The latest episode of my podcast Better Offline is a conversation with Matt Stoller — America’s leading voice on monopoly and antitrust matters, and a thoughtful and prolific writer. You can find Matt on Twitter here, and his newsletter here.
It was a timely conversation. At the start of August, a US Federal Judge ruled that Google possessed an illegal monopoly in search and online text advertising. With a future trial set to determine potential remedies, Google’s future is now clouded in uncertainty.
We talked about this, of course, but also looked at the heart of what constitutes a monopoly, how monopolies behave, and - crucially - the bipartisan political missteps and myopia that allowed our economies (and our lives) to be controlled by a handful of unaccountable mega-businesses that operate more like miniature governments.
I felt this conversation was important enough to share here. What follows is a transcript of our conversation, edited for readability and clarity. And if you want to listen to the whole unabridged thing, you can check it out here.
So, this is a very dumb place to start, but I think it's necessary. What exactly is a monopoly?
Not a dumb place to start at all. There are different definitions, but, generally speaking, it is the control of a recognized branch of trade or service, a unified control of recognized trade or service. And that's a definition I'm giving you from Louis Brandeis, who was a Supreme Court justice. But it's the same, I think Milton Friedman had a kind of a similar definition. The essence of a monopoly is control of a market or a recognized trade.
And what do most people not actually understand about them?
I think most people characterize a monopoly as kind of an economic thing or, you know, just a commercial thing. But really, a monopoly is a political institution. So, when we're talking about monopolies, we're talking about what is effectively a private government over a market, over an industry.
If you're operating in a market which is monopolized, then you have a political boss who sets the prices, the terms of trade, who can buy, who can sell, and you're under their thumb. And yeah, it's your trade, right? So, it looks like the quote unquote economy, but in fact, it's really that a person or a firm has political power over you. And if you have enough monopolies in an economy, then at least in the commercial sector, which is a big part of our lives, we're not living in a democratic society. We're living in a society of a bunch of private governments — authoritarian governments over markets.
So, Sundar Pichai of Google would be like the president of his little private government then.
Yeah, I think that's right. There's a good quote from a plumber in the Wall Street Journal who said that, you know, the government can fine me, but Google can put me out of business because Google could take his business off Google Maps. They could change his ranking in Google search. And so, he was way more afraid of Google than the government. And that's because Google has governing power over the internet.
And you can see this [elsewhere]. Like, every publisher can tell you that the change in Google's algorithm can be catastrophic or can be hugely important and impactful in some ways. Google is the private government of the internet, or, at least, the gatekeeper of the internet. And it is exactly what you're talking about. They also have political power because they're a big company and they lobby and whatnot, but just as [they are] infrastructure, they are governing that infrastructure.
It almost feels like Yelp is like a borough of the larger Google country than Yelp [is] controlling the reviews, and Yelp has a weird little mob — like the thing they do where you have to pay them to get rid of bad reviews now. I’ve never really thought about the governmental comparison.
Right. So, what you have [to understand] with something like Yelp is they’re under the control of Google. Google is doing all sorts of things to sort of try to kill Yelp. Yelp and Google has monopolized advertising, right. A company like Yelp has no choice but to move towards a kind of sleazier business model where they're extractive because all the other areas where they could make more legitimate money have been monopolized by Google or have been taken by Google.
So, in one sense, what happens when you have monopolies is you have higher prices and all the rest of it. But another thing that happens is that businesses that are operating often have a choice of continuing in existence or not. The choice of whether to continue in existence is often to [adopt] a business model that can look sleazy or can be problematic or can be coercive.
That’s the choice. Do you go out of business, or do you do this thing that, you know… There's a rule of thumb called Gresham's law about counterfeit money. When somebody starts using counterfeit money, then nobody wants to use real money because even if you want to use real money. You're like: “I'm not going to put real money out there if it's all counterfeit.”
Yeah, and the guy with the counterfeit money has the advantage. You have to play by their rules.
