Senator’s plan to breakup tech companies is not a new idea

When Sen. Elizabeth Warren of Massachusetts proposed a plan last week to break up dominant technology companies, she included an idea that has long been discussed by those who want antitrust action: The current giants on the Internet age could not have reached their status absent earlier antitrust cases against previously dominant technology companies.

It's a provocative idea, applied not just to the more recent federal litigation against Microsoft Corp. but to earlier cases against IBM and AT&T Inc. Taken to the extreme, it implies Silicon Valley itself could have remained mostly orchards and California would be a far poorer state but for government action.

The Democratic senator's plan targets "platform utilities," sites and services set up to connect large numbers of people and companies. It would bar them from competing directly against other companies on those platforms. The rules would apply to companies with revenues in excess of $25 billion a year.

The companies that are the main target of Warren's plan -- Amazon.com Inc., Facebook Inc. and Alphabet Inc., parent company to Google LLC -- have not formally responded toit . None of the three would comment on the record for this story.

But several technology industry groups have pushed back.

"What we're seeing is an assumption that correlation equals causation," said Carl Szabo, general counsel with the industry group NetChoice. "That thing you're not seeing is evidence."

For instance, Szabo noted, United States v. Microsoft Corporation, 253 F.3d 34 (D.C. Cir. 2001) didn't save Netscape, the early browser company at the heart of the government's antitrust case. The litigation also roughly correlated with a crash "that saw hundreds of dot-com companies collapse."

"Should the reverse be true?" Szabo asked.

The view that the current boom relied on past antitrust actions is among the key arguments made by a group of legal scholars known as neo-Brandeisians. This aspect of their argument may be most closely associated with Tim Wu, a Columbia Law School professor and author of the 2018 book "The Curse of Bigness: Antitrust in the New Gilded Age." Wu was among several leading neo-Brandeisians to praise Warren's plan. He did not respond to a request for comment.

But Gary L. Reback, of counsel with Carr & Ferrell LLP in Menlo Park, said he's among those who have been making many of these same points since the 1990s or longer. He is widely credited with convincing the U.S. Department of Justice to open the antitrust case against Microsoft.

Reback said one doesn't need to rely on abstract arguments to show Microsoft and other technology giants intentionally stifled competitors; they said so themselves at the time.

Prior to its 2001 settlement with the government, Microsoft could have simply blocked access to Google's home page on its Internet Explorer browser, which had a roughly 90 percent market share at the time. He shared a mock-up of the warning page Microsoft had come up with instead, warning users Google was an "unsafe" website.

"If they had done that, it would have killed Google in the cradle because nobody would have clicked," Reback said.

"But they were afraid of antitrust enforcement. They were right in the middle of this case," he added.

Reback and others have also argued Microsoft itself could owe its status to a series of antitrust cases against IBM, especially when it spun off its software division in 1956. The late IBM CEO Thomas Watson said in his own autobiography he made the move because he was "afraid of antitrust enforcement," Reback said.

Critics of Warren's proposal also argue modern antitrust fails to take into account the size and power of foreign technology giants, especially from China. Many also point to the many small businesses that have thrived selling products on Amazon, reaching customers and markets they never could have without such a platform. Finally, some argue "platform utilities" don't have the best reputation for innovation and safety.

But even some supporters of greater oversight to prevent technology monopolies are skeptical of Warren's plan.

"The legislation is not sufficiently nuanced to take advantage of some of the good things platforms can do for us," said Eleanor M. Fox, a professor focused on trade policy at the New York University School of Law.

Fox said the focus on legislation is a response to the refusal by federal courts to use Section 2 of the Sherman Antitrust Act to break up monopolies. But she added that if Democrats regain control of the Senate and the presidency, they would also regain control of the Federal Trade Commission. The FTC, in turn, could opt for lesser "behavioral solutions" that would, for instance, bar Amazon or Google from favoring their own products.

Underlying the entire debate is a disagreement about whether antitrust law should be used mainly to protect consumers from high prices, as conservatives have argued, or to enhance competition and protect consumer privacy.

The federal courts have taken the former view, said Robert H. Lande, a professor specializing in antitrust at the University of Baltimore School of Law. But he added there's nothing stopping Congress from changing 40 years of orthodoxy with a new law.

"Warren's new legislation would stand up in court," Lande said. "That's not an issue."