Rehabilitation Of Antitrust Law

Starting seven years ago I have been paying attention to monopoly power mostly in the context of Amazon. One of the clearest articles on the topic focused on a young person’s breakthrough idea. So I was very happy to read about Lina Khan’s Battle to Rein in Big Tech by rehabilitating antitrust law:

As monopolies and other large companies gain increasing control of our daily lives, Khan is Joe Biden’s pick to do something about it.

In the spring of 2011, a recent Williams College graduate named Lina Khan interviewed for a job at the Open Markets Program, in Washington, D.C. Open Markets, which was part of the New America think tank, was dedicated to the study of monopolies and the ways in which concentration in the American economy was suppressing innovation, depressing wages, and fuelling inequality. The program had been founded the previous year by Barry Lynn, who believed that monopolies posed a threat to democracy, and that policymakers and much of the public were blind to this threat. Unlike the practice at other think tanks, which publish research reports and white papers, Lynn, a former reporter and editor, disseminated the program’s findings directly to the public, through newspaper and magazine articles.

The study of antitrust law was far from fashionable; since the nineteen-eighties, the field had been dominated by a world view that favored corporate conglomeration, which was acceptable, mainstream experts believed, as long as consumer prices didn’t rise. Lynn was seeking a researcher without any formal economics training, who would come to the subject with fresh eyes. Khan had studied the 2008 financial crisis and was interested in the effects of power disparities in the economy. She checked out Lynn’s book, “Cornered: The New Monopoly Capitalism and the Economics of Destruction,” from the library and skimmed it the night before her interview. “When she walked in that door, she had no idea what this entailed or what she would become,” Lynn told me. “She was just a fantastically smart person who was very curious.”

 

Open Markets studied industries ranging from banking to agriculture. In case after case, Lynn found, the number of companies in each market had been reduced to a few big entities that had bought up their competitors, giving them a disproportionate amount of power. Consumers had the impression of vast choices among brands, but this was often misleading: many of the biggest furniture stores were owned by one company; a large percentage of the dozens of laundry detergents in most supermarkets were made by two corporations. After consolidation, it became easier for furniture sellers and detergent manufacturers to raise prices, compromise the quality of their products, or treat employees poorly, because consumers and workers had few other places to go. It also became much more difficult for entrepreneurs to break into the marketplace, because competing with these giants was almost impossible. As huge companies became even bigger, much of the American middle class struggled with stagnant wages. In Lynn’s view, the issues were connected.

Khan began researching book publishing. “There was a sense that this industry was in crisis,” she recalled. Publishers had come under pressure, first from chain stores like Barnes & Noble, and then from Amazon, which sold electronic books by pricing them at a loss, in order to encourage consumers to buy its Kindle e-book readers. Amazon eventually controlled more than seventy per cent of the e-book market, a dominance that gave it the ability to force publishers to accept its terms, undermining the business model they had long used to subsidize the creation of a wide variety of books. When publishers tried to band together to fight Amazon, the Justice Department sued them, fearing that their action would increase the retail price of e-books. The publishers saw Amazon’s power as potentially leading to a decline in the free exchange of ideas and as a crisis for democracy. Increasingly, so did Khan. Her work helped provide the basis for a piece that Lynn published in Harper’s, in February, 2012, called “Killing the Competition.” Today, he wrote, “a single private company has captured the ability to dictate terms to the people who publish our books, and hence to the people who write and read our books.”

Khan told me that she started to see the world differently. “It’s incredible, once you start studying industry structure and see how much consolidation there has been across industries—in airlines, contact-lens solution, funeral caskets,” she said. “Every nook and cranny of our economy has consolidated. I was discovering this new world.” At one point, she investigated the candy market, identifying nearly forty brands in her local store that were made by Hershey, Mars, or Nestlé. In another project, about the raising of poultry, she found that most farmers had to purchase chicks and feed from the giant poultry processor that bought their full-grown chickens, which, because it had no local competitors, could dictate the price it paid for them…

Read the whole article here.

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