Right, and so bad money drives out the good. This is one of the things you see, for example, when you go to Expedia or Hotels.com. You're looking to book something. They don't show the resort fees, the junk fees, until you get to the last page when you're going to check out, or sometimes even when you get to the hotel.
And it's not that every hotel wants to rip you off, but they all know that you're going to be looking at the price and comparing the sticker price that you see on the results page. And if their rival is not showing you that junk fee, then they're at a competitive disadvantage if they don't lie. A market where you have rules that enable, that allow fraud is just a different market than one where we don't allow fraud.
The fact that you use the term market doesn't mean anything because markets are politically structured. Like a farmer's market, a derivatives market, a slave market — they all use the term market. They're very different institutions, very different moral elements underpinning them, and very different arrangements of power.
Something you have written in the past is that America's in a "monopoly crisis." What do you mean?
So, what you have in a lot of areas — and in most, I think — is monopoly or oligopoly, which is just a small number of companies controlling a market, and [this] is now a systemic feature of the American economy. And it didn't used to be.
There are different ways to measure it. About 75 % of industries in the last 20, 25 years have gotten more consolidated. And we don't have enough public companies for the Wilshire 5000. There are only about 3,400 public companies now. There used to be around 9,000 in the 90s.
Just the number of big companies is smaller because companies have merged and gotten much, much bigger, and this has a lot of consequences. What you see is wages are much lower than they otherwise would be. You see things like the cost of healthcare, which is largely driven by market power consolidation in hospitals, pharmaceutical companies, and insurers. The price of an insured family of four has gone from about $10,000 to $15,000 a year in 2008 to about $30,000 a year today
If you just take those two facts of just how much harder it is to move to a new job because of consolidation, that $15,000 to $20,000 increase that we're paying in healthcare, that's a lot of money. That's that every single year. It's basically almost a new car every single year that's just extracted from every family by this increased amount of concentration.
And you have less ability to move because there are just less places to work.
Yeah, that's right. It used to be that, say you were in a town, you had 10 stores, a couple of dry goods stores, some grocery stores, a butcher — your standard Main Street. And then that all got put under one roof at Walmart. And so, you have one place to work and all the stuff is sold there. And now you don't have any place to bargain if you're a worker.
If you want to set up a store, you can't do that either for other reasons, because Walmart has more bargaining power with suppliers, and so you can't compete. Even if you could do it more efficiently, you still couldn't compete because you couldn't get the supplies that you needed, or you couldn't get them at the same prices.
And that sounds like another manifestation of the political nature of these companies because they just set the terms that customers will expect and that businesses have to [accept] to operate with them.
Yeah. Walmart in the 1990s and 2000s as it was growing — and there are political reasons it grew — there were just changes in pricing law and antitrust laws. But Walmart would literally just go to their suppliers and they would say: “OK, you, Levi Strauss, you're not making your jeans in China. We want you to move production to China if you want to get into Walmart, and you need to get into Walmart because we are 8%, 9 % of the retail dollar and you need it. You're going to do this.”
And they just did this across the board, and they literally restructured how American production happens.
And was that to lower prices? Was that to... Why did they want them to move to China?
Lower prices usually. Also, they had specific ways that they wanted to see their business operate. They just wanted control. There are other things that they did that are actually really interesting [that were intended] to restructure how retail works. But yeah, it was largely a price element.
God. And is the crisis that there are just so many of these little moving powers within America?
You mean that there's so many monopolies? Yeah, I mean, the crisis is that as people get used to being bossed around, they lose their respect for democracy itself, you see a ton of cynicism. And I think the reason that there's all this cynicism about the rule of law, about the idea of living in a society, is because most people experience living in an authoritarian part of their lives.
I don't want to overstate it. We're not living in a dictatorship or anything. This is still a democracy. The amount of fear in commerce is overwhelming at this point. When you talk to people in lots of different areas, they're afraid to talk about what's going on in their industry because the monopolist can retaliate against them. And so, if you're living in fear, then you're not living. You're not free.
That's interesting because so much of what I've talked about with the Valley is this — but without really framing it like you are. People fear Sam Altman of OpenAI. He's grown big because people fear his existence and what he may say about them. Reid Hoffman, same deal. And just… I never really considered the political nature of these. Is this [fear] how it got so bad that the corporations got this level of power?
