• Monopolies Will Do Anything: Talking to Senator Amy Klobuchar

    What makes progressive pro-competition policy just as critical today as progressive antitrust policy? What makes a pro-competition agenda an inclusive-economy agenda? When I want to ask such questions, I pose them to Senator Amy Klobuchar. This present conversation focuses on Klobuchar’s book Antitrust: Taking on Monopoly Power from the Gilded Age to the Digital Age. Klobuchar is the senior Senator from Minnesota, the first woman from that state elected to the US Senate, and Chairwoman of the Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights. In 2019, a Vanderbilt University analysis ranked her the “most effective” Democratic Senator in the 115th Congress. She is also the author of Uncovering the Dome and The Senator Next Door, and was a 2020 candidate for US President.

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    ANDY FITCH: Many Democrats and many progressives today might not consider themselves strong advocates of capitalist competition. So could you introduce this book’s vision for vibrant labor and consumer markets, for high innovation, low prices, a thriving middle class — all fueled by free and fair competition? And could you make the case for why progressive readers should embrace that agenda?

    AMY KLOBUCHAR: Monopolies hurt people in so many ways — whether you take insulin, or use an EpiPen, or pay for cable service, or want to keep your data private, or search for an online travel deal but gradually realize that just two companies control 90 percent of what you see. In each of these cases, with only one or two firms in town, you have very little leverage as a consumer.

    Similarly, as a small-business owner, you might put your life into getting started. But once you try to scale up at all, and to compete with the dominant companies, you can find it almost impossible. That puts the American dream out of reach for many of us, especially for minority- and women-owned small businesses.

    Or as a worker, looking for good wages, you’ll probably find that more monopolization (alongside a weakening of unions, who used to take on workplace monopolies) means increasing income inequality, with even more money going to the top. Even if you have very desirable workplace skills, when only one or two companies would consider hiring you, you have little bargaining power. You want potential employers competing for your skills. But we’ve seen a lawsuit coming out of Silicon Valley, where Apple and a number of companies basically conspired not to hire each other’s employees. No matter employees’ skills, they were stuck at the company that first hired them — and their employer would make use of this when these employees wanted a raise. Again monopolies hurt workers in many different ways.

    Monopolies harm our democracy too. Think of all the misinformation online, and how you still can’t help contributing to the profits of the social-media companies driving it all. It also hurts our democracy when certain firms can put so much money into politics that everybody fears them. We’ve recognized those dangers for over a hundred years. I’m picturing one famous cartoon with a bunch of monopolists (“Steel Trust,” “Oil Trust,” and the like) depicted as big blobs perched above the US Senate, staring down at the Senators, dictating their every move. Sadly, we have some of that going on today.

    Yeah in terms of previous eras’ cartoons and rabble-rousing speeches, why did Antitrust need to draw on these historical dimensions to achieve its goals?

    Well a lot of people today feel beaten down. They might more or less ask themselves: “How could we ever take on these monopolies? How could we ever get anywhere with such an unfair fight?” And I’d say, well, look back in time. In the book, for example, I write about Ida Tarbell, whose dad lost his job because of Standard Oil’s monopoly control. Tarbell basically said: “I’ve had it.” She certainly wasn’t as famous or powerful as John D. Rockefeller. But as an investigative journalist (what they called a muckraker back then), she started uncovering Standard Oil documents that the public hadn’t known existed. Her book The History of the Standard Oil Company eventually played a major part in Standard Oil’s break-up.

    I also think of Senator John Sherman, an Ohio Republican committed (like his brother, General William Tecumseh Sherman) to the anti-slavery cause. When John Sherman gets to the US Senate, he knows that the trusts control everything. He sees this fundamental problem in the post-Civil War economy, with monopolists taking advantage of the nation. He passes what ends up being the law used for decades to take down monopolies (a law that, unfortunately, monopolists learn to wield to their own advantage, against their employees).

    And I think of the attorneys arguing for the AT&T break-up. Nobody else thought they could succeed, but they had the facts on their side. So I use these inspiring stories, as well as some funny stuff. Antitrust humor does in fact exist, and helps to show that antitrust policy is understandable, and is doable. Some antitrust approaches and actions and reforms can get hard for nonspecialists to grasp. But you don’t have to read everything in this book. I use over a hundred cartoons, which communicate most of what you need to know (and what you already can feel happening in your own life). American voters have to understand these basics of why we need antitrust, how it works, and what steps our society has to take to make it possible.

