silicon Valley is getting hit with a tidal
wave of antitrust lawsuits from US regulators who argue that Google Meta Apple and Amazon are
illegal monopolies In two of the cases federal judges have already agreed opening the door to a
government breakup of some of the world’s biggest companies But could this really happen And why And
how did we even get to this point Today we have all the answers My name is Guy and you’re watching
the Coin Bureau The last time the US government took big tech to task over a monopoly it was
1998 and Microsoft was ruling the PC operating system market with an iron fist Depending on how
you count Microsoft’s Windows operating system enjoyed a market share of somewhere between 80 and
95% Unsurprisingly the government believed that Microsoft had monopoly power and more specifically
it accused the company of using its power to squeeze Internet Explorer rival Netscape out of
the market Now Netscape which was available for multiple operating systems was the most popular
web browser of the mid 1990s commanding a market share of 86% by 1996 It enjoyed its own network
effects where its large user base made developers want to write applications for it and the more
applications there were the more new users Netscape would attract and so on and so forth At
this point it was clear that the internet was the next big thing and Microsoft perceived Netscape
as a nent rival platform that threatened to erode its own market position Although Netscape preceded
Internet Explorer so it was really the other way around But either way Bill Gates was not going to
take a threat to his software monopoly lying down Microsoft’s launch of Internet Explorer in 1995
was remarkable not because it was a particularly good web browser but because its distribution
model involved a variety of anti-competitive practices designed to cut Netscape out of the
market These included for example entering into contracts with PC manufacturers to prevent
them from bundling Netscape with their computers or from making Netscape the default web browser
Similarly Microsoft had contracts with developers that offered them better deals if they didn’t
develop products for Netscape Now depending on the circumstances contracts like these can
be perfectly legal But in this case the court found that they were anti-competitive tactics
without legitimate economic justification used by Microsoft to maintain an illegal monopoly Now
the most powerful tool available for remedying US antitrust violations is a structural remedy aka a
breakup And that’s exactly what the judge ordered in this case And Microsoft was told to split
its web browser business and Windows operating system business into two separate companies
Microsoft however narrowly avoided this fate on appeal But the case nevertheless had a lasting
effect on big tech The finding that Microsoft was an illegal monopoly established clearly
that antitrust principles apply to big tech corporations trying to corner the software market
Whether you’re selling oil steel or code you can’t try to prevent others from competing with you and
expect to do so with impunity According to David Boy the lawyer who represented the government in
the Microsoft case the ruling helped to establish the competitive market that gave us Google Sounds
like the judge narrowly saved us from having to add Bing to the dictionary as a verb Anyway a
more indirect but no less important outcome was that Microsoft was preoccupied with fighting the
US government in court from 1998 to 2001 This gave the company a pretty full plate during a major
inflection point in the market when mass adoption of home computers and the internet was exploding
As a result of Microsoft preoccupation with legal problems during this period competitors like
Opera and Firefox which was a kind of successor to Netscape were able to get a foothold in the
market Real competition to build the best web browser ensued and Internet Explorer eventually
lost its lead to Chrome in 2012 Well hello there not going to own the internet alone At the same
time Apple became another major competitor in the early social media landscape Meanwhile MySpace
was supplanted by Facebook Google stepped into the ring with uh Plus and they all coexisted to
some extent with Twitter and others And just so you know viewed from Washington it looked like
there was plenty of healthy competition in Silicon Valley So perhaps this explains why big tech
didn’t attract too much antitrust scrutiny from the government during this period But this all
changed during the first Trump administration when the role of social media in controlling the flow
of information online came under intense scrutiny Trump became the eye of a storm of criticism of
social media platforms from across the political spectrum Critics variously alleged excessive
content moderation and censorship of free speech or negligent moderation and publishing of hate
speech misinformation and disinformation among other complaints And this is how regulation
of big tech became a matter of bipartisan consensus in Washington In 2017 President Trump’s
Department of Justice appointed Mackand Delraim as assistant attorney general for antitrust a
figure with a colorful history of working for both sides of antitrust cases He’d worked on the
1998 investigation into Microsoft before being appointed to the DOJ in the Bush administration
and then the FTC under Obama After that he had a successful stint lobbying for big farmer big
insurance big telecoms and Google In late 2016 he commented on AT&T’s controversial proposal to
acquire Time Warner for $85 billion on Canadian TV saying quote “I don’t see this as a major
antitrust problem.” Months later he was appointed as attorney general for antitrust at Trump’s DOJ
where he was expected to continue singing a pro merger tune but he instead quickly filed a lawsuit
to block that very acquisition It seems like rather strange behavior but perhaps it’s a sign of
how quickly battle lines were redrawn after Trump first took office Well anyway Delraim and Attorney
General William Bar became the unlikely pioneers of the current wave of antitrust litigation
in the US In 2019 the DOJ launched a broad antitrust investigation into Google Amazon Apple
and Facebook Bar and Del Raheem joined forces with a coalition of US state attorneys generals leading
to state level lawsuits against some of these companies The investigation culminated with the
House Judiciary Antitrust Subcommittee releasing a 450page report in October 2020 accusing the
four companies of abusing monopoly power and calling for a revival of old-fashioned breakups