It's interesting. The story of why this happened is actually not a story of big corporations seizing power, because we didn't actually have this problem in the 1970s and before that. I mean, there’s always like some big companies and there's always been some problems here and there, but largely this is a story of bad ideas taking over.
Here’s what happened. We’ve had this populist tradition in America, right? The original populists were a political party in the 1880s and 1890s. They were farmers from the South and the Midwest. They were upset about a number of changes in the economy — the dominance of railroads, the dominance of large banks. Basically, they were mad about Eastern capital controlling their businesses and making it hard to make a living selling farm products. This is very similar stuff that we're seeing today.
So, Standard Oil didn't like that. But you could go back to the 1600s and find antecedents [to the Populist Party] in England and so on and so forth. There has always been this tradition of “no one should have too much power” in America, right? That's the checks and balances thing, the Federalist Papers. Also, [people] should try to avoid conflicts of interest. I mean, that’s in the Bible. No man may serve two masters.
These two sort of basic themes — checks and balances, no conflicts of interest. And we've always kind-of understood that that's the way that we should arrange our society. [We had] very bitter fights in the 19th century over corporate chartering. This idea that we used to be laissez faire and that's always [how it’s been] is nonsense
What is corporate chartering? What do you mean by that?
So, just the idea of being able to charter a corporation, create a corporation where if it does something, it’s liable, but me as a human being that runs it is not. An eternal entity that doesn't die and is not a natural person, but can conduct business as if it is a natural person. That was an innovation in the 19th century.
It was not something that anybody could get. There were all sorts of fights over who could charter one, and for what reason. Originally it was academic institutions and municipalities. They didn't allow anyone to just charter a corporation because they were like: “this can be really dangerous.”
Corporations were originally chartered to allow the pooling [of capital and labor]. Eventually they started to charter them in business. And [governments] said, you can pool capital and men to build things of public works and make a little profit, but we're going to put very restrictive conditions in there. And it was very restrictive until the 1880s and 1890s.
That's when you started to see federal antitrust laws because the state chartering didn't work as well. We needed a new regulatory regime, and that's when we got into the federalization of it. But that's the story. The story is we've always kept a tight rein on commercial concentrations of power.
In the 1970s, there were two different political and intellectual movements that won the debate, one within the Republican Party, and one within the Democratic Party. The [winner of the] Republican debate — the one on the right — was the Chicago School. These were the libertarians. And their argument was power doesn't matter. Concentrations of power don’t matter. Conflicts of interest don't matter. Traditional things like usury caps, all that stuff, is very silly. The only thing that matters is efficiency.
We need to just think about what is most efficient, and to understand efficiency, let's ask economists. They're the scientists, right? We're going to move this political question out of the realm of the public and the citizen and move it to the expert — the scientist, the economist. That's why these political things become the economy. That's why we start using terms like human capital instead of people, or infrastructure instead of bridges.
The language gets weird and sort of flabby. I noticed this in some of the government documents that I was looking at from 78, 79. The language started getting weird and very technocratic. Wonky. So that was on the right.
On the left, was, you know, it was sort of like some quasi-socialists who made a similar argument. They didn't like small business, right, because they thought that small businesspeople were racist and rube-y. They preferred working with the big banks and the big chain stores. They thought they were cosmopolitan and smooth and cool
They were kind-of more socialist. They thought we should have big planning, Work with IBM, work with the big fancy companies to sort of plan things. And they were like, “we need experts to kind of be planners in the economy.” And that's actually not very different from saying, “let's just allow the economists to run things.” It's actually very similar.
Both the right and the left, they kind of hated each other, but they agreed that populism was bad, that small business was sort of foolish and silly, and that what we really should do is have big institutions running things. Those big institutions, maybe the right thought, well, they should just generate cash because that's more efficient. And the left maybe thought, let’s have them be more socialist and look out for the public interest. But that was the gist of what both [sides wanted], and they won. And then they changed antitrust laws in the 1970s and a whole bunch of regulatory laws in the 1980s.