    Every time I try to pass a bill, with maybe one Republican Senator at most willing to support antitrust reform, some company can make its influence felt, and multiple members of Congress will say in unison: “No way can we do that.” This happened to Chuck Grassley and myself at the end of last year, as we tried to bolster enforcement agencies basically fending off the world’s biggest companies with duct tape and Band-Aids. House Republicans, led by Kevin McCarthy and Jim Jordan, said: “No way can we rein in these companies.” Hopefully they’ll cooperate on this issue now, with COVID making certain firms much more dominant. But even the Trump administration had endorsed changing our fee structures to put more money in the hands of these agencies, so that they could hire enough people to fulfill their mandate. When individual companies can block crucial reforms like that, with my Republican colleagues as their proxies (complaining about dominant tech companies, though never doing anything serious to diminish their power), then we have no chance for reform unless we can get the American people on our side.

    Here how might a broader range of Americans respond more enthusiastically to a push for pro-competition policy, rather than for stronger antitrust enforcement?

    Competition policy encompasses more than just the narrow (though important, of course) antitrust laws. Competition policy can take on the noncompete agreements far too many Americans feel compelled to sign just to get a job. Competition policy can include immigration reform, so that our economy continues to rejuvenate itself. Competition policy means creating space for workers to push for raises, while preventing corporate money from flooding our politics. European competition policy, for example, factors all of that into making sure a handful of monopolies don’t undermine proper market functioning and democratic decision-making.

    Similarly, still in terms of recalibrating power relations across our whole society, what makes this book’s pro-competition agenda an inclusive-economy agenda — critical to addressing, say, systemic racial and gender inequities?

    Historically, the NAACP itself has taken on monopolies, because it realized that black-owned businesses faced disproportionate difficulties succeeding in concentrated markets. Again, those who start off with less might just never gain momentum in such an unfair fight. So our tech platforms might say: “Yeah, we’re helping. We’re creating space for this minority-owned small business to find customers.” But if a restaurant can’t negotiate a good deal on its delivery service during this pandemic (a situation which would have gotten even worse if the US hadn’t shot down a proposed merger between Uber Eats and Grubhub), what can this restaurant’s owners do? How can entrepreneurs of color ever hope to reduce American inequality by developing smart business ideas, and working hard to fulfill their dreams?

    We shouldn’t consider it just a coincidence that America’s less well-off entrepreneurs started facing much stronger anticompetitive pressures in response to the Reagan administration’s lax antitrust enforcement. Income inequality has since surged, just as Adam Smith, the intellectual father of America’s capitalist system, would have expected. Smith said he feared most of all the “overgrown standing army” of the monopolists. Smith said you need to take on these monopolies directly, because they almost can’t help throwing their weight around in the courts, and in our legislatures, and even when it comes to our democratic society having an informed public. Democracy needs to ward off monopolies, so that they can’t undermine our rule of law.

    Your book also points to perennial problems of American government “failing to adapt to the changing monopoly dynamics of the times.” What kinds of structural adjustments could make pro-competition enforcement less subject to the vagaries of presidential administrations and their judicial appointees, or to lapses in Congressional action?

    First, we did face this problem with Donald Trump. He talked the talk. For appointees like FTC Commissioner Joe Simon, and Makan Delrahim as the Department of Justice’s Antitrust Division head, I didn’t agree with their every decision, but they did at least take on those major tech cases near the end. I did appreciate that part. But as President, Trump undermined the federal government’s antitrust authority, because he abused these powers by targeting companies for political gain.

    More broadly for your question, presidential administrations need the policy drive to take on these cases. That also means arguing and fighting for agency resources. It means putting in place aggressive out-of-the-box thinkers like Lina Khan, President Biden’s recent FTC nominee. It means doing some really in-the-weeds stuff, such as recalibrating our vertical- and horizontal-merger standards.

    For far too long the courts have run amok with outmoded theories of Robert Bork. Supposed judicial originalists have undermined the original intent of the Sherman Act and the Clayton Act. We’ll need to change that over time, in part through judicial confirmations.

    Within Congress, we need to recognize that the economy has grown much more sophisticated, and that our antitrust laws must do the same. The Supreme Court itself might end up sometimes taking the lead to modernize our legal framework. But legislators will need to consider everything from privacy laws, to scrutinizing the pharmaceutical industry, to adjusting the standards for preempting certain mega-mergers, to reforms such as my proposal making it easier to look back at anticompetitive and exclusionary conduct.

    At this book’s opening, I describe one company buying patents on the only two heart drugs administered to babies. Big surprise: prices for those drugs jumped from $85 to $1600 per treatment. If monopolies willingly exploit vulnerable newborns’ health that way, monopolies will do anything.

    Here again Antitrust lingers on the necessities, but also the difficulties, of “kick-starting public engagement” on some of these “esoteric” antitrust concerns. At the same time, Republicans have pushed through pivotal transformations in US competition policy over recent decades, without much public fanfare. Why precisely do Democrats need to counter by catalyzing an impassioned movement demanding reform? When (if ever) does it make sense for Democrats to use antitrust’s back-burner status to their own advantage, by prioritizing low-profile but high-impact procedural change?

