Decoding Big Tech: The Efficacy of the Sherman Antitrust Act

The Sherman Antitrust Act was designed to protect consumers and uphold democratic principles by preventing monopolistic control over the American economy. Enacted by Congress in 1890, its purpose was to curb the power of large corporations, promote economic liberty for individuals, and ensure that the U.S. democratic system remains accountable to the people rather than dominated by big business. The act outlawed “every contract, combination, or conspiracy to trade” and prohibited any “monopolization, attempted monopolization, or conspiracy or combination to monopolize.” Over time, the Supreme Court and Congress have extended the act’s reach, notably with the reinstatement of the Federal Trade Commission (FTC) and the Clayton Act, which effectively extends the Sherman Act, defining specific properties of mergers and acquisitions, discriminatory prices, and tying agreements. Now in our modern day, the act is up against major tech companies, as seen in the U.S. v. Google case (2023). 

In U.S. v. Google, Google was accused of limiting the ads of competitors on its sites. The accusations against the tech conglomerations state that Google has used specifically monopolistic business practices to commit this limitation. Courts have argued that to protect Google from monopoly accusations, it should release Google Chrome as a spinoff company. This only suggests that the Antitrust Act promotes legal loopholes, and not concrete antimonopoly change in tech companies. Unfortunately, Google is not the only modern example of the Sherman Antitrust Act’s failures. Since the search engine’s industry took off, there has been a pattern of tech companies getting away with monopolizing, simply because the law cannot keep up with innovation.  The Sherman Antitrust Act seems to have less influence since the precedent was set in the first era of antitrust cases in the tech industry. The Sherman Antitrust Act can limit monopolies in industries available in the nineteenth and twentieth centuries but is not effective for the growing innovative tech industry.

The Sherman Act’s landmark case Standard Oil Co. of New Jersey v. United States (1911), regarded the breakup of standard oil and collusion with railroads through the beginning of the 20th century. In it, the court upheld Congress’s power to enforce the Sherman Antitrust Act, defining “restraint of trade” as monopolistic business practices if it led to higher prices, reduced output, and reduced quality.  These laws continue to guide courts today as they attempt to define monopolistic competition. One major problem with tech companies is that they patent their innovations, providing incentives for smaller companies to sell to these larger corporations, or to rework their platforms to be used on larger media platforms. In these cases, the courts struggle to balance equal opportunity to patent products and incentivize smaller tech firms to take greater risks and work against tech conglomerates.

These standards form the baseline of the 1982 case U.S. v. AT&T, and are key precedents for the most recent Google cases. AT&T surrounded AT&T’s monopolistic practices that allowed them to own what they called “baby bell” companies that had control in U.S. regions. This system allowed Southwestern Bell (now AT&T) to acquire companies like Pacific Telesis and Ameritech, which resulted in monopolistic control across the control. In response, the U.S. Supreme Court prosecuted the conglomeration for anticompetitive business practices, forcing them to break apart their monopoly. Today, tech companies are headed in that direction. Major portions of the internet, advertising, communication and media, and ebook purchasing are all victims of monopolies. As of 2023, Google holds 90% of the market in search advertising, as a result of its wide reach across the world. Meta, which includes Instagram, Messenger, and WhatsApp, holds 86% of the social media market. Amazon, an online store service, holds 67% of the ebook market. Upcoming companies whose innovations move faster than regulatory systems are vulnerable to capitalistic practices, such as Microsoft and Apple.

United States vs. Microsoft Corp was the first major technology campaign by the judiciary against monopolistic practices in the tech industry. The United States district court ruled that under Section 2 of the Sherman Act, which was defined in Standard Oil Co. of New Jersey vs. United States, Microsoft’s control over the personal computer market constituted a monopoly. This case led to an increase in patent activity by smaller companies with less market share. Small company patent activity promotes innovation from small tech forms, increasing competition against tech giants. However, these small companies were not able to turn their patents into profitable, marketable innovations, as the larger companies still had popular control and influence. The Microsoft Case set the precedent that consumer choice underscores the risk of restricting choice and access to market competitors. With regards to the 2023 Google case, those in favor of regulating Google in antitrust behavior took from Microsoft's precedent; as a response, Google could be forced to deintegrate their platform, making it less accessible for small-companies to promote their products.  Without access to such a well-trafficked platform, small companies may struggle in reach, inadvertently limiting innovation by lack of accessibility. Therefore, while the Sherman Act partially limited monopolization, its use in Microsoft Corp opposingly harms the very people antitrust was meant to help: the small companies and consumers.

Economist Chris Butts explains that “new economy” firms like Apple and Microsoft pose a challenge in balancing regulation and innovation. Third-party platforms are incentivized to create apps and engines that apply to the rising technology firms such as Google Chrome, Safari, and Bing. Because these search engines dominate the industry, third-party companies will get more traffic by adapting their platforms to Chrome, Safari, and Bing. While third-party motivations can be categorized as natural monopolies and as such are prosecutable under the precedent in U.S. v. Microsoft, large companies are turning away from investing in such small companies. Microsoft has an interest in investing in small companies to censure Windows, a popular platform, and profit off of those third-party companies. Similarly, Facebook is less interested in buying third-party companies, as their traffic through Facebook websites is profitable without adapting their standards to aid smaller companies to thrive independently of their platform.

While the Sherman Antitrust Act has found great success in ending monopolies, the precedent set in the United States v. Microsoft Corp case has had much influence in recent prosecutions against tech companies. The judiciary has had trouble balancing innovation and regulation while ensuring that small business interests are preserved while big tech, such as Microsoft, Apple, Google, and Meta continue to grow. Without adaptations to the Sherman Act that apply specifically to an industry as fast-changing as tech, we risk losing innovative tech entrepreneurship from the underdog, the very type of companies that once started the tech industry.

Edited by Ananya Bhatia