technologies that are crucial to the modern world. When the Bell System was <a href="https://www.cio.com/article/3267826/breaking-up-is-hard-to-do-why-the-bell-system-breakup-isn-t-a-model-for-tech.html">eventually broken up</a> in 1982, it did not do nearly as much to spread <a href="https://si.wsj.net/public/resources/images/BF-AV826_ATT_16U_20171120171814.jpg">innovation and competition</a> as the agreement that kept the Bells together a quarter-century earlier. </p>
<p>The antitrust action against IBM lasted 13 years and didn’t break up the company. However, as part of its tactics to avoid appearing to be a monopoly, IBM agreed to <a href="https://www.cnet.com/news/ibm-and-microsoft-antitrust-then-and-now/">separate pricing for its hardware and software products</a>, previously sold as an indivisible bundle. This created an opportunity for entrepreneurs Bill Gates and Paul Allen to create a new software-only company called Microsoft. The surge of software innovations that have followed can clearly trace their origins to the IBM settlement. </p>
<p>Two decades later, Microsoft was itself the target of an antitrust action. In the resulting settlement, <a href="https://www.theverge.com/2018/9/6/17827042/antitrust-1990s-microsoft-google-aol-monopoly-lawsuits-history">Microsoft agreed to ensure its products were compatible</a> with competitors’ software. That made room in the emerging internet marketplace for web browsers, the predecessors of Apple’s Safari, Mozilla’s Firefox and Google Chrome.</p>
<p>Even Margrethe Vestager, the European Union’s top antitrust official and frequent tech-giant nemesis, has said that “<a href="https://www.nytimes.com/2018/02/20/magazine/the-case-against-google.html">antitrust prosecutions are part of how technology grows</a>.” But that doesn’t mean they all have to achieve their most extreme ends and be broken up. </p>
<h2>Myth 4: COVID-19 and the end of tech bashing</h2>
<p>The current pandemic has highlighted the value of the technological innovations of the big tech companies. </p>
<p>Americans are relying more than ever on the internet and online shopping and delivery, while <a href="https://www.google.com/covid19/mobility/">mobility data</a> has been critical in gauging social distancing behaviors and guiding policy. <a href="https://sites.tufts.edu/digitalplanet/covid-19-hotspots-rural-america/">Digital tools</a> for tracking coronavirus cases, deaths and social distancing behaviors in the smallest counties <a href="https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6">have circulated widely</a>, and social media and smartphone videos were <a href="https://www.nytimes.com/2020/06/18/technology/social-media-protests.html">crucial</a> to the recent protests and calls for social justice. </p>
<p>Altogether, this has led to a <a href="https://www.coindesk.com/public-opinion-shifts-on-big-tech-and-privacy-during-pandemic">softening</a> of <a href="https://www.coindesk.com/public-opinion-shifts-on-big-tech-and-privacy-during-pandemic">public opinion toward big tech</a> and <a href="https://www.theverge.com/interface/2020/3/26/21193902/tech-backlash-covid-19-coronavirus-google-facebook-amazon">calls</a> for an <a href="https://www.brookings.edu/techstream/covid-and-the-future-of-techlash/">end to talk</a> of <a href="https://www.mercurynews.com/2020/04/09/opinion-covid-19-response-will-end-all-the-big-tech-bashing/">breaking them up</a>. </p>
<p>But the pandemic has also revealed numerous digital fault lines: differences in access by <a href="https://hbr.org/2020/04/which-countries-were-and-werent-ready-for-remote-work">country</a>, <a href="https://sites.tufts.edu/digitalplanet/how-digital-disparities-across-the-us-disproportionately-hurt-black-and-latinx-communities/">race</a> and <a href="https://sites.tufts.edu/digitalplanet/urban-rural-divide-in-the-us-during-covid-19/">region</a>; the ability of tech companies to <a href="https://www.theguardian.com/technology/2020/jul/27/california-investigations-amazon-workers-coronavirus">exploit labor</a>; and potential for new kinds of misuse of <a href="https://www.brookings.edu/techstream/the-dangers-of-tech-driven-solutions-to-covid-19/">data</a>. </p>
<p>Far from giving the technology industry a free pass, the pandemic is an opportunity to take a more balanced view. Yes, let’s celebrate the Silicon Valley’s value, but let’s not turn a blind eye to the problems they create or worsen. </p>
<p>During the hearings, you’ll likely hear politicians accentuate the bad stuff, while the tech CEOs will paint an overly rosy image of themselves. Antitrust is complicated enough without misconceptions clouding their judgments as well. </p>
<p><em>This is an updated and expanded version of an <a href="https://theconversation.com/3-myths-to-bust-about-breaking-up-big-tech-119283">article originally published</a> on July 17, 2019.</em></p><img src="https://counter.theconversation.com/content/143517/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bhaskar Chakravorti has founded and directs the Institute for Business in the Global Context at Fletcher/Tufts that has received funding from Mastercard, Microsoft, the Gates Foundation, the Rockefeller Foundation, Omidyar Network and the Onassis Foundation. He is a Non-Resident Senior Fellow at Brookings India and a Senior Advisor on Digital Inclusion at the Mastercard Center for Inclusive Growth.</span></em></p>As the government considers antitrust action against big US technology companies, a global business scholar identifies four myths that need busting first.Bhaskar Chakravorti, Dean of Global Business, The Fletcher School, Tufts UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1304522020-02-11T20:07:46Z2020-02-11T20:07:46ZHow the T-Mobile-Sprint merger will increase inequality<figure><img src="https://images.theconversation.com/files/314835/original/file-20200211-146674-1s8c3ei.jpg?ixlib=rb-1.1.0&rect=93%2C46%2C4379%2C2930&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The lawsuit filed by New York Attorney General Letitia James and 13 colleagues was the last roadblock to the merger. </span> <span class="attribution"><span class="source">Drew Angerer/Getty Images</span></span></figcaption></figure><p>A <a href="https://www.bloomberg.com/news/articles/2020-02-11/t-mobile-sprint-judge-didn-t-buy-state-claims-of-antitrust-harm?srnd=premium">federal judge gave his blessing</a> to the US$26.5 billion merger between T-Mobile and Sprint on Feb. 11, several months after the deal got <a href="https://www.geekwire.com/2019/democrat-regulators-warn-fcc-approval-t-mobile-sprint-merger-creates-cozy-oligopoly/">final antitrust approval</a> from the U.S. government. </p>
<p>A group of attorneys general from 13 states and the District of Columbia <a href="https://abcnews.go.com/Business/trial-begins-state-ags-lawsuit-mobile-sprint-megamerger/story?id=67598013">had sued to try to block the merger</a>, arguing it would reduce competition in the telecommunications industry and raise customer prices by billions of dollars. </p>
<p>Let me add a third reason the judge should have blocked the deal: It will likely increase economic inequality. </p>
<p>Research on inequality, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2395438">including my own</a>, has generally focused on how <a href="https://www.nber.org/papers/w7038">economic growth</a>, <a href="https://www.cfr.org/backgrounder/inequality-and-tax-rates-global-comparison">tax policy</a> and the <a href="https://data.nber.org/reporter/winter03/technologyandinequality.html">use of technology</a> affects it. Less attention has been paid to another important factor: enforcement of antitrust laws. </p>
<p>With the <a href="https://www.hup.harvard.edu/catalog.php?isbn=9780674979857">gap between rich and poor</a> <a href="https://www.washingtonpost.com/business/2019/09/26/income-inequality-america-highest-its-been-since-census-started-tracking-it-data-show/">soaring to new historic highs</a>, tackling the problem has become increasingly necessary.</p>
<p>My research on <a href="https://rbj.net/2020/01/20/we-need-to-bolster-antitrust-enforcement/">inequality and antitrust</a> suggests the U.S. could begin to rein in its yawning wealth gap by again vigorously cracking down on anti-competitive behavior in the marketplace – just as it did during the mid-20th century.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/314875/original/file-20200211-146696-9x7fem.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/314875/original/file-20200211-146696-9x7fem.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=421&fit=crop&dpr=1 600w, https://images.theconversation.com/files/314875/original/file-20200211-146696-9x7fem.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=421&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/314875/original/file-20200211-146696-9x7fem.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=421&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/314875/original/file-20200211-146696-9x7fem.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=529&fit=crop&dpr=1 754w, https://images.theconversation.com/files/314875/original/file-20200211-146696-9x7fem.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=529&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/314875/original/file-20200211-146696-9x7fem.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=529&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">American statesman and lawmaker John Sherman authored the Sherman Act.</span>
