Antitrust in America (classic) | Planet Money

Intro

In this episode of Planet Money, the focus is on antitrust in America. The Federal Trade Commission (FTC) has filed a lawsuit against Amazon, accusing the company of being a monopoly and using anti-competitive tactics. This case has significant implications for consumers, businesses, digital marketplaces, and antitrust law. Planet Money takes a deep dive into the history of antitrust and how the US government’s approach to big business and competition has evolved over time.

Main Takeaways

The Rise of Standard Oil and Ida Tarbell’s Investigation

• Ida Tarbell, an investigative journalist, took on the trust, or the consolidation of big companies, in the early 1900s.
• Her investigation into the Standard Oil Company and its founder, John D. Rockefeller, changed the way the US thinks about big business.
• Standard Oil was the biggest trust, with Rockefeller being the wealthiest man ever and one of the most feared businessmen in the world.
• Tarbell faced challenges in her investigation, but her exposé on Standard Oil’s shenanigans became a huge success.
• The Department of Justice filed a federal antitrust lawsuit against Standard Oil, leading to its eventual breakup in 1911.

The Impact of the Sherman Antitrust Act

• The Sherman Antitrust Act was used to determine that Standard Oil had become a bully, using its size to gain unfair advantages.
• The Court broke up Standard Oil into smaller companies, but they still coordinated with each other.
• The Supreme Court’s clarification of the Sherman Antitrust Act guided antitrust law for decades.

The Transformation of Antitrust Law by Robert Bork

• Robert Bork transformed the way antitrust law works in the US and changed the definition of what’s legal and illegal for big companies to do.
• Antitrust policies should not only consider economic efficiency, as it can lead to worse outcomes.
• The antitrust worldview in the 1960s was for the little guy without power, but Bork argued that antitrust law should focus on protecting consumers, not competitors.
• The consumer welfare standard now defines antitrust law.

The Current State of Antitrust and Big Tech

• A smaller number of firms is controlling a bigger share of the market in various industries.
• Google, Facebook, and Amazon have become gargantuan companies due to the world created by Robert Bork.
• Lena Khan, current chair of the FTC, wrote a viral article about Amazon and Monopoly Power and recently filed a lawsuit against the company.
• The rise of Big Tech has made the antitrust issue more urgent and visceral.
• The FTC is facing battles against the robber barons and industrial trust of the gilded age once again.

Summary

The Rise of Standard Oil and Ida Tarbell’s Investigation

In the early 1900s, investigative journalist Ida Tarbell took on the trust, particularly the Standard Oil Company and its founder, John D. Rockefeller. Her investigation, fueled by a belief that big business consolidation was the defining issue of the time, exposed the shenanigans of Standard Oil. Tarbell’s exposé, which became an enormous success and was read by everyone in America, including President Theodore Roosevelt, led to a federal antitrust lawsuit against Standard Oil. The Sherman Antitrust Act was used to break up the company in 1911, marking a significant turning point in antitrust law and the way the US thinks about big business.

The Transformation of Antitrust Law by Robert Bork

Robert Bork revolutionized antitrust law in the US by shifting the focus from protecting competitors to prioritizing consumer welfare. He argued that antitrust law should not only consider economic efficiency but also the outcomes for consumers. This transformation led to the consumer welfare standard becoming the guiding principle of antitrust law. Bork’s ideas challenged the antitrust worldview of the 1960s, which aimed to protect the little guy without power. While Bork’s approach brought corrective measures to the excesses of the past, it also pushed the government and the court too far in favor of big companies, resulting in fewer antitrust cases being brought and rulings favoring Goliath over David.

The Current State of Antitrust and Big Tech

In recent years, there has been a growing concern about the concentration of market power in the hands of a few dominant firms, particularly in industries such as technology. Google, Facebook, and Amazon have become massive companies, benefiting from the changes in antitrust law influenced by Robert Bork. The rise of Big Tech has intensified the urgency and visceral nature of the antitrust issue. The current chair of the FTC, Lena Khan, has been actively challenging the power of these tech giants, filing a lawsuit against Amazon and raising awareness about monopoly power. The FTC is once again facing battles against the robber barons and industrial trust of the gilded age, highlighting the ongoing relevance and importance of antitrust law.

Conclusion

The history of antitrust in America is a complex and evolving story. From the rise of Standard Oil and Ida Tarbell’s investigative journalism to the transformation of antitrust law by Robert Bork and the current challenges posed by Big Tech, the issue of competition and market power continues to shape the economic landscape. As the FTC takes on Amazon and other dominant firms, the outcome of these cases will have far-reaching implications for consumers, businesses, digital marketplaces, and the future of antitrust law.