Speaker 1: Welcome to Tech Stuff, a production from I Heart Radio.
Speaker 1: Hey there, and welcome to tech Stuff. I'm your host,
Speaker 1: Jonathan Strickland. I'm an executive producer with I Heart Radio
Speaker 1: and a love of all things tech. And in the
Speaker 1: last few years, there have been an increasing number of
Speaker 1: discussions around the world really regarding the reach and practices
Speaker 1: of certain big tech companies, you know, the ones like
Speaker 1: Google and Facebook and Amazon Apple, And this has been
Speaker 1: leading to allegations that companies like these are using their
Speaker 1: size and influence to suppress competition from others. And anti
Speaker 1: competitiveness is a big no no, particularly for large companies,
Speaker 1: and it puts these companies in danger of being deemed
Speaker 1: a monopoly, which is an even bigger no no. So
Speaker 1: Google and Facebook have been on alert for a few
Speaker 1: years now, but more so and increasingly so in recent years.
Speaker 1: And today I thought I would talk about antitrust issues,
Speaker 1: explain where those ideas kind of come from, talk a
Speaker 1: bit about an earlier case involving Microsoft from a couple
Speaker 1: of decades ago, and then chat a bit about the
Speaker 1: current situation. So this episode is less about the actual
Speaker 1: technology and more about how corporations can dominate an industry.
Speaker 1: So thoroughly that they become the center of scrutiny. So
Speaker 1: to start off, let's learn about monopolies and antitrust laws.
Speaker 1: And I'll warn you learning about antitrust laws on its
Speaker 1: own is not enough, because interpretations of the law have
Speaker 1: shifted over the more than a century since they were
Speaker 1: first drafted in the United States. The courts might interpret
Speaker 1: laws one way in one generation and a very different
Speaker 1: way later on, which makes this a lot less straightforward
Speaker 1: of a topic than technology tends to be. Before I
Speaker 1: dive in too far into this whole thing, I have
Speaker 1: to give a shout out to Laura Phillips Sawyer, who
Speaker 1: wrote a great paper titled US Antitrust Policy in Historical
Speaker 1: Perspective for the Harvard Business School. The paper is available
Speaker 1: to read for free online and it goes into great
Speaker 1: detail about how antitrust legislation and its enforcement have evolved
Speaker 1: in the United States over the years. I highly recommend it,
Speaker 1: and most of what I have to say in this
Speaker 1: section of the episode is kind of a high level
Speaker 1: overview of what Sawyer has to say. Our story begins
Speaker 1: in the United States in the latter half of the
Speaker 1: nineteenth century. Throughout the eighteen hundreds. Certain industries in the
Speaker 1: US came to be dominated by a small handful of
Speaker 1: increasingly large businesses. Some of these businesses banded to other
Speaker 1: with one another, combining their interests into a single entity. Now,
Speaker 1: these entities were called trusts. The idea is that multiple
Speaker 1: property owners create a trust in an effort to build
Speaker 1: a unified management structure. The owners appoint one or more
Speaker 1: trustees to serve as a manager of the owner's interests,
Speaker 1: and each owner retains shares in the trust. From a
Speaker 1: structural standpoint, a trust could either be a single unified company,
Speaker 1: or it could be set up as a conglomeration of
Speaker 1: multiple firms or even a cartel. Now, on the face
Speaker 1: of it, there's not a lot here that immediately jumps
Speaker 1: out as being an enormous problem. Just at at casual glance,
Speaker 1: we're talking mainly about the organizational and leadership structure of
Speaker 1: a business. But some particularly enterprising business owners were forming
Speaker 1: trusts in an effort to dominate an industry and fix
Speaker 1: prices without fear of any competition. Because they were already
Speaker 1: so big they could out compete everyone else. They could
Speaker 1: suppress competition. There will be no external forces in the
Speaker 1: market to affect the business owner's decisions, and so they
Speaker 1: could practice predatory and unethical price fixing strategies with impunity. Now,
Speaker 1: to use a simple analogy, let's say you grow up
Speaker 1: in a small town and it has a single candy
Speaker 1: shop in the entire town. There's no other place in
Speaker 1: town that sells candy. The next closest candy store is
Speaker 1: a hundred miles away. So if you want candy, you
Speaker 1: got one place you can go to. The candy shop owner,
Speaker 1: let's call him slug Worth, realizes that he has a
Speaker 1: monopoly on candies in this town, and so he marks
Speaker 1: up the price of every candy to five times what
Speaker 1: it would normally cost in a competitive market. But there's
Speaker 1: no alternative for you in this small town. You either
Speaker 1: pay five times what you should pay if you were
Speaker 1: somewhere else, or you just go without. That would stink. Now,
Speaker 1: candy is arguably anyway a frivolous and an important concern,
Speaker 1: But in the late eighteen hundreds, the United States was
Speaker 1: seeing industries that were far more critical consolidate under this
Speaker 1: trust strategy. And just to be clear, concerned about anti
Speaker 1: competitive business practices dates back much further, but the late
Speaker 1: eighteen hundreds is where it became a crisis, and there
Speaker 1: were many contributing factors that made this possible. For one thing,
Speaker 1: the United States was enjoying the benefits of the Industrial Revolution,
Speaker 1: which had taken place earlier that century. Transportation and communication
Speaker 1: networks were connecting the various parts of the country together.
Speaker 1: In addition, in the eighteen seventies, the United States went
Speaker 1: through an economic recession on the market side, with a
Speaker 1: deflationary spiral that lowered demand and thus lowered prices, and
Speaker 1: this forced several smaller companies in various industries out of business.