and presumptive merger bans This report laid the groundwork for a newer anti- monopoly framework
that recognized non-pricbased consumer harms and was more open to structural remedies like breakups
In accordance with the report’s findings the DOJ launched a lawsuit accusing Google of running
an illegal monopoly controlling web search and search ads in October 2020 And in December of that
year Trump’s Federal Trade Commission launched its own ambitious lawsuit against Facebook now
Meta that accused it of illegally monopolizing personal social networking services platforms
The Biden administration picked up where Trump left off with Biden notably appointing a trio of
died in the wool trustbusters at the DOJ FTC and the White House FTC Chair Lina Khn assistant
attorney general for antitrust Jonathan Caner and Biden’s big tech antitrust Tim Woo were dead
serious about breaking up Silicon Valley rather than just tinkering around the edges However
they are now all out after a shakeup under the second Trump administration FTC Chair Khn was
replaced with former FTC Commissioner Andrew Ferguson while the new DOJ antitrust division is
headed by former Fox Corporation executive and JD Vance adviser Gail Slater And while we’re
on the topic of the FTC you might want to pay attention to Trump’s attempted firings of its two
Democratic Party commissioners Alvaro Bedoya and Rebecca Kelly Slaughter This plainly violated
the FTC Act of 1914 and the 1935 Supreme Court ruling holding that FTC commissioners can only be
removed by the president for inefficiency neglect of duty or malfeasants in office The White House
didn’t suggest any such reason and only informed the commissioners in an email quote I am writing
to inform you that you have been removed from the Federal Trade Commission effective immediately
Your continued service on the FTC is inconsistent with my administration’s priorities Now dear
viewer you may at this point be wondering why should I care Well for one thing it could trigger
a chain of events that ends up rocking the crypto market All right All right Bear with me on this So
Trump’s attempted firing of two FTC commissioners is part of a broader push by the White House
to bring independent agencies under the control of the president He so far issued two executive
orders trying to expand his own authority in this area and fired officials at other independent
agencies in plain disregard of the law and a Supreme Court ruling that says he can’t do that
Recently two federal judges rejected two of these firings But Trump is not giving up and continues
publicly pining for control of the Federal Reserve which is kind of the crown jewels for a president
seeking to influence federal agencies The way things are going one of these cases could end
up in the Supreme Court which should have the final word over whether presidents can in fact
do this If the court says yay then Fed Chairman Jerome Powell could be toast with significant
consequences for monetary policy and therefore for crypto And for our full report on the Trump
Fed psycho drama you can check out this video over here by the way Anyway commissioners Bedoya
and Slaughter are now suing the president for illegally trying to fire them But until that’s
resolved the three MAGA FDC commissioners alongside Trump’s new DOJ are pressing ahead with
the antitrust agenda that began during his first administration They’re expected to be more hostile
to corporate power than Republican commissioners of old but they’re also less uniformly in favor
of breakups than the Biden FTC and DOJ were There are also questions about how Trump’s personal
relationships with the heads of big tech companies may influence antitrust enforcement The FTC’s case
against Meta for example went to trial this month after longtime Trump enemy Mark Zuckerberg’s
strenuous efforts to insinuate himself into the president’s inner circle and get the case dropped
ended in failure And this begs the question of what will happen to the investigation of Amazon
launched and aggressively pursued by the Biden era FTC The case is in pre-trial stage and is
expected to go to trial at the end of 2025 or in 2026 That means there is still time for Jeff
Bezos to accomplish what Zuckerberg couldn’t namely preventing the case from going to trial by
smooching the ring Bezos is another longtime Trump nemesis who unlike Unlucky Zuck has successfully
made it into the president’s good books Their new relationship passed a stress test in late April
after an apparently rogue division of Amazon proposed to show customers how much of a product’s
price is made up by Trump’s tariffs Trump saw this on the news and was insensed He called Bezos and
within hours Amazon announced that it would do no such thing Trump said quote “Jeff Bezos was very
nice He was terrific He solved the problem very quickly and he did the right thing He’s a good
guy.” Meanwhile fired FTC Commissioner Bedoya recently told the Colorado State Legislature
quote I think it’s interesting that the last public statement I made before the firing was
critical of one of the men standing behind the president’s shoulder at his inauguration I issued
a statement criticizing Mr Bezos for working his people in warehouses so fast so hard that they
literally have to put up vending machines on the warehouse floor dispensing and capping the amount
of painkillers each of those workers has to get Hm Interesting Rest assured we’ll keep an eye peeled
on the Trump Bezos relationship so you don’t have to But now it’s time to turn to Google and Meta
What are the cases against them really about and what could be their fate I’ll start with Meta
The trial started in April and is expected to last 8 weeks At the center of the FTC’s case are
Facebook’s acquisitions of Instagram in 2012 and WhatsApp in 2014 The FTC argues that these
deals established an illegal monopoly over personal social networking services which has
raised a few eyebrows because it was the FTC who voted unanimously to allow the acquisitions to
go ahead in the first place One of the reasons the FTC declined to prosecute at the time was because
consumer harm was still narrowly defined in terms of price But there is now a lot of support
for updating this definition to account for the consumer harms inflicted by distributors
of free software like Metarent Co Anyway the commission now recognizes the transactions
as anti-competitive behavior and it’s relying heavily on Zuckerberg’s own emails to prove it
The FTC’s lawsuit alleges that he wrote in a 2008 email quote “It’s better to buy than to compete.”