    For years now our Congress has been fairly good at responding to immediate economic dangers, such as with the financial crisis back in 2008-2009, and now the COVID downturn. We passed TARP in 2008, and we passed the American Rescue Plan this year. We’re pretty effective at committing money when disasters strike or threaten us in the near term. But we’ve failed to anticipate longer-term developments, and to sense things rotting out from under us. That takes a different (and today less common) type of political will.

    So can Chuck Grassley and I get some additional funds to these agencies without it becoming, as President Biden once said, a big f-ing deal [Laughter]? Probably. But almost no matter what, passing significant changes to our antitrust laws will end up getting very political. Monopolists will do whatever they can to stop us in our tracks. They’ll make it political. Big Tech already has started running ads on these topics. It has put together a coalition of companies with a lot more money than we have. That’s why I need the public on my side.

    That’s also part of what makes this recent Senate antitrust hearing so significant. After years of hiding in the shadows, certain companies have started testifying to how horribly anticompetitive this Big Tech business model has become. For a long time these companies feared that coming forward might mean Google screwing them on its search engine, or Apple kicking them off the App Store. All of that happens. But finally you have Spotify, Tile, and Match.com (a funny trio, I couldn’t help noting) coming forward to testify. And by the way, what happens the night before they speak to Congress? Google calls Match.com executives, and basically threatens them by saying: “What you’re planning to present tomorrow looks inconsistent with your earnings report.” But still these companies came forward, because they sense there’s finally a chance to get something accomplished here — whether through Justice Department and FTC lawsuits, through Congressional initiative, or through European actions (which coincided with this hearing).

    For too long, somebody like Mark Zuckerberg could feel cocky enough to send an email (later discovered by the House) basically saying: “We would rather buy firms than compete with them.” Or in another message, Zuckerberg says that if WhatsApp and Instagram grow to a larger scale, they could become “very disruptive to us.” I thought the point with tech was to disrupt stagnant industries. We want competition to disrupt sometimes. And the fact that today we have many firms coming forward, and have elected officials from both sides of the aisle wanting to hear them, and have the public growing wary, trying to protect its privacy, sensing further drawbacks to these products — that convergence of forces feels like a game-changer.

    So look, I worked in the private sector for 14 years. I respect capitalism. I want to help American capitalism flourish. But our capitalist market economy can only stay strong if we keep rejuvenating it with new ideas and new small businesses.

    For one additional underappreciated dimension of how market concentration and consolidated power reinforce each other today, what makes horizontal shareholding such a danger to economic dynamism — even when no odious robber-baron figure stands out for comic caricature?

    With horizontal shareholding, certain investors hold significant ownership in supposedly competing firms. At one point, for example, Warren Buffett’s Berkshire Hathaway owned a lot of airline stock, in multiple airlines. And more broadly today, just three major investment firms (Black Rock, Vanguard, and State Street) own most index-fund assets, and large shares in almost every single S&P 500 company.

    Harvard professor Einer Elhauge has been looking into how to reform this practice carefully, so that you don’t hurt small investors. But big horizontal shareholders basically have become our modern-day trusts. Cross-ownership in such a wide swath of companies creates significant disincentives for true competition. I haven’t proposed any bill on this complicated topic, because I start from the principle to do no harm. But we’ll definitely need to look at this model more closely, and hopefully the new administration can lead the way.

    To close then, what role might an “Office of the Competition Advocate” play in fleshing out such a living breathing antitrust agenda, less bound to legislative inertia and dated judicial precedent?

    An Office of Competitive Policy would allow us to look at these questions globally. Under Caspar Weinberger’s guidance way back, for example, the FTC collected information on consolidation across the whole economy. But today, people will ask me why I’m still using 2012 figures. And I’m like: “Well, good luck. I need to get what data I can from all kinds of places, since our government doesn’t collect it anymore.”

    Why does Epic Games itself have to document what Apple’s doing with the App Store? Well, because certain companies didn’t like the federal government collecting data on market concentration. But we need to track better what’s happening in a bunch of industries, beyond just tech. We need to spot these trends before they produce the obvious types of massive consolidation we have today — as well as to recognize where we don’t need to worry so much about consolidation producing anticompetitive effects.

    We can’t afford another long stretch like when the Trump administration put over a third of its enforcement resources into politically motivated investigations of small-scale marijuana mergers, then did nothing to follow up. We can’t have antitrust officials looking to take out political targets like California’s auto-industry standards. We do have limited resources. So let’s put them precisely where we see the most harmful concentration.

     

    Top image of Senator Klobuchar courtesy of Christopher Gregory-Rivera.

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