Speaker 1: They couldn't cover operating expenses and stay viable. Arguably, forming
Speaker 1: trusts was a necessity in that kind of economy, as
Speaker 1: individually companies were finding it difficult to stay afloat. Banding
Speaker 1: together increasing the scale and scope of the business was
Speaker 1: a potential solution to this problem. For American consumers, things
Speaker 1: weren't nearly so bleak because wages were on the rise,
Speaker 1: prices were low, and there was an abundance of goods
Speaker 1: on the market. There was a general feeling that big
Speaker 1: business could be a potential problem down the road, but
Speaker 1: there was a lot of disagreement regarding how to protect
Speaker 1: citizens and politics from that outcome. One particularly important industry
Speaker 1: in the United States at this time and still to
Speaker 1: this day, was oil. John D. Rockefeller founded the Standard
Speaker 1: Oil Company in the eighteen seventies and his business was,
Speaker 1: to put it lightly, phenomenally successful, and in eight two,
Speaker 1: an attorney for the company named SCT Dodd created a
Speaker 1: trust of oil refiners. The goal was to set prices
Speaker 1: and to control supply and at the same time find
Speaker 1: ways around pesky tax laws and regulations. Other trusts and
Speaker 1: other industries started to follow suit, and the United States
Speaker 1: saw a trend of large companies consolidating economic power. Now,
Speaker 1: generally speaking, this can be a bad thing. Consolidating economic
Speaker 1: power means that more of that economic power goes to
Speaker 1: a smaller number of entities, and it leaves many others
Speaker 1: without very much power. And companies do not tend to
Speaker 1: be the most egalitarian with their profits or their power.
Speaker 1: A company's purpose ultimately is to make money for the
Speaker 1: company's owners, whether it's a private company or a publicly
Speaker 1: traded one. On top of that, the consolidated hour would
Speaker 1: mean that these companies would be able to push around
Speaker 1: smaller companies, forcing them to either follow suit or go
Speaker 1: out of business. For example, Standard Oil might tie up
Speaker 1: enough oil refiners with exclusive agreements that would leave smaller
Speaker 1: oil companies no oil refiner companies to work with. They
Speaker 1: wouldn't have anyone that they could partner with because they
Speaker 1: were all tied up with this much bigger company. That
Speaker 1: would be an anti competitive practice. There was also a
Speaker 1: very real fear, and as it turns out, a justified fear,
Speaker 1: that wealthy companies would start to pour some of that
Speaker 1: wealth into influencing politics in an effort to make things
Speaker 1: even more beneficial to the company and its shareholders, often
Speaker 1: at the expense of others, like I don't know, the
Speaker 1: average taxpayer. The sense was these companies would dedicate resources
Speaker 1: to fight back politically against various restraints and regulations that
Speaker 1: were meant to protect fair or trade practices. Some states
Speaker 1: began to pass antitrust laws in an effort to reverse
Speaker 1: or at the very least slow this trend, calling for
Speaker 1: the need to support competition, which would prevent any one
Speaker 1: company from controlling the price and supply of critical commodities
Speaker 1: like oil or steel. But these were local responses. As
Speaker 1: I mentioned, the United States had recently transformed as railroads
Speaker 1: crossed the country and telegraph lines crossed state lines. Business
Speaker 1: was not confined to within a state's borders, and so
Speaker 1: responses to this threat needed to go beyond the state level.
Speaker 1: This led to the Sherman Antitrust Act of eighteen ninety.
Speaker 1: The United States federal government passed the Act in an
Speaker 1: effort to put some restrictions on trusts. The Department of
Speaker 1: Justice could pursue litigation against companies that were practicing anti
Speaker 1: competitive strategies or attempting to monopolize markets. The Sherman Act
Speaker 1: also allowed for private litigation cases and civil lawsuits against
Speaker 1: these companies. As it would turn out, the Act didn't
Speaker 1: quite go far enough and mostly restated common law and
Speaker 1: became more of a mild inconvenience to many of the trusts.
Speaker 1: The US government would go on to pass multiple amendments
Speaker 1: to that law to make it more effective and robust,
Speaker 1: and the US government would also recognize that needed an
Speaker 1: agency with more authority to oversee trade within the country,
Speaker 1: and the Federal Trade Commission, or FTC, would be formed
Speaker 1: in nineteen fourteen. The US government would add more laws
Speaker 1: to deal with trade issues like anti competitiveness and monopolies,
Speaker 1: and on more than one occasion, the U. S Government
Speaker 1: has forced certain companies to break apart in two separate entities.
Speaker 1: There are numerous examples, but a really big one in
Speaker 1: the tech sector was A T and T, which in
Speaker 1: the nineteen eighties was forced to spin off its local
Speaker 1: telephone service companies into seven Baby Bells, so called baby Bells,
Speaker 1: since A T and T was also known as mob
Speaker 1: Bell Bell because of Alexander Graham Bell, who was often
Speaker 1: credited with inventing the telephone, though that story itself is
Speaker 1: complicated and off topic. By the way, most of those
Speaker 1: companies that were split off would over time, through mergers
Speaker 1: and acquisitions, come back together with A T and T,
Speaker 1: So I'm not I'm not really sure what good it
Speaker 1: did in the long run. By the nineteen seventies, the
Speaker 1: interpretation of antitrust law had changed. Like I said earlier,
Speaker 1: the courts have taken a different approach to interpreting what
Speaker 1: antitrust law is over the various generations, and part of
Speaker 1: the reason for this is that the original laws were
Speaker 1: fairly vague and thus open to multiple interpretations. For many years,
Speaker 1: the main focus on antitrust law was that large companies
Speaker 1: could practice anti competitive behaviors that could hurt smaller businesses,
Speaker 1: and that's a bad thing. That's something that we should prevent.
