How Google’s monopoly survives where the Rockefeller's couldn’t: John Authers

Key topics:Judge rules Google guilty of monopoly, but penalties remain minimalBig Tech’s dominance grows, Magnificent Seven hold 36% of S&P 500Antitrust push stalls as culture wars overshadow economic reform.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By John Authers.Google, the search-engine startup that became the tech behemoth Alphabet Holdings, was founded on a clear principle: “Don’t be evil.” And yet the company was last year found guilty of running an illegal monopoly. It faced dismemberment at the hands of the US judicial system, a fate that once befell AT&T or John D. Rockefeller’s Standard Oil. It’s worth quoting the operative paragraph from Judge Amit Mehta’s ruling in full:Google is a monopolist, and it has acted as one to maintain its monopoly. The court found that, for more than a decade, Google had entered into distribution agreements with browser developers, original equipment manufacturers, and wireless carriers to be the out-of-the-box, default general search engine (“GSE”) at key search access points. These access points were the most efficient channels for distributing a GSE, and Google paid billions to lock them up. The agreements harmed competition. They prevented rivals from accumulating the queries and associated data, or scale, to effectively compete and discouraged investment and entry into the market. And they enabled Google to earn monopoly profits from its search text ads, to amass an unparalleled volume of scale to improve its search product, and to remain the default GSE without fear of being displaced. Taken together, these agreements effectively “froze” the search ecosystem, resulting in markets in which Google has “no true competitor.”The judicial opinion effectively found that Google had been evil. And yet when Mehta announced this week the remedies that he would enforce, the penalty was minimal. Its search-engine monopoly was not forcibly broken up, and it can hold on to the Chrome browser and Android operating system, the current sources of its dominance. The market’s judgment, meanwhile, couldn’t be clearer. The news sent Alphabet’s shares up 9% the next day. Apart from sessions when it had new earnings to announce, and the extreme turbulence generated five years ago by the Covid lockdowns, this was its best trading day ever. As far as the stock market is concerned, Google hasn’t been punished at all. Since the Justice Department’s investigation was first announced, in July 2019 under Trump 1.0, the S&P 500 is up 69%, while Alphabet’s market cap has quadrupled..Read more:.The Economist: Thanks to AI, Google and Apple dodge an antitrust bullet.The remedy, requiring Google to share search data with competitors and cease entering into exclusive contracts, “does nothing to right those wrongs,” argued Barry Lynn of the anti-monopoly Open Markets Institute. “Instead, it lets Google and every other monopolist know that even the most egregious violation of law will be met with a slap on the wrist.” .The case encapsulates one of the most baffling economic riddles of the age: Whatever happened to antitrust? If there was a time for an aggressive government campaign to break up monopolies and collusive oligopolies, it is now. Concentration is at levels never seen before, and a few companies enjoy unprecedented global dominance. The political stars are aligned for a new antitrust crusade. And yet this is what has resulted.Concentration and the Magnificent SevenAt any one time, some companies will dominate. It’s the nature of capitalism that winners win big, and the job of corporate managers to extinguish competition. That’s what their shareholders want them to do. Warren Buffett became the most successful investor ever by finding companies with “wide economic moats” — a euphemism for insuperable competitive advantages.All this said, the current dominance of Alphabet and the other tech groups known as the Magnificent Seven — the membership also includes Apple Inc., Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. and Nvidia Corp., and sometimes Tesla Inc. and Broadcom Inc. — is way out of the norm. This expanded list of eight Magnificents currently accounts for 36.6% of the entire market cap of the S&P 500. At the turn of the decade, the biggest eight companies were worth 21% of the whole index; in 2010, the top eight amounted to only 16%.The brute size of the tech leviathans, as well as the level of concentration, is new. The total market cap of Bloomberg’s Magnificent Seven index is $17 trillion; that’s bigger than the value of all the stocks traded on the Tokyo and Shanghai exchanges, the world’s second- and third-largest, combined.The effect on the entire US corporate sector — not just Big Tech — has been recorded by a range of impactful books, including Jonathan Tepper and Denise Hearn’s The Myth of Capitalism, Matt Stoller’s Goliath, or Timothy Wu’s The Curse of Bigness. Public companies’ profit margins, which normally widen and contract with the economic cycle, have expanded to unprecedented levels, and made a big jump after the pandemic. Profits as a share of gross domestic income have topped 9%. That’s their highest since the Great Crash of 1929, and more than double the share in 2000, the last boom in a new technology.With people furious about the resurgence in inflation, the portmanteau word “greedflation” took hold. Dominant companies find it easier to set prices and hold down payrolls while rewarding shareholders — and this pumps up the inequality that has polarized the nation.Will Technology Fix It?A popular