Competition Reconsidered

Update 670 – Competition Reconsidered
Policy and Politics of Antitrust in Congress

The spectacle of the Taylor Swift/Ticketmaster meltdown late last year and the hearing that followed last month are reminders of the continuing consumer consternation over corporate concentration and the growing popular restiveness over the (anti-) competitive practices of firms in tech and other industries. 

A speech this week by Senator Elizabeth Warren surveyed the antitrust issues before Congress and routes to their resolution. Other members have other views and proposals, with accompanying legislation, some old, some new. Today, we review the state of play of the antitrust policy debate in the House and Senate.

Enjoy Presidents’ Day weekend, all…



On Wednesday, Senator Warren delivered the keynote speech at the Open Markets Institute’s Renewing the Democratic Republic Conference. Her address laid out a broad unified strategy to fight corporate consolidation and market power and promote competition. She called on Congressional leaders to get on board with the Biden administration-led fight against growing consolidation. Senator Warren also made the case for strengthening antitrust legislation and regulation to face the escalating challenge ahead.

The Cost of Consolidation

Since the 1970’s, American antitrust policy has weakened and waves of corporate consolidation have progressively reduced competition across the economy. At the same time, corporate profits have grown. Between 1980 and 2017, corporate profits tripled from 5 to 15 percent of value added while corporate investment remained low. The pandemic only exacerbated this trend. In 2021, the scale of mergers and acquisitions was record-breaking. For the first time, the value of U.S. mergers and acquisitions crossed the $2 trillion mark, double the year before.

Small businesses paid the price for continued corporate consolidation. In the 1980s, independent stores accounted for about half of retail shopping, while they now account for under a quarter. In the first three months of the pandemic, the number of people working as business owners fell by over 20 percent. By April 2021, the Federal Reserve estimated that roughly 200,000 businesses in excess of pre-pandemic trends had exited the market.

Corporate profits have also cost consumers – who have borne the brunt of rising prices that bolster corporate profits – under the cover of rising inflation. In the second quarter of 2020, rising profit margins accounted for roughly 40 percent of price increases, beyond the usual level – before the pandemic, profits accounted for about 13 percent of the price of goods and services. A study by the Federal Reserve Bank of Boston reiterated that high concentration within industries amplifies the profit margins corporations gain from their customers and worsens current inflationary pressures.

Biden Approach to Promoting Competition

The Biden administration recognized the scale of the issue early on and initiated a whole-of-government approach to promote competition in the American economy. Biden’s July 2021 executive order included 72 initiatives by over a dozen federal agencies to tackle some of the most pressing competition problems across our economy.

Biden also appointed strong champions of antitrust enforcement to key positions with:

  • Lina Khan as chair of the FTC 
  • Jonathan Kanter as head of the Antitrust Division at the Department of Justice 

As Senator Warren said in her address, “personnel is policy.” The recent resignation of two Republican FTC commissioners present the president with the opportunity to fill both vacancies. Though Biden is barred from appointing Democrats, Republicans who support antitrust enforcement in industries subject to bipartisan scrutiny like Big Tech may be strong choices to support the broader antitrust agenda. 

A Call to Enforce the Bank Merger Act

Senator Warren highlighted the need for federal banking agencies to enforce the Bank Merger Act to prevent banks from further increasing in size. Since 2006, the Fed has received over 3,500 bank merger applications, and regulators have failed to block most of them. Just last year, U.S. Bank, America’s fifth-largest bank, was allowed to acquire Union Bank. 

Both regulators and the Biden administration have recognized an issue with existing guidelines and enforcement. In 2020, the DOJ began a comprehensive review of the bank merger guidelines of 1995. Biden’s July 2021 executive order instructed DOJ regulators to reevaluate how they consider bank deals. In March 2022, the FDIC released a request for information from banks and other interested parties on the bank merger review process. 

At the OCC’s bank merger symposium last Friday, the office’s Senior Deputy Comptroller and Chief Counsel Benjamin McDonough said that the agency’s key antitrust compliance metric may be increasingly ineffective in light of the rise of nonbank and online banking services. An update to the Herfindahl-Hirschman Index, which uses bank deposit data to measure market concentration, would be helpful moving forward to monitor consolidation within the industry. 