Speaker 1: So think of a company like Walmart or more recently Amazon.
Speaker 1: A company like that with enough scale and resources could
Speaker 1: come into a region and offer up goods at a
Speaker 1: lower cost to the consumer than smaller businesses in the
Speaker 1: area which don't have the deep pockets of the bigger corporation.
Speaker 1: The big companies might even sell certain products at cost,
Speaker 1: or even below cost, at a loss in an effort
Speaker 1: to get people into stores. The really big companies can
Speaker 1: afford to do this, and the goal is to get
Speaker 1: more folks into these big stores to not just buy
Speaker 1: the mark down goods, but other stuff as well. And
Speaker 1: a consequence of this is that the big companies are
Speaker 1: luring customers away from smaller independent businesses that can't compete
Speaker 1: on this level. And if the big companies can wait
Speaker 1: it out long enough, those smaller businesses are likely to
Speaker 1: fold entirely. And thus we can see the main street
Speaker 1: of some small towns like the one I grew up
Speaker 1: in North Georgia become ghost towns as the local businesses
Speaker 1: shut down. But if the focus was on anti competitiveness.
Speaker 1: How the heck did we change from that? What happened
Speaker 1: well in the nineteen seventies the courts began to shift
Speaker 1: the interpretation away from this anti competitive nature that can
Speaker 1: hurt smaller businesses and more toward what affects the consumer benefit,
Speaker 1: what what is best for the consumer, rather than what's
Speaker 1: fair for small businesses. The general feeling was that the
Speaker 1: US government shouldn't be so interventionist with business in general,
Speaker 1: and this philosophy had a strong link to the University
Speaker 1: of Chicago, so economics experts call it the Chicago School
Speaker 1: of antitrust policy. Now I'm not saying that this is
Speaker 1: better or worse, but it is different from a consumer perspective,
Speaker 1: though Walmart or Amazon model doesn't, at least initially seem
Speaker 1: bad because as a consumer, you can get the goods
Speaker 1: you want at a lower price than elsewhere, so in
Speaker 1: other words, you save money, which means you can actually
Speaker 1: buy more stuff. So from the consumer standpoint, things seem
Speaker 1: pretty okay. But in the long run this can be
Speaker 1: a very dangerous game to play. If enough smaller businesses
Speaker 1: go put than Amazon or Walmart or whatever becomes the
Speaker 1: only source for goods like our candy store example, and
Speaker 1: then there's nothing really stopping those companies from hiking up prices.
Speaker 1: After all, it's not like you can head over to
Speaker 1: the mom and pop store that went out of business
Speaker 1: ten years ago. That's long gone. With this new focus
Speaker 1: on consumer benefit rather than market competition, we saw companies
Speaker 1: like Walmart really take advantage of the political and legal
Speaker 1: climate of the times. They flourished in the nineteen eighties.
Speaker 1: We also saw a new era of mergers and acquisitions
Speaker 1: and hostile takeovers, and golly, I do not miss those
Speaker 1: days at all, But antitrust laws and sentiment still existed.
Speaker 1: You couldn't go too far with this stuff, or else
Speaker 1: you would get called out for it. After all, the
Speaker 1: breakup of a T and T was a rare example
Speaker 1: of the courts going after a corporation like that. That
Speaker 1: happened in the nineteen eighties kind of at the height
Speaker 1: of this Chicago school of thought. The Chicago School dominated
Speaker 1: antitrust policy thinking until around nineteen when economists began to
Speaker 1: suggest that maybe it wasn't on track. The rather reckless
Speaker 1: mergers and acquisitions of the nineteen eighties, some of which
Speaker 1: had pretty awful consequences further down the road forced people
Speaker 1: to think about things another way and acknowledge that the
Speaker 1: Chicago School of thought didn't take certain variables into account
Speaker 1: and perhaps put too much faith on market based solutions,
Speaker 1: two problems that might require more government intervention. See from
Speaker 1: the Chicago School. The idea is that the market itself
Speaker 1: will sort everything out if you leave it alone enough.
Speaker 1: It's a very kind of loss, a fair approach, but
Speaker 1: these economists were saying, you know, that didn't take into
Speaker 1: accounts stuff that really also are factors here that mean
Speaker 1: that the market can't you know, account for them. And
Speaker 1: there are still proponents of the Chicago school out there,
Speaker 1: and even in this climate, we haven't seen the more
Speaker 1: robust interpretation of antitrust laws that were present decades ago.
Speaker 1: Even as more people are are kind of rejecting or
Speaker 1: at least partially rejecting, the Chicago School, there's the potential
Speaker 1: for a more progressive movement to take the stay age,
Speaker 1: but that's still in the very early days. And as
Speaker 1: I record this, the United States is going through an
Speaker 1: election process that will largely determine how likely that will be.
Speaker 1: And that sets the stage for our next section, where
Speaker 1: I'll talk about a specific case, the United States versus Microsoft,
Speaker 1: but before we get to that, let's take a quick break.
