Antitrust matters

Published August 29, 2020 by Bernie Niemeier

Bernie Niemeier. Photo by Caroline Martin

On a bright spring day in May 2009, I was on the campus of Hampden-Sydney College near Farmville for my son’s graduation — obviously a proud moment for any parent.

U.S. Sen. Mark Warner delivered the commencement’s keynote address. During his first term as senator and one of the first times I had heard the former Virginia governor speak, Warner began by pulling his cell phone out of his pocket and saying something to the effect of, “I may be the only speaker who will never tell you to turn off your cell phone. When I hear that ring, it’s the sound of money!” It was a good laugh line and the crowd of students, parents and college administrators responded accordingly.

For Warner, cellular communications were the sound of money. In the mid-1990s, after a couple of less successful ventures, Warner made a lucrative early investment in Nextel Communications Inc., one of the first companies to offer nationwide cell phone coverage. By 2012, he was ranked as the wealthiest U.S. senator, with a net worth of approximately $200 million.

In 1974, a couple of decades before the rise of companies like Nextel, the U.S. Department of Justice filed the antitrust case United States v. AT&T. It resulted in the 1984 breakup of the old American Telephone and Telegraph (AT&T) into seven regional Bell operating companies, along with a much smaller AT&T, effectively ending a monopoly in U.S. telecommunications.

For me, these memories returned to mind as the leaders of Amazon, Apple, Facebook and Google were questioned by Congress this summer about wielding their considerable market power to dominate competitors, amass user data and attain sky-high profits. Notably, on the Forbes list of the wealthiest people in the world, Jeff Bezos of Amazon and Mark Zuckerberg of Facebook respectively hold the No. 1 and No. 7 ranks.

The legislative underpinnings of U.S. antitrust law are the Sherman Antitrust Act of 1890, the Clayton Antitrust Act of 1914 and the Robinson-Patman Act of 1936. Collectively, these acts focus on interstate commerce, price discrimination and mergers or acquisitions that reduce market competition. They were conceived in the age of railroads, long before there was such a thing as globalization or the internet.

So why does all this matter? In Virginia, technology is a very big deal.

Aside from Amazon’s much bally-hooed HQ2 project in Arlington, the stretch of land from Tysons to Loudoun known as the Dulles tech corridor is a hotbed of operations for data centers, cybersecurity firms and other tech businesses, many of them federal contractors.

Seventy percent of the world’s internet traffic passes through Ashburn in Loudoun County. It’s called data center alley due to its prominence as the world’s largest data storage center.

Furthermore, undersea fiber optic cables extending from Virginia Beach are a major source of global internet connectivity. Due to its strategic location and numerous federal operations, Hampton Roads is also a major hub for tech companies.

The ability for small companies to create, innovate and become highly successful is fundamental to economic growth. When companies grow overlarge, they inevitably cast shade on the growth of upstart competitors. Imagine if AT&T were still the only provider for telephone and communications services: Would opportunities for tech companies or the internet exist as we know them today?

Even the most casual observer of the questions asked of the tech executives by the House antitrust subcommittee would realize that many of our representatives don’t seem to know much about technology. Some of the questions were obvious partisan statements that did not address any specifics on antitrust matters.

Given the importance of technology to our economy, our infrastructure and even our democratic process, it is high time for U.S. antitrust legislation to be reviewed and updated. A system designed to run on railroad tracks can’t keep up in the age of fiber optics. Not all regulation is bad, especially when it is designed to foster the growth that comes from fair competition.