Take, for example, the deregulation of airlines, which happened in 1980. The most aggressive proponent of deregulation of airlines was Ralph Nader. It wasn't a right-wing thing. The airlines themselves didn't want it. It was Ralph Nader pushing it very aggressively. He was also very aggressive about pushing for deregulation in banking.
It's weird how the two very different sides both seem to kind of turn against workers, almost?
Yeah, so Nader realized he made a mistake, but the basic idea there was, it's bad for consumers that we have this regulatory schema for banks or for truckers or for airlines. It increases prices. It's not as efficient as it could be. If we consolidate power, that's more efficient, right?
Because at scale you'll be able to...
Right. You know, even today, if you read the autobiographies of people who worked in the Carter administration, the invective, the anger they have towards the Teamsters is really weird. I've read multiple people from [that era]. Alfred Kahn was kind-of the big one. He used to talk about how the goal of a lot of the policies was to just destroy the Teamsters and reduce wages for workers.
Why was there such bipartisan distaste for small business? It just doesn't make sense. Hindsight is 20-20, but it just feels so illogical almost on the left.
Yeah, I mean, there's an elitism to it. So, you had the first [postwar] generation. It's the sixties and seventies. And now you have finally like tens of millions of people who are college educated, right. It's right after the GI bill and World War Two, and they're trying to understand the economy.
The New Deal exists, right? The New Deal framework is there. Things are basically prosperous. And they stop caring about questions of political economy and concentrations of power and inequality, because there just isn't that much of it. I mean, yeah, there's some rich people, but they're seen as boorish and tacky. They're not considered powerful. Wall Street doesn't really matter. It's not a big deal
You know, in 1979 you could leave high school and you could just get a job making 50 bucks an hour in a factory. Right. That was just a very different society. So there just wasn't the concern over [corporate power].
And that $50 an hour job was not, I'm gonna guess, from a megacorporation.
It could be. It could be for Ford, or it could be for a supplier of Ford or whatever. There was a lot of light manufacturing by smaller companies. The point is that you had a lot of options. Inequality was fairly low, and you could also start your own business. It wasn't that hard to do that.
But the political infrastructure for that had kind of fallen apart. When inflation hit in the 1970s — and inflation hit for a variety of reasons, mostly having to do with changes in banking and oil shocks — those two movements [on the right and the left] spent a lot of time convincing people that the American economy was misshapen because there wasn't enough expertise running things.
And so, when there was inflation, when there were these financial shocks, the argument was we got to get rid of these New Deal rules.
Now, there were legitimate reasons to update those rules. The train system was a mess because you couldn't close down unprofitable routes. There were real problems with our transportation system. It was hard to update trucking rules.
There were things that needed to be updated, but they just said, you know what? All of this stuff, just throw it out and give freedom to capital to unionize, to do whatever capital wants, because that's how to bring down costs. You got to make things more efficient and that will address pricing.
And in the 1980s, that's what happened.
Was it a succession of legislation or was it one big moment?
It was some legislation, but a lot of it was through the courts. It's not like we ever repealed any of these antitrust laws, it's just that interpretations by enforcers and the courts changed. There’s this document from the Reagan Administration that a colleague uncovered from 1980 — a transition document from two important economists — that said, “we're not going to be able to convince Congress to get rid of antitrust laws, so we're just going to have to change it administratively by not enforcing the laws that we don't like.”
That's what Reagan did with mergers. He said, we're no longer going to enforce anti-merger laws. And so that's why you saw a huge consolidation wave in the 1980s. You know the movie Wall Street? Yeah, so that's about a merger. That is the moment. That's what happens.
In terms of legislation, yes, there was a tremendous amount of deregulation of finance, but also of trade, of shipping, of railroads and trucking. There were a lot of legislative changes that fostered the consolidation of economic power in the name of efficiency.
