An Economy of Godzillas: Salesforce, Slack, and Microsoft

Salesforce-Slack and Penguin-Simon & Schuster both show a failure to enforce antitrust laws creates monopolies.


Welcome to BIG, a newsletter about the politics of monopoly and finance. If you’d like to sign up, you can do so here. Or just read on…

Today I’m going to write about the Salesforce-Slack combination, and use it to show how concentration in one area of the economy creates roll-ups everywhere else. In this case, the Salesforce-Slack tie-up, while harmful, is defensive, a protective response to a bigger predator, Microsoft. There are a lot of predators around, so there are a lot of such defensive mergers. In this issue I hope to explain the dynamics of one of them as a way of illustrating an important trend in the economy.

I’ll also discuss a couple of weird monopolies: a private equity roll-up of church management software, a takeover of the software that the Democratic Party itself relies on, and the destruction of a global marketplace for rare books.

Some house-keeping. First, I’ve gotten a bit obsessed with why my side of the aisle - progressives, Democrats, the left, whatever you want to call it - doesn’t seem to have a useful political framework, so I’m going into political philosophy to try to understand the root of the problem. I found this essay fascinating.

Second, there are now 35,000 subscribers to BIG, and every issue is read fairly widely at this point. I want to start highlighting the BIG community of anti-monopolists. If you are doing something or learning something around how to address the problem of monopolization, let me know by responding to this newsletter or putting it into the comments. I’ll try to feature some of what you are doing or writing, and at the very least I do read every email. Better things are possible, and many of you are making them happen.

And now.

The Godzilla vs Mechagodzilla Economy

The biggest merger news last week was enterprise giant Salesforce buying chat software producer Slack for $27 billion. This merger is part of a wave of consolidation across the economy, which includes combinations like chipmakers Nvidia-ARM, food delivery apps Uber-Postmates, and book publishers Simon & Schuster-Penguin, along with innumerable smaller tie-ups. With high stock market prices, easy financing, and a legal framework enabling monopolization, merging with competitors is a safe and easy path to riches.

This merger represents something that is an increasingly important dynamic in the American economy, a merger done not just to gain power to exploit others, but with the goal of procuring market power to protect oneself against an existing monopolist. Concentration in one area of a supply chain leading to concentration elsewhere is a phenomenon called ‘Concentration Creep,’ and we’re now seeing it everywhere.

First, to the merger itself.

Salesforce is a collection of marketing, analytics, and customer management tools, along with a large sales force to sell it all. its CEO Marc Benioff is a highly-connected billionaire salesman who knows how to get what he wants from the political system, including lax merger enforcement. Indeed, Salesforce bought many of its lines of business, with 60+ acquisitions over the last two decades, and prior to the pandemic in 2019, Salesforce was on merger “tear,” buying companies Tableau,, MapAnything, Griddable, Rebel, MuleSoft, CloudCraze and Datorama. The purchase of Slack is in keeping with strategy of rolling up the customer relationship management software space and extending into the rest of the corporate enterprise.

That is not how the merger is being framed, of course.

As usual, the merging parties were publicly euphoric, with Benioff elatedly musing about the “future of work” and the CEO of Slack calling the deal “the most strategic combination in the history of software.” Not to be outdone, one Salesforce ally, Box CEO Aaron Levie, argued that this merger will create a “new ‘operating system’ for how knowledge workers will interact in the future, connecting the front office, back office, and customers all together in a single platform.”

The Salesforce press release even got spiritual, pledging the the combination’s combined product lines would give “companies a single source of truth for their business.” A single source of truth? Deep thoughts, from corporate PR. Somewhere from the beyond, so-called futurist Alvin Toffler is smiling as his book Future Shock continues to echo in the platitudes of self-important salesmen CEOs and PR flacks.

The bottom line is software conglomerate Salesforce will now be selling a popular chat tool along with the rest of its slapped together product lines. If that’s your idea of Shangri-La, then you too can have a successful career doing PR in Silicon Valley.

The loss of an independent Slack is sad, because Slack’s strategy wasn’t just a standard attempt to gain market power. As a company, Slack’s team thought carefully about product design, and that care showed. Slack’s most important product is work chat software that seamlessly integrates with third party apps, with the goal of “killing email” and making teams more productive. In the mid-2010s, its growth was explosive, largely adopted by employees themselves in small teams who loved the product. Such an adoption strategy is common for consumer products, but not ones used in business, which take deep relationships and wining and dining of corporate purchasing managers.

The usability of the product, and Slack’s integration with an increasing number of software packages, made the communications network central to how employees worked together. If Slack had continued being able to operate independently in an open market, it probably would have produced follow-on products to challenge existing enterprise vendors. Of course, as Salesforce’s roll-up illustrated, the business tool software market is anything but open. And Slack ran head-on into a monopolist, but in this case, the monopolist wasn’t Salesforce.