Speaker 1: In the nineteen seventies, Bill Gates and Paul Allen, two
Speaker 1: old friends, started up a company called Microsoft, named after
Speaker 1: micro computers and software, and originally the two would develop
Speaker 1: and sell versions of the programming language Basic for different
Speaker 1: computer platforms, so you can think of it as different
Speaker 1: flavors of Basic. In nineteen eighty, IBM hired Microsoft to
Speaker 1: develop an operating system for what was to become the
Speaker 1: IBM PC, the person Old computer, and Microsoft went and
Speaker 1: acquired software from a different company. They took that software,
Speaker 1: they changed it around a little bit, and they named
Speaker 1: it MS DOSS. Now the story behind that is pretty
Speaker 1: fascinating in its own right, and it gets really cutthroat
Speaker 1: right off the bat, but it's outside the realm of
Speaker 1: this episode. One thing IBM did not demand from Microsoft
Speaker 1: was exclusive rights to the operating system that they developed,
Speaker 1: so Microsoft would actually go on to make versions of
Speaker 1: MS doss for other computer manufacturers. And since IBM was
Speaker 1: relying heavily on off the shelf components for its PCs,
Speaker 1: it meant that any other company could potentially make a
Speaker 1: machine that works in pretty much the same way as
Speaker 1: the official IBM PC, and moreover, they could license an
Speaker 1: operating system from Microsoft that would allow these other machines
Speaker 1: that were built by other companies to run the same
Speaker 1: software that was developed for IBM PCs. This was a
Speaker 1: move that would make the Microsoft founders insanely wealthy, pushing
Speaker 1: the company on the path to operating system domination, and
Speaker 1: ultimately it would also spell doom for IBMS consumer products
Speaker 1: division many years later. Microsoft would then later develop an
Speaker 1: operating system with a graphic user interface or g u
Speaker 1: I or gooey. This was, of course, the Windows operating
Speaker 1: system that you know still dominates today. It took a
Speaker 1: couple of versions for Windows to really catch on, but
Speaker 1: Windows over time would become the main operating system on
Speaker 1: personal computers. There were alternatives. Apple was running a totally
Speaker 1: different operating system for Mac computers, for example, and other
Speaker 1: operating systems would emerge that allowed for alternatives to Windows.
Speaker 1: But it would be disingenuous to say that Windows was
Speaker 1: anything other than the dominant os on the market. It
Speaker 1: absolutely really was, at least for business and personal computers.
Speaker 1: So if you get into things like servers, well, that's
Speaker 1: a different story. But for like personal computers and for
Speaker 1: the stuff you would find in offices, Windows was the
Speaker 1: dominant os. Now that position meant that software developers were
Speaker 1: far more likely to focus on building out software for
Speaker 1: Windows based machines. After all, if the vast majority of
Speaker 1: computer users are relying on Windows as their operating system,
Speaker 1: it makes sense to focus development efforts where the market is.
Speaker 1: You go to where your customers are. You could create
Speaker 1: software for other operating systems, but you would do that
Speaker 1: knowing that there are fewer users that are relying on
Speaker 1: alternatives to Windows, which means your potential consumer base is
Speaker 1: already much smaller than it would be if you had
Speaker 1: developed for Windows. You could argue, and I think you
Speaker 1: could do so pretty persuasively, that the space was largely
Speaker 1: anti competitive even early on, though some platforms like the
Speaker 1: Mac had a decent amount of developer support behind them.
Speaker 1: But keep in mind we're talking about the nineteen eighties
Speaker 1: and early nineties here. This is before Apple had its renaissance.
Speaker 1: In nineteen nine, a lawyer for the FTC named Norris
Speaker 1: Washington had attended a computer trade show called Comdex, where
Speaker 1: IBM and Microsoft announced a collaboration that raised his eyebrows.
Speaker 1: The announcement sounded like it was treading a little too
Speaker 1: close to collusion in an effort to control the PC
Speaker 1: and operating system market. It wasn't until nineteen ninety that
Speaker 1: the FTC would begin its official probe into the matter,
Speaker 1: because the U S Department of Justice was initially reluctant
Speaker 1: to authorize an investigation. At this stage, the matter revolved
Speaker 1: around OS two, which belongs in the Doss family of
Speaker 1: operating systems. However, in the gap between the announced meant
Speaker 1: that IBM and Microsoft were going to work together and
Speaker 1: the actual investigation, there had been something of a falling
Speaker 1: out between Microsoft and IBM, and Microsoft was looking to
Speaker 1: push its Windows operating system over OS two, which means
Speaker 1: that it was no longer really interested in this approach
Speaker 1: with IBM. But by that time other third parties were
Speaker 1: coming forward to complain about Microsoft to the government. They
Speaker 1: were saying that Microsoft was making changes to its operating
Speaker 1: system that would make third party software incompatible with computers
Speaker 1: that were running that operating system, among other charges. The
Speaker 1: FTC was in a political deadlock over the matter, and
Speaker 1: there was a great deal of pressure from the Department
Speaker 1: of Justice to go very narrow and focused and small
Speaker 1: with the probe. The thought being that the US software
Speaker 1: industry was a really important one to the United States,
Speaker 1: and so you know, maybe we could, you know, just
Speaker 1: not break up Microsoft for some little anti competitive monopolistic behaviors.
Speaker 1: You know, what's a little what's a little illegal behavior
Speaker 1: among friends, I guess. In the end, the FTC and
Speaker 1: Microsoft would come to an agreement in which the company
Speaker 1: would sign a consent decree that was intended to limit
Speaker 1: how Microsoft might lockout competition from the PC market. But
Speaker 1: later on Bill Gates himself would claim that the consent
Speaker 1: decree amounted to nothing at all, so it might as
Speaker 1: well have been political theater. One important part of this
Speaker 1: decree was that Microsoft agreed that it would not integrate
Speaker 1: other Microsoft products into Windows as a tie in. So,
Speaker 1: in other words, Microsoft shouldn't tie you know, like productivity
Speaker 1: software like the Office Suite directly to Windows, because that
Speaker 1: would be unfair to companies that are developing third party
Speaker 1: productivity software as competition. The company would be allowed to
Speaker 1: create new features in Windows, that's okay, to make Windows
Speaker 1: more feature rich, but things that were products that were
Speaker 1: meant to be, you know, a separate thing in addition
Speaker 1: to Windows that was supposed to be separate. By the
Speaker 1: time we get to the early and mid nineteen nineties,
Speaker 1: a new complication emerged the Worldwide Web and the Internet
Speaker 1: in general. But the web is really where our story coalesces,
Speaker 1: is the point I'm making here. Now we all know
Speaker 1: that to access the web you need an Internet browser.