You know, one of the first laws that changed was the Consumer Pricing Goods Act of 1975. They said, we are going to allow discounters to basically charge much less than an item costs in order to kill their rivals. The idea used to be that if I was a producer and I sold, say, Ingersoll watches or something, I could tell the retailer what minimum price they could set. And that way, the retailer couldn't price below cost to draw people in and kill their rivals.
The reason Amazon was able to kill its rivals is because it could borrow from Wall Street for as long as it took, whereas its rivals couldn't. And that's called predatory pricing. Uber did something similar. That used to be illegal.
Right.
One of the laws that made it possible was the Consumer Pricing Goods Act of 1975. That was put in place by the Democrats who had just gotten elected and they didn’t know what to do about inflation. This is something that the Naderites told them to do. They did it, and Walmart exploded as a result.
In 1970, Walmart had about, I don't know, $20-30 million in sales. By 1980, it had a billion dollars in sales. By 1985, Sam Walton was the richest guy in the country.
So, a bunch of stuff legal changes happen — deregulation of finance, deregulation of all of these different areas — and now the dramatic relaxation of antitrust laws. And so when you legalize monopoly, which is effectively what happened, then you get a bunch of monopolies. And this is to our earlier point. If you don't monopolize, then you get eaten, right? You get destroyed.
You could say Mark Zuckerberg ‘s rolling up the social media space is bad. But if it hadn't been him, it would have been somebody else. And the same thing with Google. The same thing with all of these guys. When you create a legal environment like that, that's what happens.
These companies, they're big, they're powerful, and they use lobbying and infrastructure, and they're governing. But it didn't start out that way. Now we have a political economy problem.
So, what does it actually mean that the government said [Google] had a monopoly over search? What are the ramifications?
So, this is getting to the search trial. Google was just deemed a monopolist by a judge, Judge Amit Mehta in DC District Court. It's actually their second loss. They were also dubbed a monopolist in the Android app store. And there's a third case that's starting where it's about their control of the software that underpins online advertising markets. That starts in a couple of weeks.
Anyway, what [Judge Mehta] said is that Google is a monopolist because they control search, right? General search services, and then they control search advertising. And what they were doing that was illegal is they were preventing rivals from getting into the search market using contracts.
And so, it's not just that they were monopolizing, it's that they were thwarting rivals from challenging them. And then they were raising ad prices as a result of their control of this market.
If you are a monopoly and then you do something to maintain that monopoly or to extend your monopoly, that's what makes it illegal. Like, if I just create a new product category, some widget that no one's ever heard of before, and I start making it and it's popular, I'm by definition going to have a hundred percent of the market. That’s not illegal.
What would be illegal is if I had a hundred percent of the market and then I said to my distributors: “Hey, if you want my thing that everybody wants, you can't distribute my rival's thing.” That's what turns it into an illegal conspiracy.
So, how do you feel it’s going to go? What do you think happens next?
I don't know. The case started in 2020. It was originally brought by the Trump administration. The Biden administration has brought it forward. And it took until 2024 when it went to trial. And finally, the judge ruled that Google is a monopolist. Now is the second part of the trial, which is called the remedy phase, where the government comes and says: “here's what we want to cure the monopoly.”
And Google will say, “no, I don't think that's right. This is what you need to cure the monopoly.” And there will be effectively another trial. And then the judge will rule and make a decision. And then it will go to appeal, probably to the Supreme court, or depending on who wins in, you know, in this election, they could settle it as the Bush administration did with the Microsoft suit in 2001.
So, all of that being said, we don't even know what the Justice Department is going to ask for. The Justice Department could ask for something very small, in which case that's the most you're going to get. Or they could ask for, you know, breaking up the company and opening up the data vaults to let anybody use the data that Google collected, or opening up their IP vaults and saying anybody gets to use that.
There's a ton that the DOJ could ask for. We're going to sort of find out more about that in the next month or two.
I mean, this is the first big tech company that's been deemed to be a monopolist and the antitrust law. A lot of antitrust law is just not so much what the law says, but whether you use the law. The Department of Justice didn't bring a monopolization case for pretty much for 20 years since Microsoft. The Google case was the first one — certainly the first big one.