Slack was going after the way that corporations communicate internally that hard largely been handled by email systems and business productivity software. Microsoft is the dominant player in this space, with its Office productivity line of business generating $35 billion a year. If Slack had been able to grow, it could eventually introduce tools to compete with Microsoft’s offerings. Microsoft soon recognized the threat, and in 2016, it cloned Slack, and began offering its version of Slack’s chat product, dubbed Teams, as part of Office 365.

Microsoft has one of the if not the biggest software sales force on the planet, and offers the industry standard business productivity suite. Meanwhile, as a new company, Slack had no sales channel to big businesses, and it grew through word of mouth. So Microsoft did what it always does to kill a nascent competitor; it gave away its new product for no or low cost to existing clients, and bundled it with existing product lines. In a society with functional antitrust laws, such activity would be illegal. But alas.

Microsoft engages in exclusionary conduct like this regularly. It did it to Netscape and Sun in the 1990s to protect its Windows monopoly. It is doing it now with security software, which I noted in mid-May. An IT manager at a Fortune 500 company told me that Microsoft’s exclusionary tactics and product development roadmap are so aggressive that the company has created significant security vulnerabilities for its clients. Microsoft’s “security technologies are a mish-mash of one-off acquisitions that are not integrated with each other,” he said, nothing that Microsoft reps’ behavior tends towards being “reprehensible” and deceptive, designed to prevent competitors from getting any revenue by leveraging existing relationships with top corporate brass. Apple, Facebook, Google, and Amazon get a lot of scrutiny these days, but that doesn’t mean Microsoft has become a saint. It hasn’t.

In response to Microsoft’s onslaught, Slack didn’t stand still. In July, it filed a complaint with the EU Competition authority, accusing Microsoft of using its dominant hold on business software tools to exclude Slack’s products. “Slack threatens Microsoft’s hold on business email, the cornerstone of Office, which means Slack threatens Microsoft’s lock on enterprise software,” Jonathan Prince, vice president of communications and policy at Slack, said in a statement. This comment is an echo of the monopoly maintenance claims used against the corporation in the 1998 antitrust case that nearly broke it up.

But there was no action forthcoming. Two months later, Slack warned investors that Microsoft might strike back, writing as an investment risk that “it could be subject to retaliatory or other adverse measures by Microsoft, its employees, or agents in response to the complaint that we filed with the European Commission.” And then finally, this week, Slack threw in the towel, selling itself to Salesforce and ceasing to exist as an independent concern. As Casey Newton put it at Verge, “the medium-term future of work is increasingly a choice between three giants: Microsoft, Salesforce, and (in a distant third) Google. And with that, the golden age of worker choice in productivity tools seems to be coming to an end.” Slack’s fate, Newton notes, “mirrors that of many one-time innovators in enterprise productivity,” such as Mailbox, Acompli, and Evernote.

Had Microsoft been broken up in 1998, had antitrust enforcers acted at any point in the last fifteen years to prohibit predatory pricing or illegal tying in software markets or to slow the massive acquisition spree that both Microsoft and Salesforce have undertaken, Slack would still be an independent company and the enterprise software space would be a vibrant place with lots of choices and competition. But there is effectively no antitrust law if you are powerful. So Slack sold out to a more powerful entity, Salesforce, to protect themselves from Microsoft’s predation, since law enforcers wouldn’t bother to do so.

Now, this is a big merger, and the $27 billion price Salesforce for Slack is paying is no small amount, so clearly, antitrust enforcers will notice the deal and look it over. But my guess is that enforcers will examine this merger with the same care they showed every other transaction they waved through while napping. Of course the deal should be blocked, because the goal is to build out a vertically integrated enterprise sales and software toolset and exclude others from that market. That’s what Salesforce is, a mess of product lines glued together with press releases, market power and political connections.

As Newton noted, without being part of a big tech company, it is increasingly hard to enter the enterprise market, and in a sane world that should be enough to block a merger. But a more interesting and important question is the role of Microsoft in this merger, because clearly, if you block Slack from selling to Salesforce, Microsoft is still around, doing what it does. And in many ways, blocking this merger without addressing Microsoft’s bad conduct, while it will probably help some smaller competitors of Salesforce, will also strengthen Microsoft.

The Slack-Salesforce merger is the kind of defensive merger happening as a result of market power held elsewhere, exactly like the Simon & Schuster-Penguin merger I wrote about last week, where two giant book publishers are combining not only to crush authors, but also to protect themselves from Amazon. Such a defensive rationale for bulking up is how AT&T justified its absurd merger with Time Warner to the judge who cleared the transaction. AT&T argued that the deal was necessary to face down Netflix, Facebook, Google, and Amazon. (The merger has so far proved to be a disaster, though T-Mobile’s CEO still walked away with $300 million, which was perhaps his real rationale.)