<span class="attribution"><span class="source">Bettmann Archive/Getty Images</span></span>
</figcaption>
</figure>
<h2>Origins of antitrust</h2>
<p>The U.S. has three principal federal antitrust laws: the <a href="https://www.investopedia.com/terms/s/sherman-antiturst-act.asp">Sherman Act</a>, the Clayton Act and the Federal Trade Commission Act.</p>
<p>The Sherman Act, passed in 1890, forbids anti-competitive agreements as well as conduct that monopolizes or attempts to dominate a particular market. This applies to cartels and to any attempt to fix prices, reduce industrial output, share markets or exclude competition. </p>
<p>The administration of President Theodore Roosevelt aggressively enforced the Sherman Act, which led to the <a href="https://learning.blogs.nytimes.com/2012/05/15/may-15-1911-supreme-court-orders-standard-oil-to-be-broken-up">breakup of Standard Oil in 1911</a>. </p>
<p>The Clayton Act strengthened Sherman by more precisely defining anti-competitive behavior, while the Federal Trade Commission Act <a href="https://www.ftc.gov/about-ftc/what-we-do">provided the federal government with an agency</a> to investigate potential violations of its antitrust laws. Both laws were passed in 1914.</p>
<p>Over time, the federal courts <a href="https://www.businessjustice.com/antitrust-standards-of-review-the-per-se-rule-of-reason-and-quic.html">developed a body of antitrust law</a> that made certain kinds of anti-competitive behavior explicitly illegal. Other types of behavior were subject to a more detailed and laborious case-by-case analysis to ascertain whether the conduct in question unreasonably restrained trade.</p>
<p>But, apart from the 1900s, the federal government <a href="https://hbr.org/2017/12/the-rise-fall-and-rebirth-of-the-u-s-antitrust-movement">didn’t vigorously enforce antitrust laws</a> until the late 1930s, when President Franklin Delano Roosevelt appointed Thurman Arnold to run the Justice Department’s antitrust division. Arnold ushered in three decades of <a href="https://lawecommons.luc.edu/cgi/viewcontent.cgi?referer=&httpsredir=1&article=1494&context=facpubs">robust enforcement</a>, including a <a href="https://promarket.org/140-years-antitrust2/">landmark case</a> against the American Medical Association, which allowed doctors to work with health maintenance organizations for the first time.</p>
<h2>Antitrust goes out of style</h2>
<p>This enthusiasm for promoting competitive markets and consumer welfare began to change in the early 1970s. </p>
<p>Conservative judges and legal scholars such as <a href="https://www.washingtonpost.com/news/wonk/wp/2012/12/20/antitrust-was-defined-by-robert-bork-i-cannot-overstate-his-influence/">Robert Bork</a> argued that the purpose of antitrust should be to <a href="https://scholarworks.law.ubalt.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1676&context=all_fac">promote economic efficiency</a>, rather than consumer welfare. </p>
<p>This viewpoint dovetailed nicely with Ronald Reagan’s own views about the role of the government in markets. So when he became president in 1981, Reagan <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=276913">appointed two like-minded conservative scholars</a>, William Baxter and James Miller, to head the antitrust division and the FTC.</p>
<p>Focused solely on the promotion of economic efficiency, Baxter, Miller and judges with similar views <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2769132">dramatically reduced</a> the scope of antitrust enforcement. And the range of conduct that would previously be condemned by courts as anti-competitive decreased and the proof required to demonstrate harm to plaintiffs increased. </p>
<p>This gave businesses much greater freedom to seek profit through <a href="http://dx.doi.org/10.2139/ssrn.2612047">anti-competitive means</a>. As a result, <a href="https://news.cision.com/ibisworld/r/top-10-highly-concentrated-industries,c9219248">numerous industries</a> from search engines and telecoms to soda companies and tire makers <a href="https://www.economist.com/graphic-detail/2016/03/24/corporate-concentration">have become dominated by a handful of companies</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/314614/original/file-20200210-109951-pwvqal.jpg?ixlib=rb-1.1.0&rect=85%2C141%2C4642%2C2863&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/314614/original/file-20200210-109951-pwvqal.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=382&fit=crop&dpr=1 600w, https://images.theconversation.com/files/314614/original/file-20200210-109951-pwvqal.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=382&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/314614/original/file-20200210-109951-pwvqal.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=382&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/314614/original/file-20200210-109951-pwvqal.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=480&fit=crop&dpr=1 754w, https://images.theconversation.com/files/314614/original/file-20200210-109951-pwvqal.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=480&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/314614/original/file-20200210-109951-pwvqal.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=480&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Many industries in the U.S. are dominated by just a handful of companies, such as Amazon and Apple.</span>
<span class="attribution"><span class="source">Aytac Unal/Anadolu Agency/Getty Images</span></span>
</figcaption>
</figure>
<h2>Impact on inequality</h2>
<p>This exacerbates inequality in three ways. </p>
<p>First, when a company has market power in an industry, it can set prices on its own terms, higher than it would otherwise be able to in a more competitive environment. This <a href="https://pdfs.semanticscholar.org/2810/b52e7f8b827c67ded8ed60d2afd66802cf0f.pdf">transfers wealth from customers</a> who pay the higher prices to the dominant company. Because the managers and the owners of these powerful businesses tend to be wealthier than their consumers, this wealth transfer is regressive and therefore promotes economic inequality.</p>
<p>A second kind of anti-competitive behavior <a href="https://corpgov.law.harvard.edu/2016/08/10/mergers-and-acquisitions-technological-change-and-inequality/">arises in the context of mergers and acquisitions</a>, such as the T-Mobile-Sprint deal. The telecoms sector was already very concentrated, and <a href="https://www.theatlantic.com/ideas/archive/2019/10/t-mobile-and-sprints-merger-will-hurt-consumers/599245/">now it’s expected to get even worse</a>.</p>
<p>Or take the health care industry. After the Affordable Care Act became law, <a href="https://www.kaufmanhall.com/news/hospital-merger-and-acquisition-activity-sharply-2015-according-kaufman-hall-analysis">there was a wave of hospital mergers</a>. These mergers <a href="https://www.rwjf.org/en/library/research/2012/06/the-impact-of-hospital-consolidation.html">led to price increases</a> of over 20% for consumers.</p>
<p>So, once again, we have regressive wealth transfers from poorer consumers to wealthier hospital owners and managers.</p>
<p>Finally, anti-competitive behavior frequently arises when there is common ownership of corporations. The airline industry provides a great illustration of this. </p>
<p>From 2013 to 2015, the <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2427345">same seven shareholders controlled</a> 60% of United Airlines, 27.5% of Delta, 27.3% of JetBlue and 23.3% of Southwest. Harvard law professor Einer Elhaug <a href="https://corpgov.law.harvard.edu/2019/05/20/how-horizontal-shareholding-harms-our-economy-and-why-antitrust-law-can-fix-it/">argues</a> this kind of common ownership of multiple companies in an industry is very likely to lead to anti-competitive prices. </p>
<p>And that’s exactly what researchers have found. A 2018 paper <a href="https://doi.org/10.1111/jofi.12698">showed that ticket prices</a> are 3% to 11% higher due to common ownership, and studies of the <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2710252">banking</a> and <a href="https://promarket.org/antitrust-answer-rising-wealth-inequality/">other industries</a> have found similar effects. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/314802/original/file-20200211-146708-1bi25rc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/314802/original/file-20200211-146708-1bi25rc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=419&fit=crop&dpr=1 600w, https://images.theconversation.com/files/314802/original/file-20200211-146708-1bi25rc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=419&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/314802/original/file-20200211-146708-1bi25rc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=419&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/314802/original/file-20200211-146708-1bi25rc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=527&fit=crop&dpr=1 754w, https://images.theconversation.com/files/314802/original/file-20200211-146708-1bi25rc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=527&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/314802/original/file-20200211-146708-1bi25rc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=527&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Sprint Executive Chairman Marcelo Claure, left, and T-Mobile US CEO John Legere spoke at a House subcommittee hearing on their companies’ merger.</span>
