With the nomination of Neil Gorsuch to be the next Supreme Court Justice, there have been a lot of discussions about his pro-business stances. It was with that in mind that the Center for American Progress held an event today on “Trump, Gorsuch, and the concentration of economic power.” The first part of the event was a speech by Senator Amy Klobuchar that focused in on anti-trust laws.
Klobuchar got her start in the anti-trust arena when she was a lawyer who represented MCI. She described MCI at the time as “a scrappy” organization taking on the ATT and Bell monopolies that were running the telecommunications world at the time. MCI came in wanting to invest in improve the system while creating competition and ended up fighting for consumers and lowered prices for the general public. The Senator claims this wouldn’t have happened without anti-trust laws.
Now that she’s in the United States Senate, she still sees anti-trust issues as very important. In fact, she claims “anti-trust has everything to do with the broader economy.” While you might only think of big businesses taking over in large urban settings, it’s actually in the rural areas that Klobuchar has really seen big businesses use their monopoly power to control the economy.
While visiting each of the 87 counties in the state of Minnesota, the Senator claims it becomes obvious that the rural areas are already limited in their choices. Whether it’s through large agricultural businesses dominating the area or having few selections for internet or phone companies, consumers simply don’t have choices for where to spend their hard earned money. This harms the general public and plays a role in why rural areas have four percent more children in poverty than their urban counterparts.
Although she can see the impact that large, almost monopoly like, companies have in rural communities, Klobuchar says it’s not just consumers that are impacted by anti-trust issues. It also impacts the business community. 90 percent of businesses in the country, after all, have 20 or fewer employees. But entrepreneurs are less likely to start their own business when they believe the big businesses leave them no opportunity for success, which leads to less competition and less innovation in industry.
Klobuchar highlighted how when there are only one or two companies in a certain field, they’re generally happy with the status quo. If at least eight to ten companies are competing, however, they’re strive to make their products better in order to win over customers.
An example of this she used was the beer industry. As recently as 1978, there were only 50 breweries across the entire country and they were producing generic beers. Now there are 78 in the state of Minnesota alone and they’re creating microbrews that are beloved by consumers and causes brewers to be much more creative when brewing their beers.
She brought beer industry up to prove that it’s not always about price, but quality of product actually matters too. Why else would someone pay more for a certain IPA than a Bud Light you can find at any grocery store?
With that being said, one of the major issues with monopolies is that they’re able to drive up the price of their product without worrying about competitors underselling them. This eventually leads to the increased income inequality we’ve seen as the working class is forced to spend more of their hard earned money while enormous profits go into the pockets of executives.
This is why working to make sure companies aren’t too big and powerful and small businesses have the ability to help spur innovation should be a bipartisan issue. According to Klobuchar, it has been to some degree. She has a good working relationship with Sen. Mike Lee, for instance, who she describes as being a “tea party type.”
Now, more than ever, we actually need to have these anti-trust issues paid attention to in a bipartisan manner. Klobuchar explained this is because since 2008, American firms have engaged in $10 trillion in acquisitions. Plus, in the last five years alone there has been a 50 percent increase in the mergers reviewed by the FTC and the Department of Justice’s anti-trust division.
Comcast’s failed merger with Time-Warner is a prime example of what she believes we need to look out for because the resulting company would have controlled 60 percent of the country’s high speed internet traffic. The fact that 90 percent of freight is transported by four railroads is another example of what she doesn’t like seeing in the business world.
While all of this has been going on, we’ve seen a decline in anti-trust enforcement. At a time when we’ve seen a 20 percent increase in the nominal GDP and a 50 percent increase in merger filings between 2010 and 2016, the agencies in charge of enforcement have seen their budget remain flat.
This shouldn’t be a budget related issue either because the Department of Justice’s anti-trust division has actually made money for the federal government. There were $3.6 billion in anti-trust related fines in 2015, but the department’s budget was only about five percent of that number.
With anti-trust enforcement down and an administration that has already appointed cabinet members and staffers who support big business, the question becomes: how should leaders on the issue proceed? Klobuchar broke this down into three main points.
First, we need to give agencies the tools they need to make sure their efforts have been effective. A yearly report on the status of certain rulings, for instance, could be helpful.
Secondly, Klobuchar warns about is how large investment firms own 70 percent of the stock market, which means these firms are often investing in companies that are supposed to be competing against each other. The largest investors in Apple and Microsoft, for example, are BlackRock (which has $5.1 trillion in assets) and Vanguard (which has approximately $4 trillion in assets).
The Senator believes we need to have more information on how these funds impact competitiveness and how prevalent the issue has become.
Finally, she says “we need to up our game” through actions such as setting up feeds to be enforced in the case of mega mergers worth hundreds of billions of dollars.
She ended her speech by pointing out that capitalism is based on the spirit of fair play and anti-trust regulation helps to make sure that spirit is followed. Since it inspires competition and innovation, these regulations are also good for both the consumer and the business community.