argument against government intervention to break up dominant companies is that technological advance, egged on by capitalism and the profit motive, will generally do the job before much longer. Examples abound. International Business Machines Corp., IBM, was the world’s biggest private-sector company for more than a decade. Its supremacy over the breakthrough technology of mainframe computers was total, such that it set the parameters for the subsequent rollout of personal computers. But its pre-eminence has passed.Eastman Kodak enjoyed equal dominance over photographic film. It filed for bankruptcy in 2012, failing to deal with the arrival of digital photography. After merging with McDonnell Douglas in 1997, Boeing Co. stood supreme as the maker of civilian airliners — but technological missteps did for it. And Intel Corp. was the hegemonic maker of silicon chips for decades. Through the early years of the personal computer, the entire industry operated with “Intel Inside.” However, Nvidia was the first to work out how to produce chips for artificial intelligence. It’s now worth $4.1 trillion, more than 50 times the size of Intel. The government recognised when it embarked on the Google case that it was too late for anyone to beat the company’s search monopoly with a technologically superior product. It wanted to thwart Alphabet from using that monopoly to assert dominance over the next technology, AI. And the judge, with some reason, concluded that he couldn’t do this, as it asked him to predict the future.The lack of antitrust action has already allowed the Magnificent incumbents to thwart challenges from competitors armed with new technology. Meta is built on Facebook, which long ago lost dominance of social media. Had Instagram and WhatsApp stayed as independent companies, they might have been the Nvidia to Facebook’s Intel. But Facebook was allowed to buy both in their infancy. Similarly, Amazon.com acquires many incipient rivals and uses its scale to stop others from getting started. All are flooding the zone to try to control who wins the AI race. There was nothing inevitable about this. Netflix Inc. remains independent, and has managed to beat various Magnificents and incumbent media groups at the game of streaming video. Spotify leads far bigger companies in streaming music. There could and should have been far more examples.Politics, Trusts and Culture WarPresident Donald Trump has inspired fresh appreciation for William McKinley, the arch-protectionist of the late 19th century. But his personal style is more reminiscent of McKinley’s stick-wielding vice president, Theodore Roosevelt. After McKinley’s assassination, TR embarked on a Trump-like campaign against established orthodoxies. Attacking the trusts became his signature issue, capturing a zeitgeist that culminated (after his presidency) with the breakup of Standard Oil into 34 entities..Read more:.FT: Google and IBM say breakthroughs mean first workable quantum computer before end of the 2020s.If the end of the Gilded Age seemed the perfect moment for antitrust, so does today. In an epoch bedevilled by polarisation, politicians of left and right — and not just the populist extremes — can agree on curbing corporate dominance. Senators Amy Klobuchar, a Democrat of Minnesota, and Josh Hawley, a Republican of Missouri, have jointly sponsored legislation to boost antitrust enforcement and rein in Big Tech. In 2021, both published books backing aggressive antitrust..Joe Biden appointed Lina Khan to the Federal Trade Commission with a remit for a new assertiveness in competition policy. Though she was forced to stand down, Republicans, too, have abandoned inhibitions over political intervention in private-sector companies. Florida Governor Ron DeSantis battled with Disney after it criticized his so-called “Don’t Say Gay” legislation. Kevin Roberts, head of the Heritage Foundation, which produced the Project 2025 template for the Trump administration, describes Big Tech as “the enemy of the people” and lists the fund manager BlackRock Inc. as an institution that should be destroyed. Trump himself has crafted tariffs to exempt particular companies, and demanded a cut of Nvidia’s revenues and a stake in Intel. But while there was MAGA support for the Google case, it was influenced less by economic dominance than by the culture wars. Among the plaintiffs was Attorney General Jonathan Skrmetti of Tennessee, who also brought the suit that led the Supreme Court to back states’ rights to outlaw gender-affirming care. He complained that the company “contributed to the abuses of the narrow West Coast monoculture that suppressed conservative views in the 2020 election.” He made no comment on the lenient punishment.The culture war is also plainly uppermost in Project 2025’s Mandate for Government chapter on the FTC. It mentions environmental, social and governance investing, adamantly opposed by the Heritage Foundation, 10 times; there are only three appearances of the word monopoly, and none of oligopoly, inflation or prices. (It’s very hard to argue that ESG investing has had any significant impact on the economy, and certainly nothing compared to the over-concentration in many industries.) Antitrust is that rare issue that combines good politics and good economics. The piffling Google remedy is painful proof that it has been dormant too long. For now, America’s culture war is thwarting progress in dethroning the latest John D. Rockefellers. .© 2025 Bloomberg L.P.

How Google’s monopoly survives where the Rockefeller's couldn’t: John Authers

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