American Precedent: Dissolving the Monopolies

"Behind the ostensible Government sits enthroned an invisible Government owing no allegiance and acknowledging no responsibility to the people. To destroy this invisible Government, to dissolve the unholy alliance between corrupt business and corrupt politics, is the first task of the statesmanship of the day."
— Theodore Roosevelt, 1912

Every generation of Americans has been told, by the men who profited from it, that the monopoly of their moment was permanent. The railroad monopolies of the 1890s looked unbreakable. So did the oil trust, and so did the Bell telephone system a century later. Every single time, the American people broke it anyway. Yet, resistance to corporate monopolies is the oldest and most thoroughly tested tradition in American economic life, and it has never once failed when the public had the will to see it through.

That tradition begins with two pieces of legislation that still govern this fight today. The Sherman Antitrust Act of 1890 was the first federal law in American history to declare that no private corporation had the right to restrain trade or monopolize an industry against the public interest, a radical proposition at the time, passed nearly unanimously by a Congress exiting the era of the robber barons. Under President Theodore Roosevelt, that law was given teeth. Under Woodrow Wilson, the Clayton Antitrust Act of 1914 closed the loopholes Sherman had left open, outlawing exclusive dealing, price discrimination, interlocking directorates, strategies that monopolists used to entrench themselves against the US justice system. The Clayton Antitrust Act declared without reservation, in its own text, that "the labor of a human being is not a commodity or article of commerce," exempting honest labor unions from the antitrust laws meant for predatory combinations of capital. Samuel Gompers called it the Magna Carta of Labor, and he was right to. From its very foundation, American labor law has always known the difference between the organization of the working man and the organization of the predatory monopolists.

Theodore Roosevelt's Department of Justice fired the first shot in 1902, moving quickly against the Northern Securities Company, a holding company stitched together by JP Morgan, James J. Hill, and EH Harriman to merge the Great Northern, Northern Pacific, and Burlington railroads into a single corporation controlling rail traffic across the entire American Northwest. The financiers who built it believed it was untouchable, backed by the three most powerful men in American finance. In 1904, the Supreme Court ordered it crushed it anyway. It was the first time the federal government had broken apart a combination of this scale, and it announced to every boardroom in the country that the government of the United States, not the House of Morgan, would decide how American commerce was organized. And yet, the railroads kept running, and most importantly, the Republic survived the shock that Wall Street took perfectly well, as it always does.

Seven years later, the Supreme Court delivered the verdict that remains the single most famous act of trust-busting in American history. Standard Oil of New Jersey, John D. Rockefeller's combination, controlled roughly 90% of the nation's oil refining capacity at its peak, built through a deliberate campaign of predatory pricing, secret railroad rebates its competitors could never obtain, and the calculated destruction of every rival that would not sell on Standard's terms. In May of 1911, the Court ordered it broken into 34 separate companies. On the very same day, it ordered the dissolution of the American Tobacco Company on nearly identical grounds. Both decisions established what courts still call the "rule of reason," the principle that the law does not punish mere size, it punishes the deliberate, anticompetitive use of size to crush honest competitors and extract monopoly profits from the public. Standard Oil's constituent companies went on to become some of the most recognizable names in American energy for the rest of the century. Not one of them required the protection of the broken-up trust to survive. They required only the discipline of having to compete.

By the middle of the twentieth century, the monopoly had moved from the oil field to the movie screen. The major Hollywood studios, Paramount foremost among them, had spent decades building a vertically integrated machine: the same companies that produced films also owned the theater chains that exhibited them, and used that ownership to force independent theaters into "block booking," buying a studio's entire slate of pictures sight unseen or receiving none of them at all. Independent producers who would not play along could not get their films onto a single screen in most American cities. In 1948, the Supreme Court found this vertical stranglehold illegal and ordered the studios to sell off their theater chains entirely, severing production from exhibition for the first time in the industry's history. The decision did not destroy American filmmaking. It opened the screen to independent producers, television's coming competition, and eventually to an entire generation of filmmakers the old studio system would never have allowed near a camera. An industry the monopolists swore would collapse without vertical control instead entered one of its most creative periods.

For most of the twentieth century, a single company controlled nearly every telephone line, every long-distance call, and every piece of equipment plugged into an American wall jack, a monopoly so total that "Ma Bell" became a national byword for a utility too large to challenge. In 1974, the Department of Justice filed suit to break it apart anyway. The case took 8 years, the longest and most complex antitrust prosecution in American history to that point, and in 1982 AT&T agreed to divest itself of the regional operating companies that became the "Baby Bells," while retaining its long-distance and manufacturing businesses in a far smaller form. The long-distance market, closed to competition for generations, opened to MCI, Sprint, and a wave of new entrants within years. Long-distance rates, which Americans had been told for decades could never fall below what Ma Bell charged, fell by more than half within the following decade. The monopoly that was supposedly too essential to break apart turned out to be exactly as breakable as every monopoly before it, and the service did not merely survive the breakup. It became dramatically cheaper and better almost immediately.

The Fight Left Unfinished

In 2000, a federal court found that Microsoft had illegally maintained its monopoly over personal computer operating systems by bundling its Internet Explorer browser directly into Windows specifically to crush the independent competitor, Netscape, that threatened it, and ordered the company split in two. On appeal in 2001, that breakup order was overturned. Microsoft settled instead for a set of conduct restrictions, promises about how it would behave rather than a structural division of what it owned, and the company that emerged from that settlement went on to become one of the handful of firms that now dominate the data and computing infrastructure that now comprises the new frontier of monopoly power.

Every one of the aforementioned monopolies, the railroad combination, the oil trust, the tobacco trust, the movie studios, the shoe machine lessor, the telephone system, the operating system, was proclaimed by its owners, to be permanent, too essential, too complex, too interwoven with the national economy to survive a breakup. And yet, every one of them was broken anyway, except the times that the government blinked and decided to trust the word of the corporation, and that is precisely the monopoly whose descendants now sit astride the computing infrastructure of the entire country. Dissolving the power of monopolies, it requires the same thing today that it required in 1904:

The will to see change through to the end, rather than settle for a behavioral contract with the most predatory entities the world has ever seen.

In the words of our Platform, "America broke the railroad trust and the oil trust in the name of the citizen who built them with his labor and was left with nothing by their owners. It must now do the same to the data trust and the compute trust." The dissolution of big tech is one sentence in a story that the United States of America has been writing since the 19th century, and it is a story that the American people must bring to its long-overdue conclusion.