What Investors Need to Know -- The Motley Fool
2019-06-15 14:58

This has happened before, and it’s going to be OK.


2019-15-06-14-30-34-5d04908a804a2.png Nicholas Rossolillo

The year was 1911. After years of staggering growth, control over pricing, and legal run-ins along the way, Standard Oil is ordered to be busted up by the U.S. Supreme Court. Standard Oil was forced to split into 34 smaller companies, some of which survive today in the form of ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX). The Supreme Court ruled against Standard Oil on the basis of the Sherman Antitrust Act, which had been minted a couple of decades prior to prevent exactly the anti-competitive behavior the oil giant was involved in.

那一年是1911年。在经历了多年的惊人增长,价格控制和法律纠纷之后,标准石油公司被美国最高法院下令解散。标准石油公司被迫拆分为34家规模较小的公司,其中一些以埃克森美孚(NYSE:XOM)和雪佛兰(NYSE:CVX)的形式存活了下来。根据《谢尔曼反托拉斯法》(Sherman anti- Act),美国最高法院做出了不利于标准石油公司的裁决。《谢尔曼反托拉斯法》制定于几十年前,目的是要阻止这家石油巨头的反竞争行为。

As the saying goes, "History doesn't repeat itself, but it often rhymes." Fast forward to 2019, and the Federal Trade Commission (FTC) and the Department of Justice (DOJ) are reportedly looking into the practices of big tech companies -- namely Google parent Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG), Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), and Apple (NASDAQ:AAPL). The players have changed, but many of the same rules apply today, and antitrust laws could be brought to bear against technology. Investors could be in for some shock-and-awe treatment from the Feds, but there's no need to panic.

俗话说,“历史不会重演,但它往往会押韵。” 快进到2019年,据报道,美国联邦贸易委员会(FTC) 和司法部(DOJ) 正在调查大型科技公司的行为——即谷歌公司Alphabet(纳斯达克:GOOG)脸书(纳斯达克:FB)亚马逊(纳斯达克:AMZN)苹果(纳斯达克:AAPL)。参与者已经改变了,但许多相同的规则今天仍然适用,反托拉斯法可能会被用来对付技术领域。投资者可能会受到美联储的一些惊吓,但没有必要恐慌。

2019-15-06-14-57-03-5d0496bf725a1.jpg A black and white photo of the U.S. Capitol building with an American flag flying in the foreground.

Image source: Getty Images.

图片来源:Getty 图片

Antitrust what?


First, let's review what antitrust laws are. According to the DOJ website, there are three primary mandates: the aforementioned Sherman Antitrust Act of 1890, the first law to really crack down on monopolistic practices that restrict competition; the Clayton Act of 1914, which was passed to clarify and supplement the Sherman Act; and the Federal Trade Commission Act of 1914, which also created the FTC.


The idea behind all three laws was to crack down on anti-competitive practices, like collusion between competitors and mergers and acquisitions that lessen competition or increase prices on consumers. Regarding monopolies, the DOJ website reads as follows under the Sherman Act:


The Sherman Act also makes it a crime to monopolize any part of interstate commerce. An unlawful monopoly exists when one firm controls the market for a product or service, and it has obtained that market power, not because its product or service is superior to others, but by suppressing competition with anti-competitive conduct. The Act, however, is not violated simply when one firm's vigorous competition and lower prices take sales from its less efficient competitors; in that case, competition is working properly.


Based on this definition alone, it will take some effort to pin down the big tech names under fire. On one hand, they have grown to massive scale because they're disruptive to incumbent businesses by offering a superior service or lowering prices (like Amazon). On the other hand, though, acquisitions are common in the tech world -- think Facebook's buyout of WhatsApp and Instagram. Sometimes, a takeover is to capture growth from an upstart; other times, it's to consolidate market share in a key business segment. These deals have been going on for years relatively unchecked, and now it's an issue after the fact.