The FTC brought a few, there've been some private cases, but this is really the first big one since Microsoft, and what’s going to happen — and is already happening at every big company — is that every CEO in a company with market power is asking their counsel if they’re doing something that could land them in hot water. They didn't have to ask that a few years ago because the general counsel or their antitrust counsel could say, “eh, don't worry about it.”
Yeah, who gives a shit? It won't matter. They're not gonna do anything.
No one would ever bring a case, right? But now not only did the government bring a case, but they won the case. So, it's like, “okay, now we gotta be careful.”
How do you break up a company like Google though?
Wall Street does it all the time. I think DuPont just broke itself up into multiple pieces. You know, Google is not just one jumbled together thing. Google has different divisions. And so, you got to [bring] an investment banker in there to sell parts of the company. It's not hard, right?
This is something that Wall Street knows how to do. It’s not rocket science. Google has a bunch of people who work in YouTube, you know, there they have someone who's a CEO of YouTube. Now you can just say, “okay, if you have a share of Google, you now have a share of Google and you have a share of YouTube.”
There are [some] difficult things to break up. Like, let's say you wanted to have a separate search engine, right? Do you clone it? Who gets the Google domain? Who gets the brand?
Let's say you open up the data vault and you say other entities can come in and use the data. Those are technical questions, and the way you would deal with it is to have Google pay for a special master who would run a technical committee that would make a lot of decisions. That's what Microsoft had to do after they lost. There was a technical committee that came in and basically was a regulator for Microsoft's couple hundred people, who were just making sure that Microsoft's software was compatible with other entities' software. And they had certain legal authority over Microsoft.
You do that for parts of Google where you can't actually do a breakup. And there you go — a remedy is not that hard, depending on what you want to do.
It almost feels like they kind of want us to think it's harder than it is because that benefits them.
What Google has been saying is, all of this stuff is so hard. It's so expensive. How could we do this? And also, it's not fair. And the judge is basically like, “come on, you're Google. You've been saying how awesome you are for a long time. You can do this. This is not that hard. And it's not going to take you 10 years and $8 gazillion.”
Are there other monopolies in the tech industry you're paying attention to?
I mean, the most obvious monopoly is VeriSign's control of the dot com domain. If you want to register a dot com domain name or you need to renew one, you’re going to pay a registration company, and they’re going to have to remit a percentage of whatever they charge. I think they charge $9.50, and because the government charters them, they have 100% of the market.
[Editor’s note: Earlier this year, Verisign raised the cost of .com domains from $9.59 to $10.26]
But are you suggesting there [should] be other charters? Or charterers?
Well, what the [government] should do is either just put a price cap on it and say,” you get to charge two bucks and that's it.” Treat it like a utility and every three years just bid it out and say, “okay, whoever gives the best price gets to manage the .com domains.” They've done that for other domains and it tends to drop the price pretty dramatically.
So this is a personal one: How do you feel about the Madden franchise with Electronic Arts? The reason I ask this is because it sucks.
So, with monopolies, the moral arguments aren’t always obvious. I don’t know much about this, but you used to have a lot of different NFL sort-of football games, and they were innovative. You had to innovate around different features. I don’t play video games. I don’t believe in fun. I don’t think there should be any joy, but I lost that argument.
With these long-term monopoly arrangements, I think there’s something really problematic about it, but I don’t exactly know what to do about it. You know, it’s not that Madden has gotten worse. It just hasn’t improved. And there’s also some of the other sports games. They’re extracting more and more money — you see this with Fanatics, too —but they’ve made the experience in sports worse. I think we need to look at these long-term exclusive contracts, and there are some questions, like should the NFL be able to leverage its brand, which is a government-granted monopoly, and turn it into another monopoly? Or should the NFL be forced to say, “Anyone that uses NFL in a game has to pay me, but I can’t restrict who gets to use that in a game.”
Right...
There have been antitrust cases on that. There was one in the 40s that restructured Hollywood. So, there were a bunch of movie studios, and they owned or they controlled theater chains, and they wouldn't let rival movies into their theaters. It would be like: “if you want Gone With the Wind, which everyone wants to see, then you have to take our other movies, and you have to keep our rivals out of your theatre.”
