Are the big three tech companies (Amazon, Facebook and, Google) this era’s Standard Oil Company? In 2018, Amazon had more than 11.2 billion dollars in profit and dominated 49% of the e-commerce market share, according to techcruch.com. In 2018 , almost 30% percent of the world’s population was actively using Facebook. For 2018, Facebook’s profit was a whopping 13.92 billion. As for the world’s leading search engine, Google, Business Insider reported that 90% all 2018 Internet searches took place via the site. Google’s 2018 revenue, -which is largely made up of advertising revenue- totaled 136.22 billion dollars. Dominating the marketing and literally racking in the billions, are these big tech firms beneficial to our free market or are they in breach of the Sherman Antitrust Act law?
The Sherman Act of 1890 is a United States antitrust law that regulates corporate competition in the free market. The Sherman Act was not established to limit or prevent competition, but more so established, to prevent barriers of entry to the market. Supreme Court rulings from 1911, ordered the dissolution of John D. Rockefeller’s, Standard Oil Company, siting that the company was in breach of antitrust laws. Businessman and philanthropist John D. Rockefeller founded Standard oil in 1870 and as a business practice, the company operated by buying out competitors by means of intimidation. After its growth, Standard Oil and Rockefeller expanded in the transportation business further dominating the oil industry, by controlling the distribution channels of its oil. Standard Oil’s domination of the market share created a barrier of entry for smaller companies wanting to enter. The United states stated that Standard oil prevented competition by means of intimidation and buyouts and was therefore in breach of antitrust laws.
With the Standard Oil case as precedence, today, the question is, “are the big three tech companies breaking antitrust laws?” The Sherman Act that once protected the Davids -in the case of the corporate David and Goliath- has been ratified. In the 1960s Supreme Court Justice ,Robert Bork redefined the [once vague] law to explicitly state terms of the antitrust act. This was a direct result of overwhelming David versus Goliath cases in the 60s. Bork argues that If a company is operating in the best interest of consumers’ welfare, then it is not in breach of antitrust laws. His logic is, as long as a company isn’t price fixing or providing subpar goods/services then the company is operating ethically.
Supporters that argue large tech companies are in breach of antitrust laws, state that Facebook, Amazon , and Google have made barriers of entry almost impossible. Also argued by supporters, is that when a company has succeeded and fought past the entry barriers, they are then bought out or overtaken by much larger firms. For example, Facebook’s acquisition of Instagram. Other examples includes Beijing’s Bytedance Technology Co. 2017 Purchase of Musical.ly and Apple’s purchase of Shazam. In response to antitrust criticism, Facebook shot back by saying its purchase of Instagram was in the best interest of consumers. Facebook argued that they grew the number of users as well as improved Instagram’s infrastructure to handle its growth. Therefore operating with the consumers in mind. You be the judge, are the Big Three in breach of antitrust laws?
Note: This post was inspired by NPR’s podcast, Planet Money. There’s a three-part trilogy that goes in great detail on this subject. listen to it!