Speaker 1: You know, a program that interprets your commands, It fetches
Speaker 1: pages from servers, it displays those pages in a way
Speaker 1: that you can navigate and understand. And here's where things
Speaker 1: really escalated. So an early popular web browser, the dominant
Speaker 1: one was Netscape Navigator. It debuted in and quickly became
Speaker 1: the most popular web browsing platform. It held about seventy
Speaker 1: five percent of the market before the end of the year.
Speaker 1: Now keep in mind this is in the very early
Speaker 1: days of the web, when awareness of the web even
Speaker 1: being a thing was largely contained to stuff like college
Speaker 1: campuses and research centers. One thing that Netscape aimed to
Speaker 1: do with the Navigator browser was to create a standardized
Speaker 1: browsing experience across all operating system platforms, meaning that at
Speaker 1: least in theory, no matter what type of computer or
Speaker 1: what type of operating system you were, depending upon your
Speaker 1: experience on Netscape should be the same from computer to computer,
Speaker 1: and anyone who has used the quote unquote same software
Speaker 1: on different operating systems knows how unusual that can be.
Speaker 1: You know, just finding options can be a totally different
Speaker 1: experience from one to the other. Perhaps Microsoft was worried
Speaker 1: that more software developers would follow netscapes lead. And if
Speaker 1: the same program works same way across every operating system
Speaker 1: on every computer, it levels the playing field and other
Speaker 1: operating system developers could potentially gain some ground on the
Speaker 1: monolithic Microsoft. If Microsoft Windows is not providing a superior
Speaker 1: experience because the software just works better on it, well
Speaker 1: that could be a problem. So the company had its
Speaker 1: own strategy. In Microsoft unveiled Internet Explorer, a competing Internet browser.
Speaker 1: The original Internet Explorer was built on code developed by
Speaker 1: an Internet software company called Spyglass, which in turn based
Speaker 1: their code off of NCSA's Mosaic Browser. In fact, there
Speaker 1: were two flavors of this originally, one that was essentially
Speaker 1: Mosaic code and another that was just heavily influenced by
Speaker 1: Mosaic Code. And the deal with Spyglass was that Microsoft
Speaker 1: would pay a recurring licensing fee too Eyeglass for use
Speaker 1: of the software, plus a share of any revenues that
Speaker 1: sales would generate from this browser. But then Microsoft did
Speaker 1: something sneaky, deaky and seriously, if you look at the
Speaker 1: history of Microsoft's deals with other software companies, this next
Speaker 1: bit is not going to come as a surprise to
Speaker 1: you at all. Microsoft would end up bundling Internet Explorer
Speaker 1: with Windows for free. At least arguably it was for
Speaker 1: free because the company wasn't making revenue directly off Internet Explorer,
Speaker 1: it wasn't selling Internet Explorer to users. That would mean
Speaker 1: Microsoft would only owe Spyglass that licensing fee because there
Speaker 1: were no revenues to share at all. They didn't have
Speaker 1: to give any profits from Windows because that was an
Speaker 1: Internet Explorer. Yeah, that's kind of unethical, I would argue,
Speaker 1: or at least it was kind of low handed. The
Speaker 1: idea of I'll give you a share of everything I sell,
Speaker 1: and then you don't sell it. You just package it
Speaker 1: with something else that you happen to be selling, and
Speaker 1: then you make the argument, oh no, that didn't generate revenue,
Speaker 1: that was just part of something bigger that did generate revenue. Meanwhile,
Speaker 1: by making Internet Explore a part of the Windows bundle,
Speaker 1: the company was getting a browser in front of users
Speaker 1: before they could even consider if they wanted something else,
Speaker 1: and that Escape saw this as a threat. Pretty much
Speaker 1: right away. The company was selling its browser, and now
Speaker 1: here comes the company behind the dominant operating system on
Speaker 1: the market, offering up its own browser for free and
Speaker 1: bundled with the operating system. Beyond that, the company strong
Speaker 1: armed PC manufacturing companies into an agreement. The manufacturers who
Speaker 1: wanted to load Windows onto the machines they were producing
Speaker 1: and then selling to consumers would have to agree to
Speaker 1: have Internet Explorer bundled on those machines. So let's say
Speaker 1: you're in charge of a company that makes computers. We're
Speaker 1: gonna call it Dull Dull computers. So you run Dull
Speaker 1: computers and you build out a range of PCs both
Speaker 1: for enterprise customers and end users like you and me,
Speaker 1: and you want to license Windows to load onto the
Speaker 1: machines you're building, because that's a selling factor. Right It's
Speaker 1: the dominant operating system on the market, and most end
Speaker 1: users wouldn't be familiar with other operating systems, and even
Speaker 1: fewer of those people would understand how to install their
Speaker 1: own operating system onto a machine. But if you do
Speaker 1: enter into that licensing agreement with Microsoft, you also have
Speaker 1: to pre install Internet Explorer on those machines. It's part
Speaker 1: of the deal. The U. S Department of Justice took
Speaker 1: issue with this, and the antitrust attention against Microsoft hit
Speaker 1: a new peak. Bill Gates would argue in the trial
Speaker 1: in video depositions that Internet Explorer was not its own product,
Speaker 1: it was just a feature of Windows, which again, according
Speaker 1: to the consent decree was tots oki doki. That was
Speaker 1: fine as long as it was a feature of Windows,
Speaker 1: then that that was allowable. What was not allowed is
Speaker 1: to bundle a product with Windows. But the Department of
Speaker 1: Justice said, no, wait a minute. You also offer Internet
Speaker 1: Explorer for Mac computers, for the Mac operating system, and
Speaker 1: Microsoft does not have anything to do with the Mac
Speaker 1: operating system. That means the Internet Explorer has to be
Speaker 1: a product. It's not a feature because you sell it
Speaker 1: for the Mac, and that means that it should be
Speaker 1: separate from Windows. It should not be bundled with it.
