Monopolies and Corporate Consolidation are Neither Natural nor Inevitable
Happy Sunday,
This week’s newsletter is a continuation of our conversation from last week about the causes of the diminishing consumer experience. But before we go there, I want to say thanks to readers who shared last week’s edition. A larger than usual crop of new subscribers joined the Takes & Typo-sphere this week.
If you enjoy the newsletter please share it with someone and if you don’t like a take, I’d love to hear your thoughts why. You can simply reply to the email.
Our discussion of the worsening of the consumer experience sparked some thoughtful replies from subscribers. One reader, author Anne Lutz Fernandes, was working on a related piece when mine hit her inbox. She shared the same perception of the diminishing consumer experience but grounded her piece in how it influences people’s views of the economy and how that may impact the upcoming US Presidential election. That transforms the topic from being “hey look, Nate’s ranting again” into a more substantive social-political phenomenon. When people are pissed about the economy, they take their frustrations out at the ballot box, see: Hebert Hoover, Gerald Ford, and Jimmy Carter.
Early on Lutz notes the decay of the consumer experience is happening alongside a period of increased wages—the first time in ages. Today, more people are earning higher wages but goods and services cost more and are of lower quality, greatly diminishing their buying power. She cautions that although this doesn’t show up in headline economic data (unemployment, GDP, CPI, etc.) it may determine the upcoming election:
The Biden Administration seems to understand that corporate power is overwhelming workers and consumers. Though he can do more, Biden has been vocal in support of unions, making his support for the striking automakers visible by joining them on the picket line. His FTC has been fighting for some consumer rights: new rules have been proposed to make canceling subscriptions easier (the “click-to-cancel rule”) and to eliminate hidden and junk fees, for example. A few weeks ago it launched a lawsuit against Amazon for its “ongoing pattern of illegal conduct that blocks competition, allowing it to wield monopoly power to inflate prices, degrade quality, and stifle innovation for consumers and businesses.”
If you’ve ever tried to close an Amazon Prime or an Audible account and spent half an hour trying to find the actual “cancel” button, you are likely nodding your head at those last two policy proposals. But if there was a church of “I wish Biden would do more” I would be a bishop. What’s proposed is long overdue, very low hanging fruit when it comes to reeling in the corporate conglomerates.
A Canadian reader noted that other jurisdictions, including Canada and the EU, have more stringent privacy and consumer protections than the US. An example is the current inability of Facebook to bring Threads, its Twitter competitor, to market in Europe. The EU passed an antitrust law called the Digital Markets Act, which went into effect in November 2022. The law targets the big US tech companies (and a familiar one from China): Google, Amazon, Apple, ByteDance (TikTok), Meta (Facebook, Instagram, and WhatsApp), and Microsoft (LinkedIn).
The Digital Markets Act prevents them from engaging in additional anti-competitive practices and forces them to put competing products on equal footing in their app stores. Because Threads was launched within Instagram, importing user data and social maps seamlessly, it violates the Digital Markets Act.
The US has abandoned antitrust enforcement
The Federal Trade Commission, established in 1915, in the heyday of US trust-busting, was gutted by the Reagan administration. They narrowed the definition of “predatory pricing” and dropped major enforcement cases. That posture has largely carried the day ever since. The result is an FTC that is deferential to the whims of corporations to merge and acquire other firms setting the stage for the era of collusion and consolidation we find ourselves in now.
The last major anti-monopoly action the Department of Justice pursued was United States v. Microsoft Corp—over twenty years ago. The consumer experience is so awful because we’re interacting with conglomerates that face no meaningful competition in the marketplace.
It crosses economic sectors.
Food - ConAgra
Entertainment - Disney
Health & Beauty - Procter & Gamble
Eye Care - Essilor Luxottica
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The examples are endless.
From my beloved Tacoma: in 2015, regulators allowed Albertsons and Safeway to merge. The local Albertsons store, located at 38th & Pacific, promptly closed because of its proximity to its new corporate sibling on M Street, a three minute drive away. The result: local shoppers had fewer choices, a loss of jobs, an eyesore (the Albertsons store was vacant for ages; it’s now a 24-Hour Fitness), and prices at the local Safeway predictably rose. Albertsons is now working on a $24.5 billion merger with Kroger (Fred Meyer to folks in the PNW) that would combine the 3rd and 5th largest grocery chains in the country. Obviously, regulators should reject this.
Here’s the rub: sufficient federal antitrust legislation is already in place. More aggressive antitrust regulation and vigorous consumer protections can be implemented via executive order and enforcement by the feds. This isn’t a place where defenders of the administration can point to the dysfunction in Congress. The consumer morass we find ourselves in is a bipartisan failure of executive inaction. Because corporate donations speak louder than our complaints, Democratic administrations willfully sing from the bad pro-consolidation and monopoly song book the Reagan Administration adopted.
That sucks and needs to change.
As always, if you have any thoughts or feedback about the newsletter, I welcome it, and I really appreciate it when folks share the newsletter with their friends.