What happens when big companies get too big?
They get taken apart at the government scrapyard (otherwise known as the antitrust division of the Department of Justice).
And with the Trump administration’s new antitrust enforcer Makan Delrahim now confirmed by the Senate, it sure looks like he could swing an awfully big mallet at Big Tech all too soon.
Back in July, I warned that just such a trend was already in the works for Big Tech — Amazon, Google, Facebook & Co. — and that tech investors should beware.
“The stirring of antitrust activity,” I wrote, “goes hand in hand with overheated markets that only amplify the power of a few companies that become too big, too dominant … in a word, too powerful.”
That’s exactly the kind of language expressed by Delrahim’s agency four months later in opposing AT&T's $85 billion proposed merger with Time Warner: “The combined company would use its control over Time Warner’s valuable and highly popular networks to hinder its rivals.”
AT&T, of course, is not exactly “Big Tech,” and the telecom has already said it will fight for merger approval in the courts. The company’s CEO says the DOJ’s opposition “defies logic.”
But the pursuit of antitrust cases has always rested as much on the public’s state of mind as it does on legal precedents.
Is Amazon Next?
As an antitrust expert at the University of Pennsylvania Law School noted to Yahoo Finance recently:
“Attitudes toward mergers are changing, and they’re changing in the direction of more enforcement. There’s a view out there that mergers have been underenforced in the past decade or so, and that too many mergers have gone through that yielded higher prices [for consumers].”
So think of the DOJ’s case as a testing of the antitrust waters to see if the tide of judicial and public opinion has turned against “bigness.”
In decades past, the rising of that same tide forced…
- Standard Oil to break itself up into 34 independent oil companies in 1911.
- Xerox to stop monopolizing its patents on “plain paper” copier technology in the 1970s.
- Microsoft to give consumers a choice of internet browser software in 2000.
All of these cases threw shareholders for a loop for years, in the form of knocked-down stock prices.
If Delrahim’s lawyers win the DOJ’s case against AT&T, look for his agency to turn its crosshairs on the tech denizens of Silicon Valley and Seattle next.