The Biden administration fired its latest rhetorical salvo against market concentration on Monday with the release of new merger guidelines, as American households are still feeling the squeeze of elevated inflation.
The rules focus on the anticompetitive behaviors of companies on pricing, the hiring of new employees, and the risk posed by monopolies on digital platforms, such as those maintained by giant tech companies like Google, Facebook, Amazon and Apple.
The guidelines, released jointly by the Justice Department and Federal Trade Commission, are not legally binding but are meant to provide insight into how the agencies administer antitrust law.
“Today’s release … is an important step to lower costs for consumers, ensure a level playing field for small businesses, and ensure antitrust enforcement is fit for purpose in today’s economy,” White House economist Lael Brainard said in a statement along with the release.
“For too long, unchecked consolidation has meant big corporations getting bigger, giving them the power to raise prices for Americans and provide consumers with fewer options,” she said.
The guidelines note the harm to consumers done by “tacit coordination” on prices by companies, which becomes easier to accomplish in more highly concentrated markets.
“Tacit coordination can lessen competition even when it does not rise to the level of an agreement and would not itself violate the law,” the guidelines say. “For example, in a concentrated market a firm may forego or soften an aggressive competitive action because it anticipates rivals responding in kind. This harmful behavior is more common the more concentrated markets become, as it is easier to predict the reactions of rivals when there are fewer of them.”
The Biden administration has talked a big game on antitrust enforcement as the ghoul of inflation has haunted Americans’ pocketbooks and petrified the president’s economic approval ratings.
“Prioritizing and pursuing the consumer welfare standard in competition policy has led to consolidation and unchecked dominance in our domestic market, which has stifled competition and diminished economic liberty for our citizens and workers,” U.S. Trade Representative Katherine Tai said in a speech in June.
But actual antitrust enforcement by the government has atrophied in recent years.
Summary data isn’t yet publicly available for the Biden administration’s years in office, but from 2010 to 2019, the DOJ antitrust division investigated an average of just 1.8 monopoly cases and about 70 merger cases per year.
“In the United States, private enforcement continues to far outstrip public enforcement, by a ratio of over 10:1,” University of Michigan law professor Daniel Crane wrote in a 2019 book. “While there has been a good bit of volatility in the number of private antitrust cases initiated, the Justice Department’s trend line has been flat and stuck in low single figures.”
Still, the administration has succeeded in abrading the mergers-and-acquisitions wing of the financial sector. Antitrust lawyers have been railing against the antitrust division chiefs at the DOJ and FTC, while hit pieces written against them have proliferated across the financial press.
“Jonathan Kanter at DOJ and Lina Khan at the FTC — they’re just anti-deal and in a sense they’re anti-the law. They think the law on antitrust is not robust enough, so they want to move the law to essentially be able to stop more deals,” Scott Barshay, a mergers and acquisitions (M&A) lawyer with law firm Paul Weiss, told a conference at Tulane University in March.
“In this very narrow context of who’s going to be running the DOJ antitrust division and the FTC in the future, let’s just say our business will be a lot better if it’s somebody else,” he said earlier this year. “If there’s a deal with even a small amount of antitrust hair on it, there’s a very good chance they’re going to delay it and try and block it, and even if they fail you may have to go to litigation.”
Global M&A deals announced in the third quarter of 2023 amounted to $641 billion, the lowest third-quarter volume in 10 years.
“Following a brief uptick in global M&A activity, deal volumes have dropped again, and [third quarter] performance might deflate hopes that [the second quarter] was the start of an M&A market rebound,” Bloomberg legal analyst Emily Rouleau wrote in October.
According to S&P Global Market Intelligence, the U.S. economy is becoming more concentrated, with a growing number of large companies controlling more market share across more industries.
“In 91 of the 157 primary industries tracked by S&P Global Market Intelligence, the five largest U.S. companies by revenue combine for at least 80 percent of total revenue among publicly traded companies in their respective industries, up from 71 industries in 2000,” S&P analysts wrote in a report earlier this year.
The domestic market power of the largest five companies in each sector has increased in 105 of the tracked industries and fallen in just 38, the analysts found. Other researchers have also noted a concomitant increase in the ability of companies to raise their prices above marginal production costs.
President Biden stressed the need for more competition within the economy earlier this year, describing it as a central feature of the U.S. economy.
“Capitalism — I’ve said it before — capitalism without competition isn’t capitalism; it’s exploitation,” he said in July at a meeting of the White House Competition Council.
Economists have long noted the tendency of firm consolidation within market economies, describing it as a natural phenomenon.
“Cartelization is a historical process which affects the various branches of capitalist production in sequence, as conditions become more favorable … The development of capitalism tends to create such conditions in all branches of production,” German economist Rudolf Hilferding wrote in 1910.