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HomeIT IndustryHere’s how the ‘Chicago School’ led to feds’ antitrust iss…

Here’s how the ‘Chicago School’ led to feds’ antitrust iss…


The federal government’s biggest antitrust trial against a tech giant since it took on Microsoft in the late 1990s is scheduled to open Sept. 12. Who has the best case?

Hard to say. We’re leery whenever the government intrudes into a marketplace, and this case is no slam-dunk. Google is accused of anticompetitive behavior in its core web browser business. And even though Google and its fellow tech giants have been flaunting monopolylike power for years now, this lawsuit’s tortured history doesn’t fill us with confidence.

In what smelled like an attempt to win quick political points, the Trump administration brought the case against Google just a few weeks before a 2020 election that the former president, ahem, lost. A bipartisan mix of 35 state attorneys general, including Illinois’ Kwame Raoul, eventually joined the case — expanding it, and making for odd bedfellows, indeed.

Then, just a few weeks ago, the trial judge sharply narrowed the lawsuit’s scope, throwing out several of the primary claims against the company, which denies any wrongdoing.

Separately, the Justice Department has filed a different antitrust case focused on Google’s software for placing ads on the web, which is likely to go to trial not long after this one. It would be no surprise if the coming years bring additional antitrust actions against Facebook parent Meta, Amazon, Apple and, that old familiar target, Microsoft.

The Federal Trade Commission already has taken on some of those tech giants, with mixed results.

While it might seem like the antitrust cops are running amok, the reality is different. Antitrust enforcement has been losing steam since the 1970s, and the teams responsible for it at the Justice Department and FTC have been shrinking in relation to the economy’s size. The latest government effort to curb big companies is a far cry from the aggressive policing of prior eras.

Further, there is evidence that the pendulum has swung so far against enforcement that anticompetitive behavior is discouraging innovation and putting startups and other small businesses at a disadvantage.

To an extent, America can blame Chicago for that situation.

In the late 1960s and 1970s, the “Chicago School” of legal and economic thought targeted antitrust enforcement as an enemy of free markets. Led by Milton Friedman, Robert Bork and other University of Chicago stars of that era, the Chicago School had a huge influence on judges and regulators, who took it upon themselves to curb what Friedman, Bork & Co. argued was harmful government overreach.

Dr. Milton Friedman, University of Chicago economics professor, circa Nov. 23, 1976.

By the early 1980s, the government had shifted its focus from keeping large companies honest and challenging big mergers to targeting instances of price fixing among smaller players. At the same time, deregulation meant relying on market competition with fewer checks and balances to curb the economic power of the biggest players.

What followed was a boom in mergers and acquisitions, and, especially in tech, the rise of dominant companies able to crush or buy out emerging competitors — setting the stage for today’s government lawsuits against Google.

In a research paper published earlier this year, three academics (including two from the University of Chicago) attribute the influence of the Chicago School to moneyed interests that benefited from big businesses getting bigger. The academics seem to be taken by surprise that everyday Americans opposed this concentration of market power at the time, and elected officials generally did not cheer it on back then, either.

Unelected judges and regulators were on board, however, and with big money against it, antitrust enforcement dwindled. At the same time, public confidence in big business plunged, U.S. productivity growth lagged and inequality in wealth and income soared.

A lack of antitrust enforcement isn’t the only reason for those phenomena, but it’s a plausible contributing factor.

So, to the extent that going after Google marks a revival in enforcement, perhaps Americans should be applauding the antitrust cops. We advise clapping with one hand.

Relying on the government to fix dysfunctional markets usually comes with unintended consequences. It would be great if an antitrust crackdown spawns a new generation of world-beating companies. After all, the case against Microsoft more than two decades ago opened the door to web-browser competition from none other than ... Google.

Yet even if today’s Big Tech companies were broken up, there’s no guarantee that new U.S. players would rise to succeed them. In fact, investors in emerging companies would be likely to pull back if the government makes it harder for big companies to buy them out. And, in tech, the big companies already have a huge advantage in spending on new technologies.

For a window into the future of competition among tech companies, keep your eye on artificial intelligence (AI).

New business formation surged during the pandemic, and a bunch of AI startups are jockeying for leading positions. It will be telling if Big Tech is able to brush aside the latest efforts at antitrust enforcement to cement its dominance by crushing or co-opting these newcomers.

That would be a more significant measure of the economy’s competitiveness than the outcome of the government’s pending case against Google. We will be watching the Google case with interest, for sure, but saving our applause for innovative startups that turn into the next generation of superstars.

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