Boston Tea Party has warning for Facebook, Google

In November, it was possible to dismiss the Trump administration’s antitrust lawsuit against Google as too weak, too narrow, and too late. But now, more than 40 states – and the Federal Trade Commission – have taken action against another tech giant: Facebook. This seems unlikely to be the last major lawsuit against the tech giants.

While these cases ostensibly concern violations of antitrust laws, they are a sign of something bigger: the rebirth of a long-standing antimonopoly tradition in the United States. the history of the nation.

As historian Richard John has observed, antimonopoly is often confused and confused with antitrust. In fact, it predates antitrust law. In the 17th century, economic writers began to warn of the economic and political dangers posed by business.

Much of their indictment involved companies licensed by Parliament that had explicit and exclusive commercial rights. In 1600, for example, the East India Company obtained a monopoly on British trade with Asia. The goods included silks, spices and tea.

Most Americans know a little more about the Boston Tea Party in 1773. But one key piece of the story is often overlooked: they threw the tea overboard because they viewed the East India Company. like an illegitimate monopoly. Under the so-called “tea law” passed by Parliament, they had no choice but to purchase their tea from a company chosen by the government.

A Patriot, for example, objected: “Early teas may be sold cheaply to make a popular entry, but when this mode of receiving tea is well established they, like all other monopolists do. , will negotiate a bigger profit on their goods, and put them up at whatever price they want. “

Adam Smith couldn’t have said it better – and echoed this point in “The Wealth of Nations,” first published the same year the Americans declared independence. But where Smith’s critique has focused more on the economic implications of monopoly behavior, Americans have emphasized the political implications of a concentrated economic power. As one historian of this episode observed, the Patriots’ objection was not a question of price; it was a matter of principle.

In this formulation, the monopolies threatened to destroy freedom itself. It was what was described as a “monster, too powerful for us to control.” Another warned that if the East India Company got a foothold in America, “they will spare no effort to become your masters … they will become the most powerful trading company in the universe.”

The idea that monopolies would inevitably corrupt the political system and undermine freedoms survived the American Revolution. At the start of the republic, anyone wishing to set up a company had to obtain a special dispensation from a state legislature. This angered the anti-monopolies, who rightly pointed out that it gave politically-bound individuals the ability to get a charter – and outsmart potential competitors.

The solution the Americans ultimately adopted was not to stop issuing corporate charters – let alone nationalize industries that could easily be dominated by a single company – but to make it easier to obtain a charter. . The country was the pioneer of general laws of incorporation which made it possible to create new companies without resorting to the legislature.

Yet there was one institution that continued to enjoy an unusual monopoly: the Bank of the United States. This congressional company had a unique role in the larger financial system. Although private, it served as the financial arm of the federal government – at least until Andrew Jackson became president in 1829.

His so-called banking war devoured the nation for several years, beginning with Jackson’s veto on a bill recharging the bank. In his now famous veto message, Jackson criticized the Bank’s “monopoly” on doing business with the government, and warned of the “great evils” posed by the Bank, which said. considerable power to the elites. does not respond to the will of the people.

It was the classic anti-monopoly statement. Jackson didn’t care if the bank was doing a good job or if it was well run; he didn’t care if the Bank brought huge economic benefits to the country. This is an unwarranted concentration of economic power that must be destroyed to protect democracy itself.

Jackson succeeded, finishing what he called the “Corrupted Monster” in his second term. This was one of the great victories of the anti-monopoly tradition. As a result, the United States would not get anything close to the Bank of the United States until the creation of the Federal Reserve in 1913.

But a much greater challenge awaited the forces of the antimonopoly at the end of the 19th century. The rise of massive private companies like Standard Oil heralded a disturbing new type of business. They conquered their competition and then used their new market dominance to thwart futures.

Third parties rose up in response, from Greenbackers and populists to working class organizations like the Knights of Labor. The movement also attracted many elites and businessmen, especially those who feared being crushed by new business combinations.

The criticism they offered did not focus on the economic inefficiencies and injustices created by these behemoths, let alone the size of companies. Instead, their animosity stemmed from the belief that a concentrated economic power could easily corrupt the political system itself.

This would ultimately lead to antitrust laws, first in state legislatures and finally at the federal level with the passage of the Sherman Antitrust Act.

As the federal government began to enforce antitrust law to challenge Standard Oil and others, something surprising happened: The political dimension of anti-monopoly began to recede.

In 1911, the Supreme Court formulated what became the rule of reason doctrine in the Standard Oil case. It restricted the application of antitrust law to companies that used illegitimate methods to gain market domination, which was more restrictive and narrower than the antimonopoly tradition from which it emerged.

Things did not change overnight, and companies concerned with avoiding the wrath of antimonopolies went to great lengths to prove they were serving what was now called “the public interest.” As historian Kenneth Lipartito observed, companies from the 1920s to the 1960s pointedly adopted this perspective, avoiding competitive practices that could lead to conviction.

But that fragile consensus collapsed in the 1970s and beyond, as jurists like Richard Posner and Robert Bork further reduced the meaning of antitrust, arguing that it should only be invoked when obvious damage was done to consumers, not to competitors. This interpretation took hold under President Ronald Reagan and continues to dominate.

Antitrust lawsuits against Big Tech could drag on for years in court and ultimately fail. But Facebook and Google must not ignore the popular forces taking power against them: Americans have a long history of viewing monopolies as inherently dangerous, regardless of the benefits they bring.

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Stephen Mihm, associate professor of history at the University of Georgia, is a contributor to Bloomberg Opinion.