<span class="attribution"><span class="source">AP Photo/Jose Luis Magana</span></span>
</figcaption>
</figure>
<h2>An American tradition</h2>
<p>Americans now have over four decades of experience with relatively lax antitrust enforcement focused almost exclusively on the narrow criterion of economic efficiency. The resulting picture is not pretty.</p>
<p>Poorer consumers have padded the balance sheets of wealthier companies through prices that are higher than they would have been with more aggressive antitrust enforcement. I and <a href="https://scholarship.law.georgetown.edu/facpub/1462">other researchers argue</a> this has contributed to <a href="https://blogs.umass.edu/bikehara/2014/10/02/capital-in-the-twenty-first-century/">soaring economic inequality</a> since around 1980. </p>
<p>But since economic power <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2769132">leads to political power</a>, these companies <a href="https://www.cambridge.org/core/journals/perspectives-on-politics/article/testing-theories-of-american-politics-elites-interest-groups-and-average-citizens/62327F513959D0A304D4893B382B992B">have used their resources</a> to lobby for rules and regulations that further narrow the scope of antitrust laws and harm consumers. </p>
<p>[<em><a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=expertise">Expertise in your inbox. Sign up for The Conversation’s newsletter and get a digest of academic takes on today’s news, every day.</a></em>]</p><img src="https://counter.theconversation.com/content/130452/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amitrajeet A. Batabyal does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The T-Mobile-Sprint merger is the latest example of weakened enforcement of antitrust laws, which reduces competition and exacerbates already-record levels of inequality.Amitrajeet A. Batabyal, Arthur J. Gosnell Professor of Economics, Rochester Institute of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1240682019-10-02T12:24:22Z2019-10-02T12:24:22ZHow a 1905 debate about ‘tainted’ Rockefeller money is a reminder of ethical dilemmas today<figure><img src="https://images.theconversation.com/files/294897/original/file-20190930-194842-19pfeoo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">MIT President L. Rafael Reif acknowledged in a letter that the late Jeffrey Epstein gave funding to many researchers.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Jeffrey-Epstein-MIT/b999755e0d144061834ec80cbb2351c6/3/0">AP Photo/Stephan Savoia, File</a></span></figcaption></figure><p>Many nonprofits, including top universities and museums are confronting <a href="https://qz.com/1706647/is-it-ever-ok-to-take-donations-from-people-like-jeffrey-epstein/">serious ethical dilemmas</a> regarding accepting tainted money. </p>
<p>The MIT Media Lab, an interdisciplinary research lab, has been widely criticized for taking money from late billionaire Jeffrey Epstein, who was <a href="https://www.vox.com/2018/12/3/18116351/jeffrey-epstein-case-indictment-arrested-trump-clinton">convicted in 2008</a> for sexual exploitation of minor girls. Harvard University has now <a href="https://www.washingtonpost.com/local/education/harvard-and-mit-leaders-acknowledge-deeper-ties-to-jeffrey-epstein-than-previously-known/2019/09/13/e1e9f31a-d641-11e9-86ac-0f250cc91758_story.html">promised</a> to give away Epstein’s unused money to support groups for sexual assault victims. </p>
<p>Similarly, prominent museums such as the Guggenheim, Tate and Britain’s National Portrait Gallery <a href="https://www.nytimes.com/2019/03/25/arts/design/sackler-museums-donations-oxycontin.html">will no longer accept donations</a> from the Sackler family following allegations about its role in marketing practices that <a href="https://www.vox.com/future-perfect/2019/7/17/20697901/sacklers-louvre-opioid-crisis-philanthropy-donors-protests">pushed opioids</a> on patients who did not need them. </p>
<p>Is taking such money acceptable?</p>
<p>This dilemma is a <a href="https://www.wired.com/story/the-problem-with-rich-people-funding-science/">longstanding one</a>. As a <a href="https://rowman.com/ISBN/9781442268920/Washington-Gladden%27s-Church-The-Minister-Who-Made-Modern-American-Protestantism">historian of American religion</a>, I’ve examined an episode in the career of a prominent Ohio pastor named Washington Gladden, who led a campaign for the return of a US$100,000 gift from philanthropist John D. Rockefeller way back in 1905. </p>
<p>Then as now, the key issue was whether groups concerned with the public good could justifiably take money from people of questionable morals.</p>
<h2>Defending Rockefeller’s gift</h2>
<p>Rockefeller’s $100,000 gift – approximately $2.7 million now – went to the American Board of Commissioners for Foreign Missions, an organization that <a href="https://hollisarchives.lib.harvard.edu/repositories/24/resources/2708">oversaw the overseas missionary</a> activities of the Congregational Church. </p>
<p>Few people in the early 20th century doubted that Rockefeller’s company, Standard Oil, was engaged in <a href="https://books.google.com/books?id=9VSsDwAAQBAJ&lpg=PP1&dq=mislin%20gladden's%20church&pg=PA153">questionable practices</a>. </p>
<p>Among other things, Rockefeller had created a system of shell railroad companies. He shifted Standard Oil’s rail freight to his own companies, thereby driving competing railroads out of business and leaving their employees out of work.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/294894/original/file-20190930-194862-1k3p3l5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/294894/original/file-20190930-194862-1k3p3l5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=787&fit=crop&dpr=1 600w, https://images.theconversation.com/files/294894/original/file-20190930-194862-1k3p3l5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=787&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/294894/original/file-20190930-194862-1k3p3l5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=787&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/294894/original/file-20190930-194862-1k3p3l5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=990&fit=crop&dpr=1 754w, https://images.theconversation.com/files/294894/original/file-20190930-194862-1k3p3l5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=990&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/294894/original/file-20190930-194862-1k3p3l5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=990&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">U.S. philanthropist John D. Rockefeller.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Associated-Press-Domestic-News-United-States-JO-/61fd395d77e4da11af9f0014c2589dfb/1/0">AP Photo</a></span>
</figcaption>
</figure>
<p>Despite knowing his cut-throat methods, many people at the American Board of Commissioners for Foreign Missions board happily accepted Rockefeller’s money. </p>
<p>“Before gifts are received the responsibility is not ours,” <a href="https://books.google.com/books?id=TUkcAQAAIAAJ&dq=editions%3AT2uIWEmwwZAC&pg=PA867#v=onepage&q&f=false">declared</a> a subcommittee responsible for evaluating the contribution. </p>
<p>The mission’s position was that provided the money was acquired legally, there were no ethical concerns. </p>
<p>Graham Taylor, a <a href="https://mms.newberry.org/xml/xml_files/taylor.xml">prominent Chicago minister and social reformer</a> agreed. He <a href="https://books.google.com/books?id=8GRMAAAAYAAJ&dq=editions%3AlEYS-DId-sAC&pg=PA383#v=onepage&q&f=false">argued</a> that charitable gifts should be viewed as “separable from the person of its acquirer and possessor.” Money was a neutral object, he suggested, and the donor’s character was irrelevant.</p>
<p>There was risk in subjecting donors “to a public criticism and a private investigation of his whole life and character,” <a href="https://books.google.com/books?id=TUkcAQAAIAAJ&dq=editions%3AT2uIWEmwwZAC&pg=PA871#v=onepage&q&f=false">proclaimed an editorial</a> in the Outlook, a religious newspaper that reached <a href="https://books.google.com/books?id=DumI1WrzkOIC&lpg=PP1&dq=Hutchison%20modernist%20impulse&pg=PA116#v=onepage&q=Hutchison%20modernist%20impulse&f=false">100,000 subscribers</a> across the United States. These influential editors warned readers that if they judged Rockefeller too harshly, wealthy people like him would stop making charitable contributions.</p>
<p>A few people went so far as to encourage gifts from morally suspect individuals. </p>
<p>One anonymous letter writer, in fact, <a href="https://books.google.com/books?id=8GRMAAAAYAAJ&dq=editions%3AlEYS-DId-sAC&pg=PA338#v=onepage&q&f=false">wrote</a> not to be “afraid of ‘tainted money.’” Better for a missionary organization to have the money, this person suggested, than for Rockefeller to keep it for more nefarious purposes. </p>