It was just a way of turning their monopoly over legitimate copyright into a monopoly over distribution of movies in general. The Madden thing feels like the NFL is turning their brand into a tool for control over football-related games. And that doesn't feel that it's had the consequences that we don't like — higher prices, worse quality.
You're right about Madden. I think it's a great example of a problem with this kind of long-term licensing agreement. It keeps things trapped in amber. Things are only as good as the monopolist decides.
Yeah, that's right. And EA Sports will overpay, right? Like, they will pay more just to be the monopolist, right? They're not paying for the license. They're paying for the license and to exclude someone else from getting into the space.
Kind of like Apple with Google.
Yeah, that's right. So, the Sherman Antitrust Act bars monopolization and restraints of trade, and if you think about the term restraints of trade, it is about saying someone shouldn't be able to restrain trade. It's not a critique of big business. It's a critique of not allowing business to get big, right? And this is a case where they are preventing more business from being done by paying explicitly so others won't get that NFL licensing brand.
It almost feels like monopolies are distinctly un-American.
Well, let me get this quote from Woodrow Wilson, because it's a really good quote. I know he's virulently racist and everything, but take the good with the bad.
“America was created to break every kind of monopoly, and to set men free, upon a footing of equality, upon a footing of opportunity, to match their brains and their energies.”
So, he actually appointed Louis Brandeis to the Supreme Court. Thomas Jefferson wanted to put an anti-monopoly plank in the Constitution. That was one of his critiques. You see, historically, the anti-monopoly lens is kind of a critical way to understand American history. And you can see this over and over and over. There is this fear of monopoly power, and it comes from the recognition that we do not want to be run by a king.
John Sherman, of the Sherman Antitrust Act, said that if we will not be ruled by a monarch, we should not be ruled by an autocrat of trade. He was very explicit about the link between monarchy and authoritarianism and monopoly. And they were using the term monarchy because fascism hadn't happened yet, but monarchy did exist. In the 19th century, Americans were looking across the ocean and they were seeing a bunch of kingdoms. There was a little bit of democracy, but that's what they were really looking at. And they were like, we don't want that.
Today we would just say fascism, and we did analogize monopoly to fascism in the 1920s, 30s, and 40s. It has always been foundational in America that concentrations of power are what we escaped, and they are not what we want here. And there's always been this tension because you do need to consolidate capital and effort to do great public works and to do great works in general. But how do you control the power of that? How do you control the power of industry?
If you're going to put a billion dollars together to build a railroad across the country, that’s awesome. Now you have a transcontinental railroad. But who runs that railroad and controls the prices they charge, or the ability for them to charge different prices to different classes of people based on who they want to see succeed? Now, all of a sudden, you're talking about a political problem.
Well, of course, you don't want to say you can't have a railroad, but you do have to deal with the political power that's concentrated. And it's true with telegraphs. IT’s true with the Internet. It’s always been a political problem that we’ve tried to address, and what I think happened in the 70s and 80s is that we just forgot about it, and all this consolidation happened, and now we’re trying to get a handle on it.
Do oligopolies have the same problem? Because right now in tech you have basically three or four, maybe five companies that control all cloud compute. Is that something we should let stand? Like, do we need to see signs of price fixing? What are the bad signs?
Good question. Every market is its own special snowflake, right? Some markets, you can structure to have a lot of entrants. You can have a lot of people growing corn. You can have a lot of banks.
It’s not totally clear to me that you could have a lot of say auto producers. You’re not going to have a family artisanal auto producer that makes a lot of cars, right? Same with chemicals, same with lots of different industries. Semiconductors.
Cloud computing, when I look at it, it's a capital story, right? Who has the capital to build out the data centers? It might be the case that you really can only have three or four of them, maybe have some specialty cloud computing companies. This isn’t an area I’ve studied extensively, but typically when you do have entities where there’s a huge capital investment, and there are natural limits on the number of competitors, you have some form of public utility regulation.