Granted, we don't know yet why the DOJ and FTC are mulling an investigation. Technology names have been in media frenzy-induced trouble and in lawmakers' crosshairs for years now. Facebook's Cambridge Analytica debacle that surfaced in early 2018 is a prime example.

诚然,我们还不知道美国司法部和联邦贸易委员会为什么要考虑组织一项调查。多年来,科技公司一直都是媒体疯狂制造麻烦和议员们抨击的靶子。2018年初,浮出水面的脸书剑桥分析公司(Cambridge Analytica)崩溃就是一个很好的例子。

Data privacy and abuse of the internet are not new concerns, and to be fair, it isn't limited to just the biggest internet names. In today's digital and data-driven world, many large businesses display signs of questionable practices. In early 2018, I wrote about Southwest Airlines'(NYSE:LUV) lawsuit against a small start-up to keep internet traffic flowing direct to their website.

对互联网的隐私和滥用并不是新问题,公平来说,它不仅仅局限于最大的互联网公司。在当今数字和数据驱动的世界,许多大型企业都表现出了行为可疑的迹象。2018年初,我写了一篇关于西南航空(NYSE:LUV) 起诉一家小型初创公司的文章,这家公司的目的是让互联网流量直接流向其网站。

Whatever the reason for the possible investigation, ganging up on tech is about the only thing lawmakers seem to agree on at the moment. But should investors panic?


What could happen...


Even if mega-tech is going to be the poster child for a crackdown of internet stocks, it will likely take years for any action to be taken. Action could be taken, though. In the past, antitrust laws have been brought down in glorious fashion. Standard Oil was the first example, as it was split up into dozens of smaller energy companies. AT&T (NYSE:T) is another example, which was broken up into several regional phone operators in the 1980s. Even with those drastic measures, shareholders were just fine. Successors to both of those companies continued to develop, merged with each other later, and business grew.

即使大型科技股将成为打压互联网股的典型案例,采取任何行动都有可能需要数年时间。不过,我们是可以采取行动的。过去,反托拉斯法曾被光荣地废除。标准石油(Standard Oil)是第一个例子,它被拆分为数十家规模较小的能源公司。美国电话电报公司(NYSE:T)是另一个例子,它在20世纪80年代被分拆为几个地区电话运营商。即使采取了这些严厉的措施,股东们也仍然安然无恙。这两家公司的继任者都在继续发展,后来彼此合并,业务也在增长。

2019-15-06-14-57-51-5d0496efb74c0.jpg An illustrated "like" icon. A man in the background is pressing the like button.

Image source: Getty Images.


It's just my conjecture that something less dramatic will take place, as is usually the case. The DOJ and FTC could decide to levy restrictions on business practices, like what happened to Kodak several times. The company had a monopoly on camera film and agreed to not sell private-label product in the 1920s. Later, in the 1950s, it was required to license out its color film-processing business. Other businesses over the years have simply been required to pay fines -- albeit sometimes hefty ones -- because of unfair or monopolistic business practices.


Let's focus on Google for a moment, since the search giant has arguably been in the hottest of water with regulators over the years. Besides coming under fire for privacy and data practices along with Facebook last year, Google has also faced scrutiny over its digital-advertising duopoly. (Facebook is the other dominant party in that industry.) Across the Atlantic, Google has been fined three separate times by the European Commission over its search and Android businesses, totaling over $9 billion.


Perhaps fines are all that will happen to Google, Facebook, Amazon, and Apple if the DOJ and FTC do move ahead with an investigation. Or maybe some more disruptive regulatory activity will be laid down on the technology disruptors -- perhaps requiring a breakup, like Google needing to separate its search business from its mobile operating system business. Only time will tell.


No matter what the action, though, it's important to remember that many businesses that have had to make antitrust adjustments in the past did just fine in the long term. The ones that didn't (like Kodak) didn't die because of the law.


The real success of a company isn't competition or lack thereof, but rather its ability to innovate and change with the times. As long as Google, Facebook, Amazon, and Apple continue to advance -- whether they remain intact in their current forms or not -- investors have no need to fret.


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