On May 13th, the Supreme Court voted to allow an eight-year-long antitrust case against Apple to proceed. The case, Apple Inc. v. Pepper, was originally brought in 2011 by Robert Pepper and three other iPhone users. They accused Apple of causing harm to them and other Apple users by requiring them to buy apps from the Apple App Store. Apple argued that Pepper and his associates had no standing to sue Apple because customers buy from a third-party seller and “have no direct purchasing relationship with Apple. …”
In a 5–4 decision, the Court rejected Apple’s argument and sent the case back to the Ninth Circuit Court for further adjudication. Newly-appointed conservative Justice Brett Kavanaug, writing the Court’s opinion, noted, “There is no intermediary in the distribution chain between Apple and the consumer. The iPhone owners purchase apps directly from the retailer Apple, who is the alleged antitrust violator.” The Court found that Apple prohibits people from buying iPhone apps anywhere other than from its own App Store, thus restraining trade.
The Apple decision comes at an historical moment when 2020 Democratic presidential candidates are promoting the break-up of big-tech companies. The Huffpost ran brief profiles of the positions taken by most of the twenty-odd candidates. Sen. Amy Klobuchar (D-MN) took one of the strongest stands: “My goal is to make antitrust cool again and make people realize that we are in — not just heading into — another Gilded Age of consolidation.”
Sen. Elizabeth Warren (D-MA) is leading the charge among Democratic candidates calling for the break-up of big tech. Writing in Medium, she noted, “Today’s big tech companies have too much power — too much power over our economy, our society, and our democracy. They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.” She added:
As these companies have grown larger and more powerful, they have used their resources and control over the way we use the Internet to squash small businesses and innovation, and substitute their own financial interests for the broader interests of the American people. To restore the balance of power in our democracy, to promote competition, and to ensure that the next generation of technology innovation is as vibrant as the last, it’s time to break up our biggest tech companies.
Warren and others have singled out Apple, Facebook, Google and Amazon as the leading high-tech companies that are exercising a stranglehold on U.S. economic competitiveness. Calls for the break-up have come before. In the late-1990s, Microsoft faced antitrust scrutiny and European regulators hit Google with antitrust fines in 2018 ($5 billion) and again in 2019 ($1.7 billion). Some see the need to disassemble the giant conglomerates into smaller, more competitive parts like breaking off Instagram and WhatsApp from Facebook. They see this as a way to stimulate new-tech development and economic growth.
Klobuchar’s invoking of the Gilded Age recalls a telling historical moment in American history. Looking back to the U.S. of the 1870s through about 1900, the country seems both a far different yet all-too-familiar country. It was an era of post-Civil War recovery, of the re-uniting of a nation through a continental railroad, of the reconfiguration of the nation’s character through mass immigration and popular migration throughout the continent – and ever-intensifying inequality. This was the period of the Robber Barons who not only controlled transport, business and finance, but politics and culture as well.
In the post-Civil War era, the railroad was the “new tech” form of distribution that anchored the new economy. By the 1890s the nation’s railway systems were the largest businesses in the country. And W. H. Vanderbilt’s New York Central Railroad was the biggest player, a conglomerate fashioned through aggressive acquisitions and mergers. However, in the late-19th century, mergers and consolidations occurred throughout all industries. They fostered both horizontal integration (i.e., control over a market’s prices and output) and vertical integration (i.e., production maximization by reducing costs).
Gilded Age corporate consolidation transformed the U.S. economy. The most spectacular consolidation involved the oil industry. John D. Rockefeller merged about 100 independent oil refineries into the Standard Oil Company thus, by 1980, controlling about 90 percent of the U.S. oil business. J. P. Morgan was the premier banker facilitating the railroad consolidations, including control over Vanderbilt’s New York Central Railroad; he also controlled a number of life insurance companies and bailed out the federal government debt that ended the Panic of 1893. Often overlooked, it was a period marked by the introduction new technologies that were intended to deskill the labor force, thus lessening workers’ bargaining power.
Many late-19th-century Americans saw the proverbial handwriting-on-wall and sought to check — if not break-up — the growing power of the trusts, the monopolies. In 1890, Congress passed the first federal antitrust law, the Sherman Act, outlawing “every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade.” The Sherman Act also made it a crime “to combine or conspire . . . to monopolize any part of the trade or commerce among the several states.” However, it was not until 1895 that the Supreme Court ruled the Sherman Act could regulate interstate sales and transportation. That same year, the Court found that the Act could bar union strikes that interfered with interstate commerce, thus becoming a major weapon against organized labor.
Nevertheless, it was during Theodore Roosevelt’s presidency that the Court took a more critical, radical interpretation of the Act. In 1904, Justice John Marshall Harlan declared that “every combination” that eliminates interstate competition was illegal, including manufacturing companies and railroads. Going further, the Court found that all monopolies tended to restrain trade and “to deprive the public of the advantages that flow from free competition”; it ordered the breakup of the Northern Securities Company into independent competitive railroads.