This usually takes the form of saying: “You can't engage in price discrimination. You can raise your prices, but you can't charge more to that entity for the same service than you charge to this other entity, and you can't engage in surveillance of your clients to give yourself an advantage.” It's a little bit like a railroad or a granary or something which is clothed with public interest, but is owned by a private entity.
It gets a little tricky with things with companies that make open source tools for cloud computing entities. Do those cloud computing entities just absorb those tools, make their own version of it? I don't have an answer to all of the questions about how to run a cloud computing infrastructure business, but generally you want the economies of scale, but to pull the ability to be arbitrary and coercive out of the business model through antitrust law or regulations or just transparency of pricing.
So, there are different techniques, but the basic idea is to recognize that there is a public interest in this private infrastructure, and the public has some right, not total right, but some right to control how these entities are operating.
Another question, and I think we can wrap up with this one. Is Meta a monopoly? Because Meta is the only provider of advertising on Meta's product, and there is no way that someone realistically could compete with Facebook. It’s too big at this point. And same with Instagram, kind of. Is it a monopoly?
I think an easier way to conceptualize this would be to look at Apple and Google. And you would say, “Apple's not a monopoly. I can buy an Android phone, right?“
That's true if you're looking at it from the perspective of somebody who's buying a phone. It's a duopoly. There's a lot of market power there, but it's not a monopoly. However, what if you've bought the phone? Now, all of a sudden you, it's not easy to switch, right? You're locked in. Is Apple a monopoly? Kind of.
The same thing is true for getting [a train]. Sure, there's a lot of railroad options, but there's only one railroad that goes from one town to another. So, there might be a bunch of different railroads, but for what you need, there's only one option. There's lots of ways to understand what market power means.
So, if you take that back to Facebook, which is really like a conglomerate of Facebook, Instagram, and WhatsApp, do they have market power and what do they have market power over? I think you'd look at the ability to buy certain kinds of advertising, right? If you're running advertising campaigns, do you need to buy on Facebook or can you just avoid Facebook entirely?
This is one of the questions in the Google case, and this is the question in actually multiple Google cases, and it's been a question in a different case involving medical advertising, which had involved a company called IQVIA. There, the court found that in fact, yes, if you are doing specifically pharmaceutical marketing, IQVIA has market power in those very narrow places where you have to buy.
I think the question I would ask is if you're an advertiser, do you have to buy through Facebook's products? That's kind of how I would look at it. And I think you could make a pretty good argument that Facebook has immense market power in social networking in general.
There's different ways to test for monopoly. You could just say, “well, can they raise prices without really losing very much?” Which they have been, and I think it's pretty clear that they can. if there were another option, they would see lots of customers bleeding to somewhere else and they don't see that.
Another way to understand it is after some of the scandals that they've had, do they lose customers because of it? Do they lose users because of it? And the answer is no, right? So there doesn't really seem to be an effect on the quality of the product. It doesn't seem to affect whether people use it or not.
Actually, I might push back at that a little bit — and perhaps I'm misunderstanding your point — but Facebook's advertising product is decaying to the point that it's actually unreliable how much comes out of it. There's a big thing where they approve fake ads for fake companies. So, it's interesting as well because it almost feels as if we need a full consumer awakening just to the concept of monopolies writ large, so that people can start looking at these companies and acting, and even just discussing them differently.
Right, so to Facebook, the product quality is decaying, the advertising quality is decaying. Are they losing business because of it? Because if they're not, then that's proof of monopoly power. If there were a competitive market and the quality of a product went down, people would say, “I'm not going to buy that product anymore. The shirts fall apart. I'll go buy somewhere else.” If that's the only place where you can get the product, you have no choice. You have to keep buying from them, right?
Right, that makes sense. So Matt, this has been such a pleasure. Thank you so much for joining me today. Where can people find you?
I write a newsletter called thebignewsletter.com, which is about monopoly power and finance. And I also am the research director of a nonprofit called the American Economic Liberties Project. And then I rant on Twitter way too often.
You can find Matt Stoller on Twitter here, and his newsletter here.