Speaker 1: The antitrust trial stretched on for many, many months, with
Speaker 1: more than seventy days of testimony, the judge presiding over
Speaker 1: the case found Microsoft guilty of anti competitive behaviors and
Speaker 1: attempting to gain a monopolistic hold on the OS market
Speaker 1: and the browser market, and initially the judge ordered Microsoft
Speaker 1: to split into two companies nicknamed baby Bills after Bill
Speaker 1: Gates and a little throwback to the baby bells of
Speaker 1: a T and T that decision. The judge's decision got
Speaker 1: overturned by an appeals court, and ultimately Microsoft would settle
Speaker 1: with the Department of Justice out of court, and the
Speaker 1: whole story is a total chaotic mess. The Department of
Speaker 1: Justice's case against Microsoft had a lot of problems, some
Speaker 1: of which seemed to indicate that the government had a
Speaker 1: distinct lack of understanding when it comes to software. But
Speaker 1: Microsoft also had some really awful mistakes and just bad
Speaker 1: decisions during that trial as well, including a moment where
Speaker 1: they presented a videotape as evidence to show how easy
Speaker 1: it was to uninstall Internet Explorer, and later it was
Speaker 1: discovered and proven that that videotape had been edited. Not great,
Speaker 1: nobody came out of this looking particularly rosie, but in
Speaker 1: the end, Microsoft was not forced to break up into
Speaker 1: different companies. The trial did force Microsoft to back off
Speaker 1: a little bit from its practices Netscape Navigator, which was
Speaker 1: not a plaintiff in this case. Although executives from Netscape
Speaker 1: would be subpoena to speak during the trial, they would
Speaker 1: see their market share continued to decline until the company
Speaker 1: just pulled the plug on the browser in two thousand eight.
Speaker 1: As for Internet Explorer, it would be the dominant browser
Speaker 1: until late when Mozilla Firefox overtook Internet Explorer as the
Speaker 1: dominant browser on the market. Two interesting things about this
Speaker 1: One is that Microsoft had gone back to bundling Internet
Speaker 1: Explorer with Windows at that point, but also the company
Speaker 1: had ended support for Internet Explorer on platforms like the
Speaker 1: Mac operating system, so they were once again arguing that
Speaker 1: Internet Explorer was really a feature of Windows and was
Speaker 1: tightly integrate it into Windows and wasn't its own separate program.
Speaker 1: And the second interesting thing is that Mozilla Firefox was
Speaker 1: a spiritual successor to Netscape Navigator. Netscape had created the
Speaker 1: Mozilla Foundation just before Netscape itself got acquired by a
Speaker 1: O L. And in case you're wondering, according to stat Counter,
Speaker 1: Internet Explorer now makes up about one point five percent
Speaker 1: of the global browser market share, not a huge surprise. Obviously,
Speaker 1: Microsoft no longer supports Internet Explorer. The newer Microsoft Browser
Speaker 1: Edge has just two point eight five percent market share.
Speaker 1: At the other end of the spectrum is Google Chrome,
Speaker 1: which accounts for more than sixty six percent of the
Speaker 1: market share. Now, granted, this is across all platforms, and
Speaker 1: back in the two thousand's we were only talking about computers,
Speaker 1: mainly desktops and a few laptops. But to a you
Speaker 1: also have to include smartphones and tablets in there, and
Speaker 1: that's really where Google is running away with things in
Speaker 1: the smartphone category. And that brings us up to our
Speaker 1: next section, where we'll take a look at some of
Speaker 1: the current issues around antitrust concerns with big tech. But
Speaker 1: first let's take another quick break. Okay, Now we're up
Speaker 1: to the most recent antitrust report in the United States,
Speaker 1: which focuses on Amazon, Apple, Facebook, and Google. Now, as
Speaker 1: I'm sure has become obvious during the course of this episode,
Speaker 1: it is impossible to separate these issues from politics in general.
Speaker 1: The report is the product of the Democratic members of
Speaker 1: the House Judiciary Subcommittee on Antitrust. The investigation leading up
Speaker 1: to The report lasted more than a year. During the investigation,
Speaker 1: there were seven Congressional hearings, and the full report is
Speaker 1: about four hundred fifty pages long. Yikes. Now, I'm going
Speaker 1: to be straight with you, guys, I did not read
Speaker 1: the whole report, which is incidentally available online in its entirety.
Speaker 1: If you want to read it, go to Judiciary dot House,
Speaker 1: dot gov, slash uploaded files, slash Competition, Underscore in Underscore Digital,
Speaker 1: Underscore Markets dot pdf, just in case you find yourself
Speaker 1: with some time on your hands and an itch to
Speaker 1: learn more about this sort of thing. Thankfully, the report
Speaker 1: opens with the chairs forward, followed by executive Summary and findings,
Speaker 1: and that gives us a lot to talk about just
Speaker 1: right there without having to read the full report. The
Speaker 1: full report does have more information on how the committee
Speaker 1: came to its conclusions, and so the whole report is important.