Often, lawyers will justify such defensive mergers as ‘pro-competitive’ when what they mean is that the transaction will allow the two smaller companies that merge to operate on the same level as the existing dominant monopolist. And that might be true in one sense; Salesforce and Microsoft will be competing in some lines of business, and neither will be able to kill the other. But of course, a society where all competition is Godzilla versus Mechagodzilla, crushing everyone else underfoot, is very different than a one with lots of small nimble businesses and little predatory conduct.

And this brings me to antitrust law, which has two main elements. The first is the Sherman Act, which is about blocking monopolization and restraints of trade, which is to say, harmful conduct from a monopolist or the act of becoming a monopolist. And the second is the Clayton Act, a law designed to stop mergers that will lead to abusive market power. Enforcers tend to look at these legal frameworks in isolation, seeing the law as applying case-by-case with no larger patterns. And yet this kind of narrow view has never been how Congress understood the goal of anti-monopoly rules. The Sherman Act can apply to mergers, and the Clayton Act includes provisions against certain forms of anti-competitive conduct like price discrimination. Beyond that, the Federal Trade Commission has broad rule-making and research authority, because industry trends are patterns across different companies. Preventing monopolistic behavior is as critical to slowing a merger wave as enforcing merger law itself.

In other words, Salesforce should not be allowed to buy Slack, as businesses will ultimately have less choice in tools they can use for communication, and business people won’t be able to enter the enterprise market as easily. But then, Slack should never have had to put itself on the block in the first place.

A Democratic Party Software Monopoly: Back during the Iowa Caucuses, I wrote up how the Democratic Party itself is structured as a cartel as a way of explaining why the Iowa Democratic Party used an app to count votes that did not work.

Another part of this cartel are the software platforms used by campaigns and progressive nonprofits to organize donors, volunteers, and voter contact. Getting access to these platforms, with their voter file data and mapping capacity, is the difference between being able to talk to voters, and not.

Now one of these software companies, NGPVAN, has scooped up the rest, which includes Blue State Digital, ActionKit, NationalField, and DonorTrends. Last week it bought Mobilize, a volunteer and events management platform, leading to campaign operative Rapi Castillo speaking out angrily. This roll-up is not just about pricing power but democracy, as cutting off software access in this market can mean that a politician loses his or her office or that a challenger can’t reach voters. (Actblue, the dominant donation platform for Dems, has cut off a candidate over political disagreements.)

In announcing the acquisition, NGPVAN used the red flag words of modern monopolization: “platform” and “infrastructure.” To wit, “Mobilize’s acquisition will ensure the platform remains as core progressive tech infrastructure,” in this case for fighting for racial justice, a woman’s right to choose, LGBTQ rights, or against climate change.

But not, apparently, fighting against unfair market power.

A Church Software Roll-Up: I got this email from a contact.

One interesting roll-up you or your readers might find interesting is Community Brands. Community Brands is the parent of a consolidation of software companies focused on serving non-profits and churches. Their religious unit is Ministry Brands ( and as you can see, they essentially keep the public facing products in place, but it's all owned by the same org. Providence Equity started the roll-up and the company is now owned by Insight Venture Partners and Genstar Capital. No doubt every small software company in this space has been approached. Just a more unusual market for PE firms to notice and consolidate.

Here’s a screenshot from their website.

The Rare Book Market Collapse: This is a great comment from the last issue of BIG on Amazon and the rare book market.

My small-time grievance is Amazon invading the international rare-books field and destroying it almost instantly. Bezos suddenly acquired ABEBooks a Canadian outfit that offered small serious booksellers a global marketplace. Prior to that those were great days. Buyers relied on written (of course) descriptions, there was good faith all around and a mutual love of books. ABEBooks also had developed a marvelous tool for cataloging your books, keeping track of sales, etc.

One day I shipped a book to Australia without noticing NEW fine print--28 day return policy. I got screwed on that one and paid 28 bucks in postage both ways after, about, 28 days. NOBODY who is serious about rare books lets people touch them. They're old, and in various stages of fragility. Serious booksellers dropped off the site. I contributed some still-current descriptive language but no sensible collector would ship out that kind of product for a 28-day vacation in someone else's house. This is when we found out that Amazon snapped up ABEBooks. Golden opportunity lost to small business people.

If true, this story is one more illustration that market power and corporate size can undermine economies of scale. Rare books are the kind of segment that Amazon wouldn’t even notice destroying.

Thanks for reading. Send me tips, stories I’ve missed, or comment by clicking on the title of this newsletter. And if you liked this issue of BIG, you can sign up here for more issues of BIG, a newsletter on how to restore fair commerce, innovation and democracy. If you really liked it, read my book, Goliath: The 100-Year War Between Monopoly Power and Democracy.


Matt Stoller

P.S. I’m interested in mergers of Wall Street data players, in particular the $44 billion recently announced combination between S&P and IHS Markit. If you know anything about it or about the business in general, send your thoughts my way.