When White House press secretary Sean Spicer put both feet in his mouth on Tuesday, executives at United Airlines probably wanted to send him a fruit basket or 50. Talk of “Holocaust centers” has taken some of the spotlight off of the airline still dealing with the fallout from the videos of a bloodied passenger forcibly removed from a United flight. On Tuesday, United chief executive Oscar Muñoz finally apologized to the passenger whom Chicago police had dragged off the airplane. But calls for boycott of United are likely to fail despite their laudability, thanks to oligopoly in the airline industry — a few businesses taking over an entire industry and reducing competition. These have become increasingly common in recent decades as regulators and politicians have backed off of anti-trust laws — and the result is terrible for Americans’ pocketbooks.
United and its peers in the U.S. airline industry are a textbook example of how this trend has hurt consumers. In a little over 10 years, a series of mergers has shrunk the industry from nine companies to four. The most recent — between U.S. Airways and American Airlines — was originally opposed by the Obama Justice Department before the industry mobilized well-connected Democrats, including Chicago mayor Rahm Emanuel, to lobby the White House. A few months later the DOJ dropped its opposition, much to the shock of its staff. The result of the consolidation: record profits for the industry while passengers pay the same or higher ticket prices (and more in fees) and have fewer choices — almost all top airports now have one or two airlines that control a majority of the traffic.
The oligopolistic trend goes beyond airlines. Take the prescription drug industry, which touches virtually every American’s pocketbook. As outlined by David Dayen in the new issue of the American Prospect, recent decades have seen a tremendous consolidation of “pharmacy benefit managers” — companies that manage prescription benefits for health plans. In the 1990s, drug manufacturers acquired these PBMs, but the Federal Trade Commission forced the manufacturers to sell them. But since then, a series of mergers have led to three companies — Express Scripts, CVS Caremark and OptumRx — controlling at least 75 percent of the market. The trio’s market control gives them enormous power over drug prices. As Dayen puts it, “PBMs are sucking money out of the health-care system — and our wallets — with hardly any public awareness of what they are doing.”
The growing concentration of corporations isn’t just changing what many Americans can afford; it’s also lessening how much they’re taking home in the first place. A new paper by University of Chicago economist Simcha Barkai (first flagged by Matt Stoller) suggests that more concentration is hurting U.S. workers’ take-home pay. Barkai found that in the past 30 years, the “labor share” — money for workers’ salaries, benefits and so on — spent by corporations has declined 10 percent even as profits have increased. In particular, “the decline in the labor share is strongly associated with an increase in concentration” in industries — i.e., more concentrated industries have seen workers take a bigger hit.
You can probably already guess the rejoinder from anti-government conservatives: “Let the ‘free market’ sort it out. No one is forcing anyone to buy products from big corporations.” Let’s set aside for the moment that, thanks to these companies’ lobbying, the “free market” is full of government subsidies that tilt the playing field against small companies. What “free market” arguments avoid is that Americans don’t have a choice. Because of the lack of choices, travelers can’t avoid higher fares and fees unless they choose not to fly — a massive inconvenience. No one can be expected to turn down life-saving medications because of oligopolies. And consolidation takes money out of people’s pockets long before they can choose whether to spend it.
Continued corporate consolidation has been a plague on U.S. consumers for decades now, and things don’t seem to be slowing down in the Trump era. Massive mergers like Bayer and Monsanto, AT&T and Time Warner and (potentially) Walgreens and Rite Aid will further the trend of fewer choices for Americans and more damage to their pocketbooks. There is some hope: Senators from both parties have been critical in the past of regulators’ lax attitude towards oligopolies. But until Washington has a massive cultural and regulatory shift back toward helping consumers, oligopolies will continue to take money out of our pockets.