Keeping Titans in Quarantine
Antitrust law once imposed a simple rule on dominant firms: stay in your lane. That idea fell out of favor. Unfortunately, its logic did not.
The clearest example comes from midcentury enforcement. In 1956, the U.S. Department of Justice (DOJ) imposed a sweeping antitrust remedy on AT&T. The DOJ consent decree required AT&T’s research arm, Bell Labs, to license its existing patents for free and to grant access to future patents on reasonable terms. Those two measures made a difference. But the most consequential element was a third prong: a bar on entering industries not directly related to telecommunications.
The goal was straightforward—to prevent a monopolist from leveraging its market power into adjacent and emerging markets. The effects were anything but modest. Shielded in part from AT&T, International Business Machines Corp. (IBM) consolidated its position in computing. Intel, Microsoft, and Apple followed. The “quarantine” remedy, as it came to be known, helped shape an entire industry—and, given the ubiquity of computing, much of the modern world.
That approach, however, did not last. The quarantine remedy has largely fallen out of favor in the United States. Some scholars—notably Tim Wu—have urged its revival in digital platform markets, but those proposals have gained little traction with enforcers. The European Union has never formally adopted this type of remedy. Although some have proposed other, arguably equally “radical,” tools to address anticompetitive conduct, quarantine remedies remain outside the EU’s competition-law toolkit.
Yet abandoning the label has not eliminated the underlying effect. Modern enforcement often produces functionally similar outcomes. Even when agencies do not describe them in these terms, several actions have blocked or significantly impeded dominant firms from entering emerging markets.
This disconnect reflects a familiar feature—perhaps a bug—of antitrust enforcement. Antitrust rules often diverge from how authorities apply them, as Dan Crane has shown. Remedies designed to address one concern can produce very different effects in practice. In particular, efforts to level the playing field in digital markets may create de facto quarantine remedies. Those outcomes can limit entry into adjacent markets and weaken competition.