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murders and executions -antitrust and implications for late stage capital

Guv Dhaliwal
3 min readAug 3, 2020

The end of the 19th century saw the birth of U.S. antitrust law.

Standard Oil Co. Inc. was an American oil producing, transporting, refining, marketing company. Established in 1870, by John D. Rockefeller and Henry Flagler, it was the largest oil refiner in the world of its time. Its history as one of the world’s first and largest multinational corporations ended in 1911, when the U.S. Supreme Court ruled, in a landmark case, that Standard Oil was an illegal monopoly.

Standard Oil dominated the oil products market initially through horizontal integration in the refining sector, then, in later years vertical integration; the company was an innovator in the development of the business trust. The Standard Oil trust streamlined production and logistics, lowered costs, and undercut competitors. Critics accused Standard Oil of using aggressive pricing to destroy competitors and form a monopoly that threatened other businesses.

These companies were called “trusts,” which gave antitrust law its name.

In 1890, Congress passed the Sherman Antitrust Act, the country’s very first antitrust law. It prohibited companies from making anticompetitive agreements or cheating their way into monopoly power.

Broadly the Sherman Act broadly prohibits

(1) anticompetitive agreements and

(2) unilateral conduct that monopolizes or attempts to monopolize the relevant market.

However it was not until Teddy Roosevelt and the action of his office in 1901 that this regulation came to prominence. Roosevelt’s DOJ brought 44 antitrust suits against different companies, starting with J.P. Morgan’s Northern Securities Company — then the U.S.’ largest railroad monopoly. Roosevelt subsequently dismembered up Standard Oil.

‘The law attempts to prevent the artificial raising of prices by restriction of trade or supply. “Innocent monopoly”, or monopoly achieved solely by merit, is perfectly legal, but acts by a monopolist to artificially preserve that status, or nefarious dealings to create a monopoly, are not. The purpose of the Sherman Act is not to protect competitors from harm from legitimately successful businesses, nor to prevent businesses from gaining honest profits from consumers, but rather to preserve a competitive marketplace to protect consumers from abuses’

The Clayton Act further bolstered regulations when enacted in 1914; it banned “interlocking directorates,” certain holding companies, and anticompetitive mergers.

Finally the Federal Trade Commission was also created the same year, and put in charge of antitrust enforcement, among other responsibilities.

Those two bills form the bedrock of U.S. antitrust law. The DOJ’s and FTC’s current investigations are measuring tech giants’ activities against the Sherman Act and the Clayton Act.

Antitrust implications on late stage capital

This week’s very entertaining but largely toothless hearings look to centre on the point of competitive landscape -> mergers and acquisitions.

Clearly apparent and not withstanding moral hazard, is the innate ability for large tech incumbents to use their influence to price out, buy out, or take out competition; murders and executions.

Amazon, Facebook, Apple, Google along with Microsoft, have collectively bought 720 companies over the last 30 years, according to data from the American Antitrust Institute.

There are traditionally two exit routes for latter stage companies; IPO or being acquired.

Going forward, big tech will naturally and understandably be reticent to engage in corporate acquisition given the intense regulatory focus. This is no small matter…

The downstream implications of this change of strategy are seismic disruptions within late stage m&a and connected valuations; potentially having an overdue cleansing and ratifying effect within the start-up eco system — ‘you can always be thinner, look better’.

Not precluded are the potential for smaller mid-market acquisitions allowing collaborators to gain market share and be better placed to compete.

Companies built with a view to longevity and exploration of truly new ideas and concepts rather than relying on verticals which are attractive to incumbents will be key in ushering in a new era of hyper innovation.

‘There is an idea of a start-up, some kind of abstraction, but there is no real business, only an entity, something illusory, and though I can hide my revenues and you can crunch my numbers and feel rising market-share gripping yours and maybe you can even sense our industries are probably comparable: I simply am not there..’

Time to get real.

Ellis, Bret Easton. American Psycho. New York : Random House, Inc., 1991



Guv Dhaliwal

VC/Investor/Advisor @fuelventures Wolverhampton->Cambridge->London->Hong Kong->LA …….Do the maff…