The Biden administration and Democratic lawmakers are going all in on antitrust ahead of the election as prices loom 20 percent above where they were just a few years ago and confidence in the president’s handling of the economy sags.
Democrats are making a full-court press to deflect voters’ sour mood on the economy onto the private sector, which reaped record profits for years after the U.S. deployed fiscal and monetary rescue measures amid the pandemic.
“The Biden administration is very concerned about perceived inflation by voters and consumers, and so they feel that antitrust is one way they can try to push back on that,” University of Central Arkansas economist Jeremy Horpedahl told The Hill. “They want to appear like they are fighting price increases.”
The Justice Department and 30 states filed a sweeping lawsuit in May against Live Nation and Ticketmaster, alleging “unlawful, anticompetitive conduct” and “monopolistic control” over the U.S. live events industry.
Financial firebrand Sen. Elizabeth Warren (D-Mass.) blasted the company’s alleged monopolistic practices — which have been criticized by celebrities in the music business going back decades — Tuesday in a Rolling Stone op-ed.
“This monopoly power … robs the audience,” she wrote. “The corporation charges what DOJ calls a ‘Ticketmaster Tax,’ made up of tacked-on fees including ‘service,’ ‘handling,’ ‘payment processing,’ and ‘facility’ fees. Today, Ticketmaster’s fees amount to almost a third of a ticket’s face value.”
The DOJ in March opened a similar lawsuit against technology giant Apple, accusing it of Whac-A-Mole-style contractual rules that have “allowed [the company] to extract higher prices from consumers, impose higher fees on developers and creators, and to throttle competitive alternatives from rival technologies.”
DOJ antitrust chief Jonathan Kanter last month touted the mergers blocked by his agency, ranging from the airlines to the book publishing industry.
The Federal Trade Commission (FTC), which called out “elevated profits” in the food and beverage sector in March, is also mulling a suit against Southern Glazer’s Wine and Spirits, one of the nation’s largest alcohol distributors, according to reporting by Politico.
Meanwhile, Democratic senators sounded an alarm last week to Attorney General Merrick Garland about Exxon Mobil’s proposed $60 billion takeover of Pioneer Natural Resources, a merger that would be the biggest oil-and-gas deal of the century.
Last month, the FTC filed a complaint alleging that Pioneer’s founder Scott Sheffield tried to collude with OPEC representatives “to reduce output of oil and gas,” a move that would hike prices at the gas pump.
Amid all the opposition to mergers from Democrats, Republicans are speaking out in favor of big businesses in Biden’s crosshairs.
Thirty-eight Republican senators sent a letter to FTC Chair Lina Khan in March blasting Democratic scrutiny of mergers and exhorting the agency to follow the letter of the law.
“The oil and gas industry (like any other industry) should not be subject to unfair investigations or heightened antitrust scrutiny in order to further a political agenda,” Sen. Ted Cruz (R-Texas), Senate Minority Leader Mitch McConnell (R-Ky.) and three dozen other GOP senators wrote.
At a fundraiser in Houston in May, presumptive Republican nominee and former President Trump promised oil executives they would be treated differently if he were in the White House, The Washington Post reported last week.
The number of mergers in the U.S. economy has diminished in recent years after hitting a record in 2021 at more than 25,000, according to a tally by the Institute for Mergers, Acquisitions and Alliances. It fell in 2022 and 2023 and stands at 5,808 for this year, as of the end of May.
The antitrust debate is heating up after the highest inflation in 40 years has weighed on voter sentiment and depressed Biden’s approval ratings. Inflation and the economy regularly poll as top issues for American voters.
While voters’ opinions of presidential performance on the economy consistently fall off during their time in office, Biden’s scores are lower than any president since George W. Bush, according to recent polling by Gallup.
Only 38 percent of Americans surveyed by Gallup in May reported feeling “a great deal or a fair amount of confidence” in Biden “to do the right thing” on the economy.
While antitrust initiatives may have extra political resonance following the highest inflation in decades, they are not as likely to affect prices in the run-up to the election as the more traditional tools of monetary policy, which have been engaged in tightening since the first quarter of 2022.
The personal consumption expenditures price index (PCE), an important inflation measurement for the Federal Reserve, has fallen from a 7.1 percent annual increase in June 2022 down to 2.7 percent in April, close to the Fed’s target range.
“Whatever’s going to happen with current mergers on the board, we’re not going to know how that affects prices till years down the road,” Horpedahl said.
Biden’s antitrust push comes as industries within the U.S. economy are more concentrated than they used to be. It’s not clear what that means for prices, investment or economic dynamism.
“The … fact is that there has been a broad decrease in turnover and a broad increase in concentration across most U.S. industries,” researchers Germán Gutiérrez and Thomas Philippon concluded in a 2017 paper, drawing a connection between lower levels of competition and weaker investment.
Gustavo Grullon of Rice University and others published a more concerning result in 2019, finding that more than three-quarters of all US industries have become more concentrated since the 1990s, with implications for higher profits.
“We find that firms in industries with the largest increases in product market concentration show higher profit margins and more profitable mergers and acquisitions deals. At the same time, we find no evidence for a significant increase in operational efficiency,” they wrote.
These arguments were extended even further in 2020 by economist Jan de Loecker and others who documented increased market power along with higher markups and profitability starting around 1980.