<p>These arguments won many supporters. The editorial pages of religious periodicals joined the Outlook in urging the missionary board to keep the $100,000.</p>
<h2>A prominent opponent</h2>
<p>But opponents of Rockefeller’s gift had a notable ally: Washington Gladden. </p>
<p>A Protestant pastor from Columbus, Ohio, the 69-year-old was so well known late in his life that one profile in the religious magazine the Independent <a href="https://books.google.com/books?id=9VSsDwAAQBAJ&lpg=PP1&dq=mislin%20gladden's%20church&pg=PR8#v=onepage&q&f=false">described</a> “the whole United States” as his pastorate.</p>
<p>Gladden was an early champion of the progressive Christian movement that became known as the <a href="https://theconversation.com/how-the-social-gospel-movement-explains-the-roots-of-todays-religious-left-78895">Social Gospel</a>. The movement’s leaders urged the restructuring of business and society on Christian principles. Gladden lectured widely throughout the nation and <a href="https://books.google.com/books?id=9VSsDwAAQBAJ&lpg=PA190&dq=Washington%20gladden's%20church&pg=PR8#v=onepage&q&f=false">wrote</a> over 30 books on topics ranging from social ethics to Biblical interpretation.</p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/294895/original/file-20190930-194819-8otslb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/294895/original/file-20190930-194819-8otslb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=885&fit=crop&dpr=1 600w, https://images.theconversation.com/files/294895/original/file-20190930-194819-8otslb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=885&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/294895/original/file-20190930-194819-8otslb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=885&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/294895/original/file-20190930-194819-8otslb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1112&fit=crop&dpr=1 754w, https://images.theconversation.com/files/294895/original/file-20190930-194819-8otslb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1112&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/294895/original/file-20190930-194819-8otslb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1112&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Washington Gladden.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:WashingtonGladden.jpg">Ohio History Central</a></span>
</figcaption>
</figure>
<p>Much of Gladden’s reputation stemmed from his decadeslong critique of large corporations. He blamed greedy corporate leaders for poor conditions endured by the working class. Businesses like Standard Oil were, <a href="https://books.google.com/books?id=OPESAQAAMAAJ&dq=tools%20and%20the%20man&pg=PA255#v=onepage&q&f=false">he argued</a>, part of a “system of industry” causing “social wreckage.”</p>
<p>According to Gladden, one manifestation of this wreckage was in business ethics. In his view, businessmen <a href="https://books.google.com/books?id=LaSTIZ0mf2cC&dq=Social%20Facts%20and%20Forces%3A%20The%20Factory%2C%20the%20Labor%20Union%2C%20the%20Corporation%E2%80%A6&pg=PA90#v=onepage&q&f=false">hid</a> “themselves behind the corporation” and seemingly abandoned whatever moral compass they possessed.</p>
<h2>Attacking tainted money</h2>
<p>Because of his stature, Gladden was named to the largely symbolic position of moderator of the nationwide Congregational Church. He <a href="https://books.google.com/books?id=PNE8AAAAIAAJ&dq=gladden%20recollections&pg=PA400#v=onepage&q&f=false">assumed this role</a> just months before Rockefeller’s $100,000 donation to the church’s mission organization became public.</p>
<p>Gladden demanded the mission board return Rockefeller’s gift. </p>
<p>In <a href="https://books.google.com/books?id=TUkcAQAAIAAJ&dq=editions%3AT2uIWEmwwZAC&pg=PA985#v=onepage&q&f=false">his view</a>, the fact that the businessman made his money “within the letter of the law” did not absolve beneficiaries of moral responsibility. Gladden <a href="https://books.google.com/books?id=TUkcAQAAIAAJ&dq=editions%3AT2uIWEmwwZAC&pg=PA985#v=onepage&q&f=false">asserted</a> that Standard Oil operated in an “unscrupulous and brutal way … with utter disregard to the ordinary principles of business morality.”</p>
<p>For Gladden, the issue of tainted money affected all institutions that existed for the good of society. No gift, no matter how large, <a href="https://books.google.com/books?id=8GRMAAAAYAAJ&dq=editions%3AlEYS-DId-sAC&pg=PA281#v=onepage&q&f=false">could</a> “compensate for the lowering of ideals and the blurring of consciences” required to accept it. Tainted money inevitably bred tainted institutions, and everyone suffered as a result, he noted.</p>
<p>Despite his fame, Gladden did not win many supporters: Only <a href="https://books.google.com/books?id=TUkcAQAAIAAJ&dq=editions%3AT2uIWEmwwZAC&pg=PA967#v=onepage&q&f=false">25 of 189</a> American Board of Commissioners sided with him. </p>
<p>The appeal of Rockefeller’s $100,000 proved too great. Given the support it might provide to the board’s missionary activities, the overwhelming majority saw no reason to return it. </p>
<p>The board eventually reached a <a href="https://books.google.com/books?id=JsMEAAAAYAAJ&dq=gladden%20recollections&pg=PA408#v=onepage&q&f=false">tacit agreement</a> not to take future donations from figures as controversial as Rockefeller – not exactly the bold repudiation of tainted money that Gladden had wanted. </p>
<h2>The unresolved dilemma</h2>
<p>Observers in 1905 astutely recognized that the Rockefeller “tainted money” episode had significance beyond a single gift to one organization. </p>
<p>As the editors of a Congregationalist church newspaper <a href="https://books.google.com/books?id=8GRMAAAAYAAJ&dq=editions%3AlEYS-DId-sAC&pg=PA276#v=onepage&q&f=false">noted</a>, the questions their mission board faced “must be answered sooner or later by those who administer any kind of benevolent enterprises.” </p>
<p>Today, institutions that benefited from contributions from Jeffrey Epstein, the Sackler family and other controversial benefactors are <a href="https://www.theatlantic.com/business/archive/2014/03/dirty-money-from-rockefeller-to-koch/284244/">having the same realization</a> – and it is spurring similar debates. </p>
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<p class="fine-print"><em><span>David Mislin does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Institutions that benefited from donations from benefactors such as Epstein are facing hard questions. In a somewhat similar ethical debate in 1905, a pastor argued for return of a Rockefeller gift.David Mislin, Assistant Professor of Intellectual Heritage, Temple UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1192832019-07-17T11:18:19Z2019-07-17T11:18:19Z3 myths to bust about breaking up ‘big tech’<figure><img src="https://images.theconversation.com/files/284118/original/file-20190715-173342-1ji5sep.jpg?ixlib=rb-1.1.0&rect=45%2C0%2C5069%2C3376&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Before taking on tech giants, shatter a few misconceptions.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/iron-hammer-breaking-glass-window-340890053">W. Scott McGill/Shutterstock.com</a></span></figcaption></figure><p>As the public and government regulators around the world discuss <a href="https://www.npr.org/2019/06/09/731044346/big-tech-and-antitrust">whether and how</a> to manage the power of technology companies, one idea that keeps coming up is breaking up these large conglomerate corporations into smaller pieces. Public distrust for tech companies has shifted to talk of <a href="https://www.wsj.com/articles/justice-department-is-preparing-antitrust-investigation-of-google-11559348795">antitrust action</a> against them. Facebook, for instance, might then have to <a href="https://www.mercurynews.com/2018/05/21/facebook-owns-instagram-messenger-whatsapp-now-theres-a-call-to-break-it-all-up/">compete with Instagram for photo-sharing</a> and WhatsApp for messaging – rather than owning both. </p>
<p>The idea has managed to garner support from both <a href="https://www.politico.com/2020-election/candidates-views-on-the-issues/technology/tech-competition-antitrust/">Massachusetts Sen. Elizabeth Warren</a>, a Democrat, and <a href="https://www.nbcnews.com/politics/donald-trump/trump-claims-collusion-between-big-tech-democrats-backs-antitrust-fines-n1015726">Republican President Donald Trump</a>.</p>
<p>However, <a href="https://www.politico.com/2020-election/candidates-views-on-the-issues/technology/tech-competition-antitrust/">advocates</a> and <a href="https://www.weforum.org/agenda/2019/07/these-are-some-of-the-best-quotes-about-technology-monopolies-in-2019/">opponents</a> of breaking up big technology firms are falling prey to some serious misconceptions. I study the effects of digital technologies on lives and livelihoods across 85 countries and lead Tufts Fletcher School’s <a href="https://sites.tufts.edu/digitalplanet/">Digital Planet</a> initiative studying technological innovation around the world. In my opinion, there are three myths worth busting before considering taking on big tech. </p>