Speaker 1: It's just exhaustive and exhaust staying as well, the report opens,
Speaker 1: as I said, with the chairs forward, and that includes
Speaker 1: some you know, semi harsh words for the CEOs of
Speaker 1: the four companies that are involved, stating that the answers
Speaker 1: that the leaders gave to Congress were frequently evasive, or
Speaker 1: non responsive. The chair also states that the four companies
Speaker 1: have become quote a gatekeeper over a key channel of distribution.
Speaker 1: By controlling access to markets, these giants can pick winners
Speaker 1: and losers throughout our economy end quote. So, like the
Speaker 1: antitrust cases of old, the chair asserts that these companies
Speaker 1: have made it a practice to consolidate power, both in
Speaker 1: the market and beyond. The chair goes on to state, quote,
Speaker 1: they not only wield tremendous power, but they also abuse
Speaker 1: it by charging exorbitant fees, imposing oppressive contract terms, and
Speaker 1: extracting valuable data from the people and businesses that rely
Speaker 1: on them. End quote. It goes on to state that
Speaker 1: the companies use their vast influence to maintain a market
Speaker 1: advantage over other companies, suppressing competition, either through buying out
Speaker 1: competitors or copying what those competitors are doing in an
Speaker 1: effort to undermine them. Facebook leaps to mind when I
Speaker 1: hear this, because the company had done things like they
Speaker 1: acquired Instagram because Instagram was doing better in the photo
Speaker 1: sharing space than Facebook was, And they've also spent a
Speaker 1: lot of time recently copying other platforms like Snapchat and TikTok,
Speaker 1: largely through their Instagram division. Moving on to the findings
Speaker 1: of the report itself, it states that the combined value
Speaker 1: of the four companies is more than five trillion dollars,
Speaker 1: which goes beyond a princely some it moves into like
Speaker 1: Grand puba territory. The conclusions found that these companies represented
Speaker 1: a monopoly in several markets, including social networking, online advertising,
Speaker 1: and online search. The finding state that, quote, in interviews
Speaker 1: with subcommittee staff, numerous businesses described how dominant platforms exploit
Speaker 1: their gatekeeping power to dictate terms and extract concessions that
Speaker 1: no one would reasonably consent to in a competitive market.
Speaker 1: End quote. It goes on to say, the various market
Speaker 1: players state they are dependent on these larger companies, and
Speaker 1: as a consequence, they have no recourse but to agree
Speaker 1: to those concessions. So, in other words, if you don't
Speaker 1: play by these companies rules, you don't get to play
Speaker 1: at all. The subcommittee also lays some blame at the
Speaker 1: feet of the Federal Trade Commission, stating that the FTC
Speaker 1: declined to investigate most of the acquisitions that these companies
Speaker 1: had pursued over the years, pointing out that Facebook acquired
Speaker 1: dozens of companies, nearly one hundred of them, but the
Speaker 1: FTC only chose to invest eight one of those, and
Speaker 1: that was Instagram. In the subcommittee concludes that the FTC
Speaker 1: essentially turned a blind eye towards mergers and acquisitions that
Speaker 1: have since, at least by the Subcommittee's estimation, proven to
Speaker 1: have reduced competition in the market. This, the Subcommittee says,
Speaker 1: has reduced consumer choice, it's hurt innovation and entrepreneurship, as
Speaker 1: good ideas can be smothered if they're not coming from
Speaker 1: within one of these four companies, and has caused greater
Speaker 1: harm by extension by reducing americans privacy and also hurting
Speaker 1: the free press. Uh. Those shots seemed fired primarily at Facebook,
Speaker 1: though I'm sure Google takes some heat for that as well.
Speaker 1: The report lays out a fairly extensive argument against each company,
Speaker 1: providing evidence supporting the allegations. It also goes on to
Speaker 1: explain the consequences of the anti competitive and monopolistic strategies
Speaker 1: that are playing out in the real world, from shutting
Speaker 1: down potential competitors to impacting the democratic process itself. But
Speaker 1: I feel like most of us have at least a
Speaker 1: grasp on this stuff already. I think it's pretty obvious
Speaker 1: that Facebook dominates social networking, and even more obvious that
Speaker 1: Google has the lockdown on search. And we know about
Speaker 1: the ways that companies like Facebook and Google make money
Speaker 1: through ads, which is then boosted because the companies have
Speaker 1: vast amount of information about us, you know, the consumers
Speaker 1: who are using these products. Turns out we are the product,
Speaker 1: We're the ones being bought and sold, and we know
Speaker 1: about Amazon and Apple on top of that. So the
Speaker 1: question remains, what, if anything, is there to be done
Speaker 1: about it here in the United States. The subcommittee concluded
Speaker 1: that a multi pronged approach is needed to address the
Speaker 1: problems that were uncovered in the investigation. One of those
Speaker 1: starts with the role of Congress when it comes to
Speaker 1: providing oversight into antitrust matters. The subcommittee concluded that there
Speaker 1: is a need to examine antitrust laws to make sure
Speaker 1: they're working properly and that they're being enforced, and in
Speaker 1: cases where the law isn't doing enough, that Congress drafts
Speaker 1: new amendments or even new laws to fix this. To
Speaker 1: that end, the subcommittee identified various reforms for consideration, including
Speaker 1: several intended to restore competition in the digital economy. Among those,
Speaker 1: the Subcommittee suggests reforms that would prevent companies from operating
Speaker 1: within adjacent lines of business. So, in other words, if
Speaker 1: a company is focused on a specific business within the
Speaker 1: digital economy, then the company would not be allowed to
Speaker 1: make moves to expand into related but distinct minds of business.
