At the end of July, after finalize plans to part ways last yearGeneral Electric announcement that the new companies would be called GE Aerospace, GE Vernova and GE Healthcare. A few months earlier, cereal maker Kellogg Co. announcement it would also split into three companies – for cereals, snacks and plant-based foods. Just a few years ago, Dow Chemical and DuPont merged, but with the proposed rearrange then spinning three separate companies: Dow for basic chemicals, DuPont for specialty chemicals and Corteva for agricultural chemicals.
It’s not just American companies either. Recently, the British pharmaceutical giant GSK made a spin-off from its consumer healthcare business to create a brand new company, Haleon PLC.
Corporate disruptions are part of the routine of capitalism. So why is it considered irreparable interference in the markets when regulators tear down companies, instead of CEOs or activist investors?
When we think of breaking up companies, we think of famous examples like Standard Oil in 1911 or AT&T in 1982. In these cases, trustbusters in government divide the company to restore competition or to limit the power of a dominant company.
What is less known is that when the US Supreme Court split it into 33 separate companies, it became more attractive to chunked investors than it was. together. Rockefeller was on the golf course when he heard the news. “Buy standard oil” was his response, which turned out to be great stock market advice. Today, some investors are making similar arguments for breaking Facebook and Alphabet.
Not a death sentence
Although antitrust breaches are rare by comparison, they are conducted – in theory – for reasons of public interest. Public figures like Elizabeth Warren and Teaching of the Zephyr championed them, but antitrust breaks are often presented as sweeping, ineffective, or unachievable. Fiona Scott Morten, professor of economics at Yale, writing that “simply ‘breaking’ them is a simplistic phrase, not a real policy that would restore competition in digital markets and benefit consumers. Other tech journalists called them “messy proposal» and even a «nuclear option.”
As federal and state antitrust investigations intensify against Google, Facebook and Amazon by the Federal Trade Commissionthe justice departmentand State Lawyers generalnarrative resistance is also built.
When it comes to disruptive decisions, advocates of free markets and corporate sovereignty generally rely on a few key claims. The first is the “omelette” argument: just as it is impossible to unscramble an egg, it is impossible to untie businesses. Proponents of this view argue that it is a technical nightmare to separate internal functions and infrastructure, organizational arrangements and technical specifications for products that have been built together. The American Action Forum, a conservative public policy think tank, said that for highly integrated tech companies, disruptions are a “death sentence.”
Better guard dogs
However, as investors and corporate executives regularly show us, where there is a will and an incentive on the balance sheet, there is a way. Presenting corporate dissolution as sweeping not only ignores the fact that it is routinely (and voluntarily) done by corporate executives, but also flouts the legal mandate of the Federal Trade Commission and the Department of Justice to administer these remedies. .
In 1961, Justice Brennan of the Supreme Court observed in a DuPont case, “divestiture has been called the most important antitrust action. It’s simple, relatively easy to administer and…it should always be at the forefront of a court’s mind when it comes to [an anticompetitive merger] Was found.”
Other arguments against breakups include the idea that investors are better market watchdogs than governments or that markets will correct themselves in favor of competition. Government action is seen as a slow, heavy, and blunt tool – a rock thrown into the otherwise smooth waters of market efficiency.
Proponents of this view also argue that governments respond to the whims of popular political sentiment, politically charged talking points, and electoral pressures from whichever politician happens to be in power. Current FTC Commissioner Christine Wilson has already tweeted on his need to fight for “the integrity of [The FTC], sound (non-subjective and politicized) application of antitrust laws; the rule of law and due process; and free markets, which produce free people, because command-and-control economies fail.
However, markets are not abstract forces guiding companies towards better and more efficient business decisions. They are public creations governed by politically determined rules. Today, we have markets governed by a set of rules that allow for constant mergers and acquisitions, which has resulted in one of the most concentrated economies in American history.
Only recently, under the leadership of Chairwoman Lina Khan, has the FTC begun to challenge mergers, such as the recent attempt to block the acquisition by Meta of the creator of the application Within. In the past decade, the FTC has not blocked a single merger of Amazon, Google or Facebook, as tech companies have amassed unprecedented market power.
A different set of rules could lead to fairer markets, a fairer level playing field and better outcomes for consumers. Breakups are common for businesses and should be common for antitrust authorities as well. Breaking up companies is not a baseless interference in markets, the politicization of legal precedent or a Herculean task. When warranted, breaks are just good business governance, as investors regularly show us.
While tech companies and their networks of academics and paid advisers will try to color the breaks as a radical last resort, enforcers should take a cue from private sector precedent. They can consult the extensive documentation on voluntary business transfers to guide them.
Business dissolution can benefit consumers, workers, small businesses and even investors. Breakups can be a rare example of a true win-win scenario. As the FTC wages an aggressive campaign to rein in big tech, the agency is aligning itself with capitalists around the world who routinely break up companies to keep markets competitive.
Denise Hearn is Principal Investigator at the American Project on Economic Freedoms and co-responsible for Access to markets Initiative. She is co-author of The myth of capitalism: monopolies and the death of competition and write the Embodied Economy newsletter.
The opinions expressed in Fortune.com comments are solely the opinions of their authors and do not reflect the opinions and beliefs of Fortune.
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