<h2>Myth 1: Comparing Standard Oil and Google</h2>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=901&fit=crop&dpr=1 600w, https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=901&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=901&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1132&fit=crop&dpr=1 754w, https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1132&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1132&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">John D. Rockefeller, founder of Standard Oil.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:John_D_Rockefeller_1872.png">Urbanrenewal/Wikimedia Commons</a></span>
</figcaption>
</figure>
<p>Arguments for and against antitrust action against tech firms rely heavily on the <a href="https://www.nytimes.com/1998/10/19/business/microsoft-trial-precedents-previous-antitrust-cases-leave-room-for-both-sides.html">experiences of earlier cases</a>. The massive <a href="https://theconversation.com/for-tech-giants-a-cautionary-tale-from-19th-century-railroads-on-the-limits-of-competition-91616">19th-century monopoly Standard Oil</a> has, in fact, been referred to as the “<a href="https://www.nytimes.com/2018/02/20/magazine/the-case-against-google.html">Google of its day</a>.” There are also people who are recalling the 1990s <a href="https://www.nytimes.com/2018/05/18/opinion/microsoft-antitrust-case.html">antitrust case against Microsoft’s dominant position</a> in the era of personal computers. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=490&fit=crop&dpr=1 600w, https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=490&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=490&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=615&fit=crop&dpr=1 754w, https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=615&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=615&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Google co-founders Sergey Brin, left, and Larry Page.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Schmidt-Brin-Page-20080520_(cropped).jpg">Joi Ito/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Those cases from the past may seem similar to today’s situation, but this era is different in one crucial way: the global technology marketplace. Currently, there are two parallel “big tech” clusters. One is in the U.S., dominated by <a href="https://theconversation.com/big-tech-isnt-one-big-monopoly-its-5-companies-all-in-different-businesses-92791">Google, Amazon, Facebook and Apple</a>. The other is based in China, dominated by <a href="https://singularityhub.com/2018/08/17/baidu-alibaba-and-tencent-the-rise-of-chinas-tech-giants/">Baidu, Alibaba, Tencent and Huawei</a>. This global market is subject to different political and policy pressures than regulators faced when dealing with Standard Oil and Microsoft.</p>
<p>Both clusters are attempting to add users to <a href="https://hbr.org/2019/01/which-countries-are-leading-the-data-economy">accumulate reservoirs of data</a>, which will fuel the next stage of competitiveness in a future run by artificial intelligence. The Chinese government has blocked most of the U.S. companies from entering the Chinese market, protecting its “<a href="https://www.scmp.com/tech/china-tech/article/2120913/china-recruits-baidu-alibaba-and-tencent-ai-national-team">AI national team</a>.” The <a href="https://www.bloomberg.com/news/articles/2018-06-27/alibaba-pulls-back-in-u-s-amid-trump-crackdown-on-chinese-investment">U.S. government has done likewise</a>, blacklisting some Chinese outfits for a period while discouraging others.</p>
<p>If the U.S. technology giants are broken up, the result would be a vastly uneven global playing field, pitting fragmented U.S. companies against consolidated state-protected Chinese firms.</p>
<p>Geopolitical factors aren’t limited to the U.S.-China rivalry. The European Union, Russia and India are also heavy users of Silicon Valley technologies, and each is <a href="https://www.ft.com/content/3eb00398-9815-11e9-8cfb-30c211dcd229">exploring its own options</a> for legislation and regulation too.</p>
<p>U.S. companies’ size and data accumulation capabilities give the country economic and political influence around the globe. Their power would change if they were broken up – and, in my view, that should be a key consideration in regulators’ decisions.</p>
<h2>Myth 2: Price is right</h2>
<p>There are two main views of antitrust action in these discussions. One focuses on consumer welfare, which has been the prevailing approach federal lawyers have taken <a href="https://www.jstor.org/stable/724991">since the 1960s</a>. The other view suggests that regulators should look at the <a href="https://www.yalelawjournal.org/note/amazons-antitrust-paradox">underlying structure of the market</a> and potential for <a href="https://www.pbwt.com/antitrust-update-blog/a-brief-overview-of-the-new-brandeis-school-of-antitrust-law">powerful players to exploit</a> their positions.</p>
<p>Those two sides seem to agree that price plays a key role. People who argue against breaking up the tech giants point out that Facebook and Google provide services that are <a href="https://slate.com/technology/2019/06/facebook-big-tech-antitrust-breakup-mistake.html">free to the consumer</a>, and that Amazon’s marketplace power drives its products’ costs down. On the other side, though, are those who say that <a href="https://www.yalelawjournal.org/note/amazons-antitrust-paradox">having low or no prices</a> is evidence that these companies are artificially lowering consumer costs to draw users into company-controlled systems that are <a href="https://techcrunch.com/2019/02/04/why-no-one-really-quits-google-or-facebook/">hard to leave</a>.</p>
<p>Both sides are missing the fact that the monetary price is less relevant as measure of what users pay in the technology industry than it is in other types of business. Users <a href="https://theconversation.com/how-much-is-your-data-worth-to-tech-companies-lawmakers-want-to-tell-you-but-its-not-that-easy-to-calculate-119716">pay for digital products with their data</a>, rather than just money. Regulators shouldn’t focus only on the monetary costs to the users. Rather, they should ask whether users are being asked for more data than is strictly necessary, whether information is being collected in <a href="https://theconversation.com/7-in-10-smartphone-apps-share-your-data-with-third-party-services-72404">intrusive or abusive ways</a> and whether customers are <a href="https://www.axios.com/mark-warner-josh-hawley-dashboard-tech-data-4ee575b4-1706-4d05-83ce-d62621e28ee1.html">getting good value in exchange for their data</a>.</p>
<h2>Myth 3: Trust-busting is all or nothing</h2>
<p>There aren’t just two ways for this debate to end, with either a breakup of one or more technology giants or simply leaving things as they are for the market to develop further. </p>
<p>My own idea of the best outcome would take a page from the history of antitrust litigation: The company that is sued is not broken up, and yet the very fact that there was a lawsuit leads to progress. That has happened in the past, in the cases against the Bell System, IBM and Microsoft.</p>
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<a href="https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=538&fit=crop&dpr=1 600w, https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=538&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=538&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=676&fit=crop&dpr=1 754w, https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=676&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=676&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A replica of the first transistor, developed at AT&T’s Bell Laboratories in 1947.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Replica-of-first-transistor.jpg">National Archives</a></span>
</figcaption>
</figure>
<p>In the 1956 federal consent decree against the Bell System, which settled a seven-year legal proceeding against the company, the company wasn’t split up, but Bell was required to <a href="https://economics.yale.edu/sites/default/files/how_antitrust_enforcement.pdf">license all its patents royalty-free</a> to other firms. This meant that some of the most profound technological innovations in history – including the <a href="https://www.computerhistory.org/atchm/who-invented-the-transistor/">transistor</a>, the <a href="https://www.popsci.com/article/science/invention-solar-cell/">solar cell</a> and the <a href="https://www.photonics.com/Articles/A_History_of_the_Laser_1960_-_2019/a42279">laser</a> – became widely available, yielding computers, solar power and other technologies that are crucial to the modern world. When the Bell System was <a href="https://www.cio.com/article/3267826/breaking-up-is-hard-to-do-why-the-bell-system-breakup-isn-t-a-model-for-tech.html">eventually broken up</a> in 1982, it did not do nearly as much to spread <a href="https://si.wsj.net/public/resources/images/BF-AV826_ATT_16U_20171120171814.jpg">innovation and competition</a> as the agreement that kept the Bells together a quarter-century earlier. </p>