Speaker 1: Another reform suggestion is that Congress should create restrictions to
Speaker 1: eliminate the ability of a digital platform to us self
Speaker 1: preferential approaches. So, in other words, a company shouldn't be
Speaker 1: allowed to design a platform that then gives advantages to
Speaker 1: that company's designed programs and disadvantages to programs that are
Speaker 1: made by third parties. So the Microsoft Windows example from
Speaker 1: earlier in this episode falls into this kind of category.
Speaker 1: Microsoft was giving preferential treatment to Internet Explorer at the
Speaker 1: expense of competitors like Netscape. You could argue that you
Speaker 1: could look at Apple and say, all right, as Apple
Speaker 1: giving preferential treatment to Apple developed apps and giving and
Speaker 1: gate keeping other companies that are attempting to make competitive apps.
Speaker 1: And you can make a decent argument about that, especially
Speaker 1: since Apple is so very careful about which apps are
Speaker 1: allowed into the app store. The subcommittee also suggested that
Speaker 1: platforms format data in such a way that the data
Speaker 1: becomes easily portable. So, in other words, the data should
Speaker 1: be platform agnostic. Now why would this matter, Well, one
Speaker 1: of the big challenges that we see with these these
Speaker 1: consolidated tech companies is that a lot of us as
Speaker 1: users have a ton of stuff stored within these various
Speaker 1: companies platforms. So, for example, I've got thousands of photos
Speaker 1: and posts up on Facebook that creates a sort of
Speaker 1: anchor to me for Facebook, Like I am stuck there.
Speaker 1: It would not be easy for me to port that
Speaker 1: stuff over to some other platform, even if there were
Speaker 1: a platform out there that I felt was up to
Speaker 1: the task of doing that. Making data portable would at least,
Speaker 1: in theory, make it easier for users to move their
Speaker 1: stuff from one platform to another if they really wanted to.
Speaker 1: And this isn't really important, but I actually recently deactivated
Speaker 1: my Facebook account. I've been conflicted about even being on
Speaker 1: the platform for a few years now, but I stuck
Speaker 1: with it because that's where all my friends and family
Speaker 1: had a presence. But I kind of reached a point
Speaker 1: where that just isn't enough, however, that's really tangential. Other
Speaker 1: proposed reforms include more scrutiny for future mergers and acquisitions,
Speaker 1: reaffirming the practice of safe harbor, which tells us that
Speaker 1: a platform should not be held accountable for stuff that
Speaker 1: other people have put up on that platform. If I
Speaker 1: were to build a box on the street corner for
Speaker 1: people to stand on, I would not be held responsible
Speaker 1: if someone stood on there and said truly terrible things.
Speaker 1: I just made the box. I didn't make the person
Speaker 1: say the terrible things. That's safe harbor kind of, and
Speaker 1: also placing more restrictions on using corporate power to coerce
Speaker 1: companies into unfavorable business concessions because of a dominant market position.
Speaker 1: The report also calls for strengthening of antitrust laws in
Speaker 1: the United States, as well as a call for antitrust
Speaker 1: enforcement in general, not just that we have the laws,
Speaker 1: but we actually enforce them. After all, if you have
Speaker 1: a law but you never enforce it, then it doesn't
Speaker 1: really mean anything. It's just words on a page. The
Speaker 1: report itself will not have any direct impact on those companies.
Speaker 1: It does not carry with it any actions or punishments
Speaker 1: beyond recommending that Congress take further steps that would allow
Speaker 1: the government to intervene with companies like these. Those interventions
Speaker 1: could potentially include really big actions, like an attempt to
Speaker 1: break up those companies into smaller entities that focus on
Speaker 1: specific lines of business, but that's something that will have
Speaker 1: to wait for further action in the future. In the meantime,
Speaker 1: the report is really just a call for more action,
Speaker 1: not an action unto itself. Now, that's just a quick
Speaker 1: glipse into the situation with antitrust legislation and technology in
Speaker 1: the United States. Where the story goes next will depend
Speaker 1: heavily on who is a charge of the government in
Speaker 1: the future months and years. As I record this, we
Speaker 1: don't know for sure who that's gonna be. And of course,
Speaker 1: this episode focused solely on the United States. There are
Speaker 1: other parts of the world, such as in Europe, where
Speaker 1: fights like these have been going on for many years,
Speaker 1: frequently resulting in large fines being placed against these companies
Speaker 1: and other penalties. Will we see the monumental companies and
Speaker 1: technology gets split up into smaller components. Will those components
Speaker 1: just coalesce again in the future, much like a T
Speaker 1: and T did over time, or will we see a
Speaker 1: completely different tactic that leaves companies intact but places finds
Speaker 1: and other penalties on them should they be found to
Speaker 1: engage in anti competitive practices, or maybe nothing happens at all.
Speaker 1: All of those are possibilities, and then there are others
Speaker 1: on top of that. I don't have the answers to
Speaker 1: these questions. I'm not entirely certain anyone in government does either,
Speaker 1: but we'll have to wait and see. In the meantime,
Speaker 1: If you have any questions or suggestions for topics I
Speaker 1: should cover here on this show, reach out to me
Speaker 1: on Twitter. The handle is text stuff h s W.
Speaker 1: I'll talk to you again really soon. Y. Text Stuff
Speaker 1: is an I Heart Radio production. For more podcasts from
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