July 19, 2023
A little more than two years ago, on July 9, 2021, President Biden signed an executive order to promote competition in the U.S. economy. Echoing the language of his predecessors, he said, “competition keeps the economy moving and keeps it growing. Fair competition is why capitalism has been the world’s greatest force for prosperity and growth…. But what we’ve seen over the past few decades is less competition and more concentration that holds our economy back.”
In that speech, Biden deliberately positioned himself in our country’s long history of opposing economic consolidation. Calling out both Roosevelt presidents—Republican Theodore Roosevelt, who oversaw part of the Progressive Era, and Democrat Franklin Delano Roosevelt, who oversaw the New Deal—Biden celebrated their attempt to rein in the power of big business, first by focusing on the abuses of those businesses, and then by championing competition.
Biden promised to enforce antitrust laws, interpreting them in the way they had been understood traditionally. Like his progressive predecessors, he believed antitrust laws should prevent large entities from swallowing up markets, consolidating their power so they could raise prices and undercut workers’ rights. Traditionally, those advocating antitrust legislation wanted to protect economic competition, believing that such competition would promote innovation, protect workers, and keep consumer prices down.
In the 1980s, government officials threw out that understanding and replaced it with a new line of thinking advanced by former solicitor general of the United States Robert Bork. He claimed that the traditional understanding of antitrust legislation was economically inefficient because it restricted the ways businesses could operate. Instead, he said, consolidation of industries was fine so long as it promoted economic efficiencies that, at least in the short term, cut costs for consumers. While antitrust legislation remained on the books, the understanding of what it meant changed dramatically.
Reagan and his people advanced Bork’s position, abandoning the idea that capitalism fundamentally depends on competition. Industries consolidated, and by the time Biden took office his people estimated the lack of competition was costing a median U.S. household as much as $5000 a year. Two years ago, Biden called the turn toward Bork’s ideas “the wrong path,” and vowed to restore competition in an increasingly consolidated marketplace. With his executive order in July 2021, he established a White House Competition Council to direct a whole-of-government approach to promoting competition in the economy.
This shift gained momentum in part because of what appeared to be price gouging as the shutdowns of the pandemic eased. The five largest ocean container shipping companies, for example, made $300 billion in profits in 2022, compared to $64 billion the year before, which itself was a higher number than in the past. Those higher prices helped to drive inflation.
The baby formula shortage that began in February 2022 also highlighted the problems of concentration in an industry. Just four companies controlled 90% of the baby formula market in the U.S., and when one of them shut down production at a plant that appeared to be contaminated, supplies fell dramatically across the country. The administration had to start flying millions of bottles of formula in from other countries under Operation Fly Formula, a solution that suggested something was badly out of whack.
The administration’s focus on restoring competition had some immediate effects. It worked to get a bipartisan reform to ocean shipping through Congress, permitting greater oversight of the shipping industry by the Federal Maritime Commission. That law was part of the solution that brought ocean-going shipping prices down 80% from their peak. It worked with the Food and Drug Administration to make hearing aids available over the counter, cutting costs for American families. It also has worked to get rid of the non-compete clauses which made it hard for about 30 million workers to change jobs. And it began cracking down on junk fees, add-ons to rental car contracts, ticket sales, banking services, and so on, getting those fees down an estimated $5 billion a year.
“Folks are tired of being played for suckers,” Biden said. “[I]t’s about basic fairness.”
Today, the administration announced new measures to promote competition in the economy. The Department of Agriculture will work with attorneys general in 31 states and Washington, D.C. to enforce antitrust and consumer protection laws in food and agriculture. They will make sure that large corporations can’t fix food prices or price gouge in stores in areas where they have a monopoly. They will work to expand the nation’s processing capacity for meat and poultry, and are also promoting better access to markets for all agricultural producers and keeping seeds open-source.
Having cracked down on junk fees in consumer products, the administration is now turning to junk fees in rental housing, fees like those required just to file a rental application or fees to be able to pay your rent online.
The Department of Justice and the Federal Trade Commission today released new merger guidelines to protect the country from mass layoffs, higher prices, and fewer options for consumers and workers. Biden used the example of hospital mergers, which have led to extraordinary price hikes, to explain why new guidelines are necessary.
The agencies reached out for public comment to construct 13 guidelines that seek to prevent mergers that threaten competition or tend to create monopolies. They declare that agencies must address the effect of proposed mergers on “all market participants and any dimension of competition, including for workers.”
Now that the guidelines are proposed, officials are asking the public to provide comments on them. The comment period will end on September 18.
One of the reporters on the press call about the new initiatives noted that the U.S. Chamber of Commerce has accused the Biden administration of regulatory overreach, exactly as Bork outlined in a famous 1978 book introducing his revision of U.S. antitrust policy. An answer by a senior administration official highlighted a key element of the struggle over business consolidation that is rarely discussed and has been key to demands to end such consolidation since the 1870s.
The official noted that small businesses, especially those in rural areas, are quite happy to see consolidation broken up, because it gives them an opportunity to get into fields that previously had been closed to them. In fact, small businesses have boomed under this administration; there were 10.5 million small business applications in its first two years and those numbers continue strong.
This is the same pattern the U.S. saw during the Progressive Era of the early twentieth century and during the New Deal of the 1930s. In both of those eras, established business leaders insisted that government regulation was bad for the economy and that any attempts to limit their power came from workers who were at least flirting with socialism. But in fact entrepreneurs and small businesses were always part of the coalition that wanted such regulation. They needed it to level the playing field enough to let them participate.
The effects of this turnaround in the government’s approach to economic consolidation is a big deal. It is already having real effects on our lives, and offers to do more: saving consumers money, protecting workers’ wages and safety, and promoting small businesses, especially in rural areas. It’s another part of this administration’s rejection of the top-down economy that has shaped the country since 1981.