<p>The antitrust action against IBM lasted 13 years and didn’t break up the firm. However, as part of its tactics to avoid appearing to be a monopoly, IBM agreed to <a href="https://www.cnet.com/news/ibm-and-microsoft-antitrust-then-and-now/">separate pricing for its hardware and software products</a>, previously sold as an indivisible bundle. This created an opportunity for entrepreneurs Bill Gates and Paul Allen to create a new software-only company, called Microsoft. The surge of software innovations that have followed can clearly trace their origins to the IBM settlement. </p>
<p>Two decades later, Microsoft was itself the target of an antitrust action. In the resulting settlement, <a href="https://www.theverge.com/2018/9/6/17827042/antitrust-1990s-microsoft-google-aol-monopoly-lawsuits-history">Microsoft agreed to ensure its products were compatible</a> with competitors’ software. That made room in the emerging internet marketplace for web browsers, the predecessors of Apple’s Safari, Mozilla’s Firefox and Google Chrome.</p>
<p>Even Margrethe Vestager, the European Union’s top antitrust official and frequent tech-giant nemesis, has said that “<a href="https://www.nytimes.com/2018/02/20/magazine/the-case-against-google.html">Antitrust prosecutions are part of how technology grows</a>.” But that doesn’t mean they all have to achieve their most extreme ends, of breaking up the companies. </p>
<p>Antitrust rules are complicated enough, and plenty of experts will be called on to give their views on what to do with “big tech.” Technology pervades every aspect of modern lives, giving each person a responsibility to weigh in on this issue without misconceptions clouding their judgments. Technology has become a political issue. In a politically overheated climate, public sentiments may matter even more than the opinions of experts.</p><img src="https://counter.theconversation.com/content/119283/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bhaskar Chakravorti has founded and directs the Institute for Business in the Global Context at Fletcher/Tufts that has received funding from Mastercard, Microsoft, the Gates Foundation, the Rockefeller Foundation and the Onassis Foundation. He is a Non-Resident Senior Fellow at Brookings India and a Senior Advisor on Digital Inclusion at the Mastercard Center for Inclusive Growth.</span></em></p>Advocates and opponents of breaking up Facebook, Google and other technology giants are falling prey to some serious misconceptions.Bhaskar Chakravorti, Dean of Global Business, The Fletcher School, Tufts UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1142622019-03-26T13:56:33Z2019-03-26T13:56:33ZInternet giants could strangle the smart tech revolution at birth – here are our options<figure><img src="https://images.theconversation.com/files/265862/original/file-20190326-36244-q4y2i8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Candy crush?</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/phone-smartphone-broken-screen-isolate-on-1315172114">rogistok</a></span></figcaption></figure><p>Google is digesting its third whopping antitrust penalty from the European Commission, <a href="http://europa.eu/rapid/press-release_IP-19-1770_en.htm">having been fined</a> €1.5 billion (£1.3 billion) for abusing its market dominance around online advertising. The case concerned web publishers embedding a Google-powered search engine on their site, and being prevented from letting third parties place search adverts at the top of search results. </p>
<p>Margrethe Vestager, the EU’s competition commissioner, said this “denied other companies the possibility to compete on the merits and to innovate – and consumers the benefits of competition”. It takes the EC’s total antitrust fines against Google to €8.2 billion in two years, following <a href="https://www.computerworlduk.com/galleries/it-vendors/google-vs-europe-antitrust-battle-timeline-major-milestones-3589424/">previous findings</a> in June 2017 and July 2018, respectively about Google unfairly advantaging its Shopping service and Google Chrome browser. </p>
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<a href="https://images.theconversation.com/files/265864/original/file-20190326-36248-atgf2u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/265864/original/file-20190326-36248-atgf2u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/265864/original/file-20190326-36248-atgf2u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=692&fit=crop&dpr=1 600w, https://images.theconversation.com/files/265864/original/file-20190326-36248-atgf2u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=692&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/265864/original/file-20190326-36248-atgf2u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=692&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/265864/original/file-20190326-36248-atgf2u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=870&fit=crop&dpr=1 754w, https://images.theconversation.com/files/265864/original/file-20190326-36248-atgf2u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=870&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/265864/original/file-20190326-36248-atgf2u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=870&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Elizabeth Warren: break-up call.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/washington-dc-july-25-2016-senator-684236263">Kelly Bell</a></span>
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<p>The European Union is not the only one gunning for big tech. UK chancellor Philip Hammond <a href="https://www.itpro.co.uk/policy-legislation/33214/chancellor-hammond-backs-calls-wane-tech-giants-market-power">has hinted about</a> tightening digital competition policy following an independent report which raised concerns that the sector was anti-competitive. And US presidential hopeful Elizabeth Warren <a href="https://medium.com/@teamwarren/heres-how-we-can-break-up-big-tech-9ad9e0da324c">wants</a> the likes of Google, Amazon and Facebook <a href="https://www.theguardian.com/us-news/2019/mar/10/elizabeth-warren-break-up-amazon-google-facebook-socialism-capitalism">broken up</a> to unleash a new wave of digital innovation. In an echo of the EC’s Google findings, Warren cites various examples of these companies using their market dominance against smaller rivals – Amazon <a href="https://www.yalelawjournal.org/pdf/e.710.Khan.805_zuvfyyeh.pdf">creating</a> own-brand versions of goods being sold on its platform, for instance. </p>
<p>I broadly agree with this growing movement. Yet my main concern hasn’t come into focus – even though it’s arguably the biggest threat these companies pose to the future. They are standing in the way of the next big digital revolution, and need to be reined in before it’s too late. </p>
<h2>The smart future</h2>
<p>The first computing revolution started in the 1950s as mainframe computers slowly entered the workplace and began to automate basic back-office functions like payroll and accounts. The second revolution, in the 1980s-2000s, centred on the PC and the migration of computers to the desktop and then to our homes. Third came the mobile revolution, which put those computers in our pockets so we could take them wherever we went. </p>
<p>The next shift has started already. In our homes, smart assistants like Amazon Echo and Google Home are steadily colonising personal spaces, along with the likes of smart lighting and security systems. Smart home devices <a href="https://www.idc.com/getdoc.jsp?containerId=prUS44361618">shifted</a> some 640m units last year, and will be doing twice that by 2023. </p>
<p>Over the same period, we can also expect something like 50% growth in unit sales of wearable devices like fitness trackers and smart clothing – a huge market <a href="https://techcrunch.com/2019/03/05/idc-apple-led-wearables-market-in-2018-with-46-2m-of-the-total-172-2m-devices-shipped/">for Apple</a> – to approaching 300m a year. As for the workplace, an equivalent flurry of sensor technology, underpinned by AI, is now transforming factories and production lines. Sometimes known as industry 4.0, the sector is <a href="https://www.globenewswire.com/news-release/2018/10/17/1622652/0/en/Global-Industry-4-0-Market-Will-Reach-USD-155-30-Billion-By-2024-Zion-Market-Research.html">forecast to</a> double to over US$150 billion by 2023, <a href="https://www.researchandmarkets.com/reports/4519307/industry-4-0-market-and-technologies-2018-2023">and over</a> a trillion dollars by the early 2030s. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/265865/original/file-20190326-36252-wk26h6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/265865/original/file-20190326-36252-wk26h6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/265865/original/file-20190326-36252-wk26h6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/265865/original/file-20190326-36252-wk26h6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/265865/original/file-20190326-36252-wk26h6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/265865/original/file-20190326-36252-wk26h6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/265865/original/file-20190326-36252-wk26h6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/265865/original/file-20190326-36252-wk26h6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">From despair to wear.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/man-running-on-beach-modern-technology-501041416">Kaspars Grinwalds</a></span>
