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How the antitrust battles of the ‘90s set the stage for today’s tech giants

In early August, the creators of the incredibly popular gameFortnite announced that they would be leaving the Android Play Store. Tim Sweeney, CEO of Epic Games, decried the “monopoly app store” model that Google had established. A few months before that, the Supreme Court accepted a lawsuit against Apple’s App Store from users who alleged Apple was abusing an iOS monopoly. Facebook CEO Mark Zuckerberg has struggled to name a company that competes with Facebook’s services, and there’s a credible argument for breaking it up. The internet today feels increasingly dominated by a few huge platforms, and users are locked in by these companies’ sheer size.

These concerns date back to the earliest days of the World Wide Web in the 1990s. At that point, they were playing out against a very different landscape where America was still getting online, and the consequences of having massively powerful platforms weren’t necessarily so obvious. They laid a foundation not only for the rise of modern tech platforms like Google, but for the way we think about regulating these platforms — or have neglected to do so.

The 1980s saw major changes in the tech and telecommunications landscape, primarily the breakup of AT&T, which agreed to end its telecom monopoly by splitting into a number of “baby bells.” At the start of the ‘90s, the Federal Trade Commission was already scrutinizing computerized systems that seemed to facilitate entirely new monopolistic and collusive schemes. In 1992, for instance, the Justice Department sued eight major airlines for running a price-fixing scheme through their computerized reservation system. Companies would signal their fares in obscure ticket metadata, creating what the complaint called an “electronic smoke-filled room.” (The case eventually went to a settlement.)

Meanwhile, the newly ascendant Microsoft was gaining a startling amount of power in the personal computing market. Microsoft and regulators were in nearly constant conflict throughout the decade, starting in 1989, when the FTC flagged an agreement between Microsoft and IBM as potential collusion. Microsoft spent the first half of the ‘90s largely dismissing these concerns. It agreed to a 1994 consent decree that supposedly limited its ability to lock out competitors, but Bill Gates’ one-word assessment of its effect was “nothing.”

This changed after Microsoft was hit by what Gates, in a 1995 memo, termed the “internet tidal wave.” Gates declared war on browser company Netscape, attempting to smother it by bundling its own free Internet Explorer browser with Windows and pressuring other companies to use it instead of Netscape Navigator. Fighting for its life, Netscape hired attorneys Gary Reback — whoWired would later dub “the only man Bill Gates fears” — and Susan Creighton to write a confidential report explaining Microsoft’s anticompetitive behavior to the Department of Justice.

Reback and Creighton’s case against Microsoft drew on relatively new antitrust theories like network effects. Essentially, if a service like Windows became more valuable the more people adopted it, its size could give it an insurmountable advantage, even if other products were superior. And the worst-case scenario wasn’t just Microsoft crushing Netscape Navigator or other programs, like word processing software WordPerfect, which Microsoft allegedly crippled by refusing its developers access to technical information. It was Microsoft controlling access to the web itself.

How the antitrust battles of the ‘90s set the stage for today’s tech giants

Microsoft quickly started moving into every corner of the internet market. Among other deals, the company invested $1 billion in Comcast to help speed up broadband deployment, and it purchased the startup WebTV to capture potential internet users who didn’t use a PC. In 1997,The Wall Street Journal reported on Microsoft’s plans to take over online commerce with its Sidewalk web service, with CTO Nathan Myrhvold confirming that the company wanted a “vig” (or vigorish, a financial payout) for every internet transaction made using Microsoft technology.

According to a recent oral history of the Microsoft trial and a more contemporaneousWired report, regulators took years to seriously act on Reback and Creighton’s warnings. That was far too long to save Netscape, which was eventually acquired by AOL. But in mid-1998, the Justice Department and 20 state attorneys general filed a massive complaint against Microsoft. The suit stretched past the turn of the millennium until a judge ruled that Microsoft had violated antitrust laws and ordered that the company be split up, an order that was later overturned and replaced by a more limited settlement in which Microsoft agreed to lift some barriers to third-party software on Windows.

Even without a split, the Microsoft settlement is credited with giving web companies like Google — and browsers like Google Chrome, which overtook Internet Explorer in 2012 — space to grow. “They don’t owe everything to antitrust, but they owe a sizable debt to the antitrust law,” technology law expert Tim Wu toldThe Vergeearlier this week. (Wu has previously noted that Microsoft benefited from an ‘80s antitrust case against IBM.)

Microsoft wasn’t the only company that was accused of abusing a huge consumer network to lock out a competitor. In 1997, News Corp-owned gaming company Kesmai — which created some of the first major massively multiplayer online games — sued to block a merger between AOL and CompuServe. Kesmai argued that AOL was favoring its newly launched online gaming program WorldPlay over Kesmai’s services, and that this had a devastating effect given AOL’s market power. “All the money — over 90 percent — comes from AOL, even though we have other distribution pathways,” said Kesmai CEO Chris Holden. “The reality is that AOL is cyberspace.” Kesmai settled its suit, before games publisher Electronic Arts acquired both it and WorldPlay in 1999. And the CompuServe merger went through.

Today, of course, AOL evidently doesn’t have a monopoly over cyberspace. And the theory of network effects has received substantial criticism, partly because some early platforms collapsed so dramatically. “Services were exhibiting network effects, but those network effects were dying almost as soon as they started up,” says Electronic Frontier Foundation Danny O’Brien, a longtime digital rights activist. That included both internet providers like AOL and early social networks like SixDegrees, which drew millions of users but shut down within a few years of launch.

“One of the things that I think sort of impeded the idea of restricting or breaking up the current incumbents has always been slightly the expectation that the same thing would happen to them,” says O’Brien. “That Facebook would go the same way as Friendster, and a competitor to Facebook would arise and take over.” Wu has called this notion part of the “mythology” holding back meaningful antitrust reform — the idea that large, slow companies will “automatically go away.”

But just looking to the decline of AOL and other ‘90s giants would be misleading. There’s no rule that tech platforms flame out, and there are good reasons to believe this time is different. When Microsoft offered Internet Explorer for free to crush Netscape, the move was somewhat unusual, but social media apps now are almost universally free, which makes it harder to argue that monopolies are directly hurting consumers. Wu notes that while Microsoft’s rise and fall was relatively quick, AT&T held onto its telephony monopoly for decades, and Facebook could persist as well. And he argues that Facebook, Google, and Amazon have bought so many competitors that new players may simply expect to be acquired — creating a chilling effect that goes beyond basic structural advantages.

The legacy of the ‘90s antitrust cases lives on in subtler ways as well. The sort of middleman platforms that might once have been annoying are now ubiquitous. A ‘90s case against Ticketmaster, where a court ruled ticket buyers couldn’t sue for monopolistic behavior, was a periodic headache for concertgoers. Now, it’s a key precedent in a similar suit against Apple’s App Store, which controls access to services people use every day. And while Microsoft might have been poised to eat the internet, Facebook is often accused of actually doing so and of being a global private government and an imminent threat to democracy to boot. The last generation of antitrust cases weren’t precise analogs for today’s complaints, but they helped set the stage for them.

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