Last week, Hillary Rodham Clinton recognized that the United States has an oligopoly problem. In an op-ed for Quartz, Clinton wrote that many major industries are dominated by a handful of companies and warned that highly consolidated markets enable firms to raise prices, limit choices and stifle competition. “As president, I will take on this fight,” Clinton wrote, sketching out how she would tackle concentrated economic power.
Clinton’s statement is a big deal. For years, policymakers and economists — many from the Clintonite wing of the Democratic Party — have treated mergers and acquisitions as the product of some inexorable force of progress, rather than as corporate decisions with profound public implications. Despite research from journalists and advocacy groups suggesting that extreme consolidation contributes to inequality and creates a host of political and economic hazards, officials have largely ignored the issue. At the most basic level, Clinton’s statement breaks from this pattern.
That said, Clinton’s proposals suggest she fails to grasp the scope and depth of the challenge. As outlined, the thrust of her plan is to push antitrust agencies to investigate anti-competitive conduct and challenge anti-competitive mergers — tasks they are already charged with doing. Greater enforcement on these fronts is better than nothing but would hardly amount to systemic change.
An effective antitrust agenda would touch on a few key areas of major reform.
First, it’s not enough to stop future consolidation; we need to consider breaking companies up. Major industries in the United States — including agriculture, airlines, banks, books, energy, health insurers, general retail, telecom and pharmaceuticals — are already highly consolidated and conglomerated. As the Wall Street Journal reported last week, almost two-thirds of publicly traded companies operate in more highly concentrated markets today than they did in the mid-1990s. In some cases, we are past the point where halting mergers alone would be sufficient to restore competition.
Breaking companies up is not a radical act. Corporate managers do it all the time, spinning off particular units that the firm predicts would either perform better as a standalone business or shield other operations from losses. Moreover, ordering company breakups has long been a basic tool of antitrust policy, most famously used against Standard Oil in 1911 and AT&T in 1982. Leading financial reformers — including several members of Congress — have offered plans to break up the nation’s biggest banks. Breaking companies up may be especially important in industries where firms have vertically integrated, making their competitors now dependent on them (think AB InBev’s expansion into distribution, Amazon running its own publishing arm, Ticketmaster merging with Live Nation, or Comcast buying up NBC). All of these cases create ripe opportunities for companies to discriminate against or lock out smaller rivals, and they should be addressed by the next administration. (Amazon founder and chief executive Jeffrey P. Bezos owns The Washington Post.)
Second, any president serious about 21st-century antitrust must focus on online platforms, such as Amazon, Google, Airbnb and Uber. As central marketplaces that connect buyers and sellers, these companies are the railroads of the Internet economy, natural monopolies on which a growing share of commerce crucially depends. These firms are armed with troves of data that empower them to dictate the development of entire markets and to further entrench their political economic dominance. Moreover, they host a huge share of public discourse and activity, yet remain largely unaccountable to the public. While the Federal Trade Commission has recently started examining aspects of the “sharing economy,” the threat of anticompetitive conduct by dominant platforms deserves comprehensive attention, with an eye to introducing greater regulation or, as some scholars have suggested, adopting public utility models.
But dealing with new online platforms isn’t enough. A primary factor hindering antitrust enforcement — both in cutting-edge sectors like ride-sharing and in old-school industries like agriculture — is the very way that government agencies measure the harm that results from lack of competition.
Today, the Justice Department and the FTC view anticompetitive harm through the lens of “economic efficiency” and “consumer welfare.” If companies can show that merging would enhance efficiency and lower consumer prices, agencies are likely to bless the deal. No doubt, mergers can create the risk of higher consumer prices. But the current approach mostly neglects to consider a host of other notable harms, such as effects on suppliers and employees, for example, or the power to block and squash new entrants.
It wasn’t always this way. Described as the “Magna Carta of free enterprise” by the Supreme Court in 1972, antitrust laws traditionally promoted a variety of aims, including open markets, fair distribution, innovation and decentralization of political economic power. Rather than try to predict whether merging companies would raise prices (a highly speculative endeavor), enforcers looked at market structure itself as a gauge of competition. By focusing on “concentration” generally, and acknowledging that consolidation affects not just consumers but also workers, Clinton’s statement gestures to this broader structural approach. Following through would require the executive branch to issue new merger guidelines that hew to this more expansive and sophisticated understanding of power.
Any real reform efforts need to make antitrust agencies accountable. Antitrust activities at the DOJ and FTC are entirely shielded from public scrutiny. Officials are not required to justify to the public why they did not challenge a particular merger, or reckon with cases where mergers that they approved made us all worse off (see, for example, airlines and car rentals). Nor do agencies have to explain why they ended lengthy investigations with no action. In 2012, for example, the Justice Department quietly closed a three-year investigation into Monsanto, whose anti-competitive activities had been documented by journalists and described by state officials as “very bad.” Upon shutting down its inquiry, the DOJ made no public announcement; only a short press release from Monsanto conveyed the news. The FTC, meanwhile, culminated its extensive investigation into Google with some voluntary agreements, effectively clearing the company of all allegations. The public later learned that FTC staff had concluded that Google violated antirust laws on three counts, and had recommended bringing a suit.
One way to make agencies more accountable would be through requiring them to conduct retrospective reviews, assessing how their merger predictions actually played out. The president could create antitrust inspector general units within the DOJ and FTC, whose job would involve evaluating how specific mergers had affected factors like choice, quality, profit margins, and conduct with suppliers. Without making agencies accountable, the public can have no confidence that handing the agencies more money — as Clinton proposes — will lead to stronger and smarter enforcement.
Finally, the next administration should convene a group to systematically and comprehensively examine the problem of concentration in our political economy. In doing so, the president could follow the example of Franklin D. Roosevelt, who in 1938 urged Congress to undertake a “thorough study of the concentration of economic power in American industry and the effect of that concentration upon the decline of competition.” Over the next few years, this Temporary National Economic Committee probed how concentration across sectors — from producers of soap and glass to manufacturers of firearms and automobiles — was affecting issues like employment, innovation, investment and entrepreneurship. A similar project by the next administration should be no substitute for enforcement, but is vital for documenting the extent of concentration that exists and understanding its deep effects.
The degree of economic concentration evident today harks us back to the Gilded Age. If Clinton — or any other presidential candidate — is serious about unwinding this power, she must offer an antitrust agenda worthy of the task.