Facebook and Google cases are our last chance to save the economy from monopolization

It’s the same question asked by tech executives of an earlier era whose companies had also been accused of illegal monopolization — Kodak, Xerox, IBM, AT&T, Intel and Microsoft. And the honest answer, one that regulators and politicians rarely say out loud, is that when companies are so successful that they achieve dominance in their markets, then some of what they used to do — and what their rivals can still do — becomes illegal. At its core, antitrust law says that to save competition, sometimes you have to limit it.

Which is why the government’s recent decision to sue Google and Facebook is so significant.

First and foremost, these cases represent a recognition that regulators and judges were asleep at the switch over the past two decades and failed to prevent monopolization in the economy’s fastest growing sector and a linchpin of American competitiveness.

Simply by bringing these cases, the government will temporarily restrain the predatory instincts of Facebook and Google, which will be on their best behavior for the next five to eight years as the cases wind their way through the federal court system. More broadly, the cases will be seen as a legal shot across the bow of dominant firms in other highly concentrated industries — pharmaceuticals, telecommunications, financial services — who are now on notice that their nonstop acquisitions and hardball business practices could invite similar challenge.

Filing cases is one thing, of course, and winning them quite another — particularly given a steady stream of adverse rulings in recent decades from federal judges who, in the thrall of free-market ideology, have adopted an increasingly cramped and skeptical view of antitrust law. No less than the companies, state and federal antitrust regulators also have a lot riding on these cases. For if they fail to convince the courts that Google and Facebook acted illegally in entrenching their monopolies — or if they are forced to accept a settlement that leaves the companies intact and only modestly restrains their business practices — such a defeat will effectively signal the demise of antitrust enforcement in the United States.

“That would be a damning outcome,” warns Diana Moss, president of the American Antitrust Institute. “It would mean that anti-monopolization law is broken not just for digital platforms but for all sorts of different industries.”

In prosecuting the Google and Facebook cases, the government’s lawyers will have to walk a fine line between “realism and ambition,” says William Kovacic, a former chairman of the Federal Trade Commission and law professor at George Washington University.

On the one hand, government lawyers will try to convince judges that the facts and legal theories on which the cases are based fit squarely with the previous decisions of the Supreme Court and federal appeals courts — precedents that in recent years have been more concerned about too much government intervention rather than too little. That’s the realism part.

The Justice Department’s complaint against Google, for example, tracks closely with the wording of the appeals court upholding the decision of the trial judge in the largely successful case against Microsoft.

And in their complaints against Facebook, the FTC and state attorneys general lay out the history of the company’s “buy or bury” approach to potential rivals that harks back to the tactics used by Standard Oil and the railroads at the dawn of the 20th century that were found to be illegal.

For the government, however, the danger of pursing such a safe and narrow legal strategy is that it might not justify such drastic legal remedies as breaking up the companies, or at least forcing them to share their data, platforms and software with their competitors. More significantly, it would fail to set the new precedents that could be applied to other companies in other industries and reinvigorate antitrust enforcement.

To achieve that more ambitious outcome, says Gene Kimmelman, a former chief counsel to the Justice Department’s antitrust division, the government does not have to go so far as to convince the courts that their past decisions were wrong. But it would have to convince judges that those earlier precedents have to be adapted to the competitive realities of today’s winner-take-all markets — markets where customers all want to use the same network or supplier, the price of a product can be zero, and the competitive threat comes from small start-ups offering a different product or technology.

Even as these cases proceed through the courts, the issues they raise will also be actively debated in Congress, where there is considerable bipartisan interest in restraining the power of Big Tech. And what happens in one forum is likely to inform and affect the other.

The filing of the court cases, for example, is likely to give further impetus to legislative proposals to strengthen the antitrust laws and create a new agency to directly regulate digital platforms, much in the way the Federal Communications Commission regulates telephone and cable companies and the Federal Energy Regulatory Commission regulates electric utilities. In addition to regulating business practices and approving mergers, such an agency could also address issues of privacy, data ownership and regulation of disinformation and hate speech. Just this week, both the British government and the European Union unveiled a proposal for such an agency.

At the same time, the prospect of even more intrusive regulation might prompt Facebook and Google to try to settle the antitrust cases in an effort to slow the momentum, or limit the scope, of the legislative initiative.

Keeping a close eye on both the antitrust cases and the legislative debate will be the members of the Supreme Court, including six conservatives justices who have a well-documented hostility to government regulation of business. The century-old Sherman and Clayton acts are remarkably spare and concise statutes, which has meant that most antitrust law has been judge-made, based on the precedents laid down in individual cases. Any antitrust reform that might come out of Congress, however, is certain to be much more detailed and prescriptive than those earlier laws. Not only would such legislation erode the power and discretion of the court, but it would also likely overturn a number of recent precedents that have made it much more difficult for regulators to limit the size and business practices of dominant firms.

All that could well be playing out in Congress just as the court considers the inevitable appeals in the cases of U.S. v Google and FTC v. Facebook. And it would hardly be unprecedented if some members of the Supreme Court were to consider the political and legislative consequences as they decide the fate of two companies with whom most Americans interact on a daily basis.

A similar dilemma faced Judge Learned Hand of the U.S. Court of Appeals in 1945 as he considered U.S. v. Alcoa. After the longest federal trial in history — two years — a district court judge had ruled against the government’s request to break up Alcoa, declaring that the company had legally obtained its 90 percent share of the aluminum market. Hand himself was an antitrust skeptic. But in a memo to his fellow appeals court judges, Hand recognized that the public would not accept a highly technical ruling that any such monopoly was benign.

“If we hold that [Alcoa] is not a monopoly, deliberately planned and maintained,” Hand wrote, “everyone who does not get entangled in the legal niceties … will quite rightly, I think, write us down as asses.”

In the end, the appeals court ruled that Alcoa had illegally monopolized the market for aluminum, and Hand’s opinion became one of the most influential, and controversial, in the history of antitrust. The cases against Google and Facebook will be no less consequential or contentious.