Banks often promise that mergers will result in cost saving. Regulators should also begin examining the extent to which those savings are passed on to consumers and consider when bank mergers result in institutions that are all but too big to manage.

Progress on Bills to Rein in Big Tech

Supporters of antitrust legislation tackling Big Tech saw forward movement, if not the broad success they had hoped for in the last session. In her speech on Wednesday, Senator Warren laid out a path for Congress to follow in its effort to rein in tech, calling for the revival of three key pieces of legislation that previously received bipartisan support:

  • American Innovation and Choice Online Act (AICOA)
  • Open App Markets Act (OAMA)
  • Journalism Competition and Preservation Act (JCPA)

American Innovation and Choice Online Act (AICOA) & Open App Markets Act (OAMA)

The AICOA, sponsored by Senators Klobuchar (D-MN) and Grassley (R-IA) would prohibit large tech platforms from unfairly giving preference to promoting their own products over those of their competitors, who are forced to use the platforms they own. The OAMA, introduced by Senators Blumenthal (D-CT), Klobuchar (D-MN) and Blackburn (R-TN) would have forced Google and Apple to stop abusing control of their app stores by opening them to competitors. Warren recalled the incident saying, “Those bipartisan antitrust bills should be law today. And they would be law today IF they had gotten votes on the floor of the Senate and the House. But there was never a vote on those bills. It was a mistake we cannot afford to repeat.” 

A unified front against anti-competitive behavior is necessary to avoid similar pitfalls in this Congress. Leadership on antitrust, particularly by senior Senate Democrats, will prove necessary in the forthcoming battles in reining in tech. The bills would likely receive broad bipartisan support if reintroduced. 

Journalism Competition and Preservation Act (JCPA)

The JCPA was reintroduced in both chambers in 2021 with bipartisan support. The bill was introduced in the Senate by Senators Klobuchar (D-MN) and Kennedy (R-LA) and by Representatives Cicilline (D-RI), Buck (R-CO) and DeSaulnier (D-CA) in the House.

The bill would give publishers the power to bargain with companies like Facebook and Google over the distribution of their content on their platforms and establish a temporary four-year safe harbor from antitrust laws for outlets that allow publishers to negotiate with platforms that distribute their content. The idea is to fight one example of anticompetitive behavior by big tech – their profiting off distributing the work of journalists while many outlets struggle to innovate to maintain the financial support they need. The bill saw debate in the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights. Senator Klobuchar has touted the bill as a means to ensure the survival of local news outlets.

If reintroduced, the bill has the potential to provide a valuable lifeline to local media. 

Treating the Problem or Symptoms?

The Biden administration has embraced a strategy of addressing specific anticompetitive conduct by corporations in heavily consolidated industries. During his State of the Union address, the President outlined his administration’s efforts to tackle unfair and costly junk fees and called on Congress to pass his Junk Fees Prevention Act.

Upcoming votes provide opportunities to add industry-specific antitrust provisions to legislation:

  • The Farm Bill can include provisions to create a special investigator office within USDA to police antitrust violations committed by meatpackers to regulate the agriculture sector
  • FAA Reauthorization Bill presents a chance to include provisions regulating consolidation within the airline industry, which received a substantial bailout following the onset of the pandemic

Senator Warren highlighted a need to move beyond industry-specific remedies and address the broader problem of corporate consolidation. She announced her plan to reintroduce the Prohibiting Anticompetitive Mergers Act, which would make mergers worth more than $5 billion illegal and ban deals that result in market shares above 33 percent for sellers or 25 percent for employers. The bill was designed to target the tech industry. A press release on the bill last year explicitly referred to Meta’s acquisition of Instagram and T-Mobile’s merger with Sprint.

In the last Congress, the Promoting Anticompetitive Mergers Act only managed to garner eight cosponsors, all of whom were Democrats. In its current form the bill may not gain enough support to pass. Despite this, Senator Warren is on the right track. Restoring a strong, clear antitrust legislative framework is the only sustainable solution to tackling the issue of corporate consolidation, constrained competition, and protection of consumers, workers and small businesses. Without that, anticompetitive behavior will continue to manifest in new iterations that outpace legislative efforts to combat it.