In 2012 he emailed a colleague quote “We really need to get our act together since Instagram’s
growing so fast They could easily copy what we’re doing now.” After closing the deal he celebrated
by explaining to a colleague in another email quote “Instagram was our threat.” One thing about
startups though is that you can often acquire them The nature of Facebook’s acquisition of Instagram
at least seems pretty clear from these emails However the FTC may have shot itself in the foot
by also resting its case on a dubious definition of Meta’s competitive market contrived to
support the existence of a monopoly The FTC claims Meta competes with Snapchat and a minuscule
blockchainbased social media app called Miwi but not X LinkedIn Tik Tok Reddit or YouTube This
would give Meta an 80% market share with little meaningful competition But in coming up with such
a counterintuitive definition of the market the FTC has arguably hurt its case Moreover unlike
Microsoft’s successful hit job on Netscape the FTC’s case against Meta has no dead bodies to
help back it up Microsoft cut the market leader out of its own market with clear implications for
consumer choice But it’ll be harder to demonstrate consumer harm done by Facebook acquiring a company
it expects to emerge as a competitor in the future Indeed the case against Meta was initially thrown
out by the judge based on a lack of facts and later allowed to go ahead only in a revised form
The same judge also indicated to the FTC that it will be fighting an uphill battle on this one and
at the moment we tend to agree We therefore think it’s unlikely that this particular case will lead
to a breakup of Meta Google however is another story because it has a market share of about
90% of the US web search market as pretty much any fool could tell you It has also cornered the
world market on online advertising tech Concurrent trials in the US have now established that Google
runs illegal monopolies in both search and adtech In the former case Google’s anti-competitive
tactics resemble those used by Microsoft in the 1990s For example paying Apple $20 billion per
year to have Google as the default search engine on the iPhone and entering into contracts with the
likes of Samsung LG AT&T and Verizon to similar ends This was how the government got Google
Although it would have been nice if they’d also tried to prove in court that Google has abused
its captive market by allowing its search engine to become a dumpster fire of AI slop where it’s
increasingly hard to find useful information But I digress Now there was initially skepticism that
the cases against Google would end in a breakup but this outcome has become more likely now that
both cases have proven the company is running illegal monopolies All that’s left now aside from
fending off Google’s appeals is to decide what should be done about them The DOJ has signaled a
willingness to seek breakups and there have even been suggestions that Google might proactively
separate its ad network Chrome and maybe even Android to preempt further legal action Google’s
appeals may end up in the Supreme Court where a decision could shape the future of antitrust law
in the US and indeed around the world However any final remedy may not be implemented for years due
to the complexity of targeting specific components of the software ecosystem that forms Google’s
business But if a breakup does happen it likely won’t be the last And if a cascade of breakups
takes place it could in fact be bullish for the companies involved That’s according to Deep Water
Asset Management who believe that a breakup could unlock a significant amount of shareholder
value This is based on the idea that company assets like YouTube and Whimo which analysts
don’t typically try to value independently may be worth more than they’re currently priced
at under the Google or if you like Alphabet umbrella This is all totally speculative though
and frankly nobody has suggested that YouTube or Whimo are going anywhere for the time being
Like I said these cases will take years to be resolved So don’t go holding your breath Breaking
up the Death Star takes much longer in real life than it does in the movies So while you wait why
not check out our latest report exposing insider trading on Capitol Hill Now there’s something that
really needs breaking up Okay that’s all from me for now As always thank you for watching and
I’ll see you next time This is Guy Over and out