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<p>Hand in hand with this will be an explosion in smart services. Tech companies will increasingly seek to improve our lives by crunching sensor data from all this hardware, as well as from all the activities that we do on our phones. Alongside the tech giants, numerous start-ups are staking out territory in this frontier. </p>
<p>In the US, a company called <a href="https://getnotion.com">Notion</a> has raised US$16m towards smart home sensors to alert owners via a phone app about water leaks, intrusions and temperature fluctuations. British start-up McLear <a href="https://mclear.com/">has launched</a> a smart ring which can electronically unlock doors and authenticate payments in retail outlets. If you look on start-up databases like <a href="https://about.beauhurst.com">Beauhurst</a> or <a href="https://www.crunchbase.com">Crunchbase</a>, you come across thousands of similar companies. </p>
<p>But if there is a rapidly growing ecosystem, there is a competitive imbalance. Just like Notion, many smart devices rely on smartphone apps as the interface through which users control them. With almost 3 billion smartphones in use globally, <a href="http://gs.statcounter.com/os-market-share/mobile/worldwide">almost</a> three quarters are Android devices, controlled by Google, and one quarter are iOS, controlled by Apple. </p>
<p>Apps distributed via these two gatekeepers’ app stores must comply with their regulations. In many cases, the giants themselves will be competing in the same marketplace. We already knew that Apple was betting heavily on health-related wearables services, for instance; the <a href="https://www.cnet.com/how-to/apple-card-what-you-need-to-know-now-about-apples-new-credit-card-for-your-iphone/">Apple credit card</a> announcement shows it also has finance in its sights. </p>
<p>Similarly, Amazon <a href="https://www.theguardian.com/technology/2018/feb/28/amazon-buys-video-doorbell-ring-smart-home-delivery">last year spent</a> US$1 billion on smart doorbell maker Ring. Type “smart doorbell” into Amazon’s search box and, perhaps not surprisingly, its own products show up first. As innocent as this might be, one can imagine the temptation for such companies to give preference to their own devices and services when presenting search results. </p>
<h2>There will be blood</h2>
<p>Yet search is actually something of a side issue in all of this. Between them, Amazon, Facebook, Google and Apple hold detailed data on the interests, health, social connections and purchasing habits of billions of people. This data will be an essential input for the AI systems that will power the coming generation of smart services. This, therefore, is the greater threat to competition and innovation. </p>
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<a href="https://images.theconversation.com/files/265866/original/file-20190326-36252-1y91lll.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/265866/original/file-20190326-36252-1y91lll.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/265866/original/file-20190326-36252-1y91lll.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=770&fit=crop&dpr=1 600w, https://images.theconversation.com/files/265866/original/file-20190326-36252-1y91lll.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=770&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/265866/original/file-20190326-36252-1y91lll.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=770&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/265866/original/file-20190326-36252-1y91lll.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=967&fit=crop&dpr=1 754w, https://images.theconversation.com/files/265866/original/file-20190326-36252-1y91lll.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=967&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/265866/original/file-20190326-36252-1y91lll.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=967&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Oil be darned.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Pascola-Standard-Oil-sign-mo.jpg#/media/File:Pascola-Standard-Oil-sign-mo.jpg">Wikimedia</a></span>
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<p>If “data is the new oil”, as many <a href="https://medium.com/@adeolaadesina/data-is-the-new-oil-2947ed8804f6">have argued</a>, then the <a href="https://www.economist.com/business/1999/12/23/standard-ogre">US break-up</a> of Standard Oil in 1911 into 34 companies because of its dominance on oil production and supply is something we should be studying closely. Whether the answer is to break up some tech giants, force them to open up their data assets to new entrants, prevent them buying start-ups in this sector, or allow users more control over their personal data, this is a debate we should have urgently. <a href="https://www.telegraph.co.uk/technology/2018/11/20/hike-pressure-tech-giants-share-mapping-data-government-told/">Calls</a> in the UK for big tech to make its mapping data freely available are almost certainly the shape of things to come. </p>
<p>The open nature of the internet over the past 20 years created an environment where innovation could flourish. It is vital that this continues, but legacy monopolies from the previous revolution threaten to slow the process down. Unless digital data is liberalised, smart services could still fall a long way short of their potential. As we saw with the <a href="https://www.whatcar.com/news/history-of-the-electric-car/n18063">electric car</a> throughout the 20th century, vested interests are more than capable of impeding progress to keep their own business activities alive and well.</p><img src="https://counter.theconversation.com/content/114262/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Martin De Saulles does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There are mounting calls to dismember the likes of Google, Apple and Amazon, but most people seem to have overlooked the biggest threat of all.Martin De Saulles, Principal Lecturer, Centre for Digital Media Culture, University of BrightonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/916162018-03-06T11:39:53Z2018-03-06T11:39:53ZFor tech giants, a cautionary tale from 19th century railroads on the limits of competition<figure><img src="https://images.theconversation.com/files/208956/original/file-20180305-146655-1l0ia1y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Southern Pacific steam engine No. 1364 in 1891.</span> <span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File%3ATrain_at_Arcade_Station%2C_1891_(00031881).jpg">Wikimedia Commons</a></span></figcaption></figure><p>Late 19th-century Americans loved railroads, which seemed to eradicate time and space, moving goods and people more cheaply and more conveniently than ever before. And they feared railroads because in most of the country it was impossible to do business without them.</p>
<p>Businesses, and the republic itself, seemed to be at the mercy of the <a href="https://archive.org/details/railwaysandrepu00hudsgoog">monopoly power</a> of railroad corporations. American farmers, businessmen and consumers thought of competition as a way to ensure fairness in the marketplace. But with no real competitors over many routes, railroads could charge different rates to different customers. This power to decide economic winners and losers threatened not only individual businesses but also the conditions that sustained the republic.</p>
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<a href="https://images.theconversation.com/files/208953/original/file-20180305-146650-3i9vpv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/208953/original/file-20180305-146650-3i9vpv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/208953/original/file-20180305-146650-3i9vpv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=907&fit=crop&dpr=1 600w, https://images.theconversation.com/files/208953/original/file-20180305-146650-3i9vpv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=907&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/208953/original/file-20180305-146650-3i9vpv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=907&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/208953/original/file-20180305-146650-3i9vpv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1140&fit=crop&dpr=1 754w, https://images.theconversation.com/files/208953/original/file-20180305-146650-3i9vpv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1140&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/208953/original/file-20180305-146650-3i9vpv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1140&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">An 1882 political cartoon portrays the railroad industry as a monopolistic octopus, with its tentacles controlling many businesses.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File%3AThe_Curse_of_California.jpg">G. Frederick Keller</a></span>