In 1914, Congress passed two additional antitrust laws to added teeth to the Sherman Act. One was the Federal Trade Commission Act that created the FTC; the second was and the Clayton Act that bars one company from acquiring another when “the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” Now, a century later, it is a new era of U.S. global conglomerates that dominate the U.S. economy.
A century-and-a-half after the fabled Gilded Age, we live in a world in which so much has changed yet so much is the same. Today, conglomerates – 21st-century trusts, cartels – rule. Where once the domestic market determined what constituted a trust or monopoly, now the global market determines nation-state market control. Not unlike what took place during early days of modern capitalism during the Gilded Age, postmodern capitalism is fostering corporate, industry-sector consolidation that requires a new way of assessment.
Warren’s critical assessment of the tech-trust — notably Apple, Facebook, Google and Amazon – helps illuminate a more substantial reconfiguration transforming all sectors of the economy. Not unlike what took place during the Gilded Age, consolidation is remaking the marketplace. Three key market sectors – finance, agri-business and telecommunications – reveal just how powerful are the new postmodern conglomerate trusts. Much the same analysis can be applied to oil-&-gas, big pharma, auto industry, airlines and still others.
In October 2018, Sen. Bernie Sanders (I-VT) introduced legislation to break up the nation’s biggest banks in order to safeguard the economy and prevent another costly taxpayer bailout. Sanders introduced his bill on the 10th anniversary of the enactment of the Troubled Asset Relief Program (TARP), which injected $424 billion into sputtering banks to stave off a global financial meltdown.“No financial institution should be so large that its failure would cause catastrophic risk to millions of Americans or to our nation’s economic well being,” said Sanders. “We must end, once and for all, the scheme that is nothing more than a free insurance policy for Wall Street: the policy of ‘too big to fail.’”
Three years earlier, in May 2015, the Senator introduced a similar bill, insisting, “If an institution is too big to fail, it is too big to exist.” He reminded Americans that “the biggest banks in the United States are now 80 percent bigger than they were one year before the financial crisis in 2008 when the Federal Reserve provided $16 trillion in near zero-interest loans and Congress approved a $700 billion taxpayer bailout.” He detailed the strangle-hold the big banks wield in stark terms:
The six largest U.S. financial institutions today have assets of some $10 trillion, an amount equal to almost 60 percent of gross domestic product. They handle more than two-thirds of all credit card purchases, control nearly 50 percent of all bank deposits, and control over 95 percent of the $240 trillion in derivatives held by commercial banks.
These banks are the usual suspects — JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs, Bank of America and Morgan Stanley.
Sanders’ critique of the big banks applies with equal accuracy to big agri-businesses. He stresses this issue at rallies in heartland American: “Agriculture today is not working for the majority of Americans. It is not working economically for farmers, it is not working for rural communities, and it is not working for the environment. But it is working for big agribusiness corporations that are extracting our rural resources for profit.” The consequences of these corporate agriculture actions are profound: “Our mid-size and small towns have been decimated. Local businesses were replaced with national chains, many schools and hospitals shut down, and good jobs left at an alarming rate.”
Food & Water Watch finds that agri-business is driving market consolidation. Some of the key sectors where this has occurred are — the Bayer-Monsanto conglomerate controls 78 percent of the corn seed market; market share of four largest soybean seller increased to 76 percent from 51 percent between 2000 and 2015; four companies slaughter 85 percent of all beef; and hog farms in Iowa declined by 82 percent between 1982 and 2007. The Vermont Senator has called for “Roosevelt-style trust-busting laws to stop monopolization of markets and break-up existing massive agribusinesses.
And then there are the telecom trust, the 21st-century railroad, the leading network of mass information distribution. One of the defining features in the postmodern world is the shift from old-fashioned analog wireline or “switched” voice services to the digital world of Internet-based landline and “smart-phone” wireless services. Sadly, as this great transition to digital and wireless takes place, the American consumer – along with municipalities and telecom workers – are being squeezed by the telecom trust. In 2017, the top two US telecom corps – AT&T ($170.8/b) and Verizon ($130.9/b) had combined revenues of $300 billion.
Trump Republicans are setting today’s telecom agenda. The U.S. Attorney General, William Barr, got his political start serving as General Counsel for GTE Corporation, a telco that merged with Bell Atlantic to form Verizon.The FCC chairman, Ajit Pai, formerly served as Verizon’s Associate General Counsel. Since taking office, Republicans in Congress have repealed Net Neutrality laws, encouraged new merger and acquisition deals, and have proposed to reduce the telco’s corporate tax rate. Americans’ phone bills are creeping up, employees are being let go and services are faltering. And the telecom trusts’ promotion machine champions flawed “5G” technology – and this for a nation ranked a second-tier networked country.
The U.S. has entered the age of the new Robber Barons and Donald Trump is its quintessential embodiment. Looking at him on TV or online, he seems to embody the glow of the postmodern capitalist ethos of plunder. Trump is the 21st-century grifter, a pathetic, overambitious character drawn from a second-rate post-WW-II noirnovel. Unfortunately, he has real power – and is misusing it with a vengeance.