Can the federal forms resuscitate market dynamism in America?
July 15, 2021
TWHERE TRENDS in American capitalism over the past few decades are too strong to be ignored. The first is increasing market concentration – a phenomenon observed in 75% of industries ranging from body fluid industries (kidney dialysis and blood plasma donation centers) to data traffic industries (broadband providers, credit card companies, etc., tech giants in Silicon Valley). The second trend is the declining share of booty going to labor suppliers until the mid-2010s. Whether these are unhealthy indicators is hotly debated. Some argue that the intense competition unleashed by globalization and technological advances can destroy the least efficient companies, leaving only a small cadre of the most productive companies (the “Winner Take Most” model). Others insist that it is a sure sign of market sclerosis.
On July 9, President Joe Biden announced that he fully identified with the critics. At the time, he signed an executive order in which he argued that a lack of competition had raised prices for consumers and depressed wages for workers, and that the federal government would not condone it. Posing himself as Roosevelt of the Modern Age (both Teddy and Franklin broke trust), he vowed that the entire federal government would devote itself to “overconcentration, monopoly and unfair competition.” His order specified 72 initiatives for more than a dozen federal agencies to work on, as well as the creation of a new competition council composed of cabinet members and senior White House officials.
In order for this to be tangible, the competition authorities would have to be more aggressive than usual when filing lawsuits and the judges would have to show more respect for the new, expansive definition of antitrust proceedings. Judging by the stock market movements on the day of Mr. Biden’s orders, investors were intrepid. But analysts at Goldman Sachs’ quarterly earnings talks were worried enough to pound David Solomon, the CEO, with questions about the potential impact on the investment bank’s merger and acquisition business.
The most momentous changes, if they should occur, would be labor markets. One of the sharper debates among labor economists is “monopsony power,” a rather ugly phrase that denotes the degree to which concentration among those who demand work (also known as corporations) depresses the price (also known as wages) paid for it. The most annoying source of this is non-compete clauses, which prevent more than 36 million workers from leaving their jobs easily for better-paid workers. These are widespread among both high-paid and low-paid workers, including 58% of workers for low-wage companies like McDonald’s and Jiffy Lube, according to a study by the late Alan Krueger and Orley Ashenfelter.
Mr. Biden wants the Federal Trade Commission (FTC), which has extensive but conservatively used powers to curb anti-competitive behavior, to prohibit or restrict this practice. He also wants the FTC to end unnecessary professional approvals, pesky rules that turn some professions into glorified guilds. For example, to become a certified interior designer in California, you must have more than six years of experience and pass an exam. The FTC has issued frequent advice to states considering these types of licensing requirements; Mr Biden now urges you to intervene within the scope of your existing legal powers.
Most of the president’s other goals are more bite-sized. Mr Biden rightly believes that the lack of competition between the mainstream industrial companies has led Americans to overpay for things like off-patent drugs, hearing aids, internet connections, and travel on trains and airplanes.
An equally momentous, albeit obscure, debate is raging within the legal academy about what justifies the enforcement of antitrust law. Since its introduction by the conservative legal scholar Robert Bork, the so-called consumer protection standard has dominated American jurisprudence. This states that regulators and courts should primarily examine the impact of corporate actions on the prices paid by customers. Given that most major tech companies offer their services to consumers for free, this standard would suggest that regulators and attorneys general have little opportunity to contest their growing market share. Instead, a broader definition of antitrust law, sometimes referred to as the neo-Brandeisian school after the ideas of anti-monopoly Supreme Court Justice Louis Brandeis, is gaining ground.
“People laughed at me then,” said Barry Lynn, executive director of the Open Markets Institute and longtime anti-monopoly agitator, of his testimony against consumer protection standards in December 2017. Lina Khan, a subsidiary of the Open Markets Institute for seven years , who wrote a law review article for antitrust action against Amazon while she was a student at Yale, is now the head of the FTC. The fate of Mr Biden’s emerging pro-competitive agenda rests on her shoulders.
But it will also depend on whether the judges are willing to accept more extensive antitrust proceedings. So far the signs are not promising. In June, a federal judge dismissed a complaint filed against Facebook by the FTC and 46 state governments, arguing that the social media giant was trying to stifle competition by buying Instagram and WhatsApp. However, Mr Lynn believes the judiciary can be rearranged. “We will bring them into the 21st century. We’ll get them from Bork’s garage. Supreme Court Justices, Justice Justices – These People Don’t Read! They just bask in the worship of lesser people. Raising these people is not easy. But we will.” ■
This article appeared in the USA section of the print edition under the heading “Anti-Trust in me”