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</figure>
<p>That may sound familiar. As <a href="https://global.oup.com/academic/product/the-republic-for-which-it-stands-9780199735815?cc=us&lang=en&">a historian of that first Gilded Age</a>, I see parallels between the power of the railroads and today’s internet giants like Verizon and Comcast. The <a href="https://www.nytimes.com/2017/12/15/technology/right-and-left-net-neutrality.html">current regulators</a> – the Federal Communications Commission’s <a href="http://www.fcc.gov/document/fcc-releases-restoring-internet-freedom-order">Republican majority</a> – and <a href="http://www.businessinsider.com/internet-isps-competition-net-neutrality-ajit-pai-fcc-2017-4#-3">many of its critics</a> both embrace a solution that 19th-century Americans tried and dismissed: market competition.</p>
<h2>Monopolies as natural and efficient</h2>
<p>In the 1880s, the most sophisticated railroad managers and some economists argued that railroads were “<a href="https://www.investopedia.com/terms/n/natural_monopoly.asp">natural monopolies</a>,” the inevitable consequence of an industry that required huge investments in rights of way over land, constructing railways, and building train engines and rail cars. </p>
<p>Competition was expensive and wasteful. In 1886 the Atchison, Topeka and Santa Fe Railway and the Missouri Pacific Railroad both built railroad tracks heading west from the Great Bend of the Arkansas River in Kansas to Greeley County on the western border, roughly 200 miles away. The tracks ran parallel to each other, about two miles apart. Charles Francis Adams, president of the Union Pacific Railroad, called this redundancy the “<a href="http://books.wwnorton.com/books/978-0-393-34237-6/">maddest specimen of railroad construction of which</a>” he had ever heard. And then his own railroad built new tracks into western Kansas, too. </p>
<p>After ruinous bouts of competition like this, rival railroad companies would agree to cooperate, pooling the business in certain areas and setting common rates. These agreements effectively established monopolies, even if more than one company was involved. </p>
<h2>Monopolies as unfairly subsidized</h2>
<p>Anti-monopolists who opposed the railroads’ power argued that monopolies originated not as a result of efficient investment strategies, but rather <a href="http://books.wwnorton.com/books/978-0-393-34237-6/">from special privileges afforded by the government</a>. Railroads had the ability to condemn land to build their routes. They got subsidies of land, loans, bonds and other financial aid from federal, state and local governments. Their political contributions and favors secured them supporters in legislatures, Congress and the courts.</p>
<p>As stronger railroads bought up weaker companies and divided up markets with the remaining competitors, the dangers of monopoly became more and more apparent. Railroad companies made decisions on innovation based on the effects on their bottom line, not societal values. For instance, the death toll was enormous: In 1893, 1,567 trainmen died and 18,877 were injured on the rails. Congress enacted the <a href="https://www.federalregister.gov/documents/2010/07/02/2010-16153/railroad-safety-appliance-standards-miscellaneous-revisions">first national railroad safety legislation</a> that year because the companies had insisted it was too expensive to put automatic braking systems and couplers on freight trains.</p>
<p>But a monopoly’s great economic and societal danger was its ability to decide who succeeded in business and who failed. For example, in 1883 the Northern Pacific Railway raised the rates it charged O.A. Dodge’s Idaho lumber company. The new rates left Dodge unable to compete with the rival Montana Improvement Company, reputedly owned by Northern Pacific executives and investors. Dodge knew the game was up. All he could do was ask if they wanted to buy his company.</p>
<p>For anti-monopolists, Dodge’s dilemma went to the heart of the issue. <a href="https://archive.org/details/railwaysandrepu00hudsgoog">Monopolies were intrinsically wrong</a> because they unfairly influenced businesses’ likelihood of success or failure. In an 1886 report on the railroad industry, the U.S. Senate Select Committee on Interstate Commerce agreed, stating clearly that the “<a href="https://www.gpo.gov/fdsys/pkg/FR-1982-09-14/pdf/FR-1982-09-14.pdf">great desideratum is to secure equality</a>.”</p>
<h2>Turning to regulators for help</h2>
<p>To achieve equality, anti-monopolists wanted more government regulation and enforcement. By the late 1880s, some railroad executives were <a href="https://archive.org/details/railroadtranspo03hadlgoog">starting to agree</a>. Their efforts at cooperation had failed because railroads treated each other no better than they did their customers. As Charles Francis Adams put it, his own industry’s “<a href="http://www.nytimes.com/2011/07/17/books/review/book-review-railroaded-by-richard-white.html">method of doing business</a> is founded upon lying, cheating, and stealing: all bad things.” </p>
<p>The consensus was that the railroads needed the federal government to enforce the rules, bringing greater efficiency and ultimately lower rates. But Congress ran into a problem: If an even, competitive playing field depended on regulation, the marketplace wasn’t truly open or free.</p>
<p>The solution was no clearer then than it is now. The technologies of railroads inherently gave large operators advantages of efficiency and profitability. Large customers also got benefits: <a href="https://www.britannica.com/topic/Standard-Oil-Company-and-Trust">John D. Rockefeller of Standard Oil</a>, for example, could guarantee large shipments and provide his own tank cars – so he got special rates and rebates. Newcomers and small enterprises were left out.</p>
<p>Some reformers suggested accepting monopolies, so long as their rates were carefully regulated. But the calculations were complex: Charges by the mile ignored the fact that most costs came not from transport but rather from loading, unloading and transferring freight. And even the best bookkeepers had a hard time <a href="https://archive.org/details/accountstheirco02colegoog">unraveling railway accounts</a>.</p>
<h2>Managing power</h2>
<p>The simplest solution, advanced by the Populist party and others, was the most difficult politically: <a href="http://historymatters.gmu.edu/d/5361/">nationalize the railroad routes</a>. Turning them into a publicly owned network, like today’s interstate highway system, would give the government the responsibility to create clear, fair rules for private companies wishing to use them. But profitable railroads opposed it tooth and nail, and skeptical reformers did not want the government to buy derelict and unprofitable railroads.</p>
<p>The current controversy about the monopolistic power of internet service providers echoes those concerns from the first Gilded Age. As anti-monopolists did in the 19th century, advocates of an open internet argue that regulation will advance competition by creating a level playing field for all comers, big and small, resulting in more innovation and better products. (There was even a radical, if short-lived, proposal to <a href="https://www.scientificamerican.com/article/trump-administration-idea-for-nationalized-5g-falls-flat1/">nationalize high-speed wireless service</a>.)</p>
<p>However, no proposed regulations for an open internet address the <a href="https://www.wired.com/2014/06/net-neutrality-missing/">existing power</a> of either the service providers or the “<a href="https://www.bloomberg.com/view/articles/2017-11-15/the-big-five-could-destroy-the-tech-ecosystem">Big Five</a>” internet giants: Apple, Amazon, Facebook, Google and Microsoft. Like Standard Oil, they have the power to wring enormous advantages from the internet service providers, to the detriment of smaller competitors.</p>
<p>The most important element of the debate – both then and now – is not the particular regulations that are or are not enacted. What’s crucial is the wider concerns about the effects on society. The Gilded Age’s anti-monopolists had political and moral concerns, not economic ones. They believed, as many in the U.S. still do, that a democracy’s economy should be judged not only – nor even primarily – by its financial output. Rather, success is how well it sustains the ideals, values and engaged citizenship on which free societies depend.</p>
<p>When monopoly threatens something as fundamental as the free circulation of information and the equal access of citizens to technologies central to their daily life, the issues are no longer economic.</p><img src="https://counter.theconversation.com/content/91616/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard White receives funding from Stanford Humanities Center, Huntington Library.
They gave me money but neither is connected to this subject.</span></em></p>Efforts to curb railroads’ monopoly power in the 19th century hold lessons for 21st-century policymakers and internet giants alike.Richard White, Professor of American History, Stanford UniversityLicensed as Creative Commons – attribution, no derivatives.