Graeme Sloan/Sipa USA via AP Images
Since 1982, the antitrust agencies have used the “consumer welfare standard” to assess whether mergers should be allowed.
In January, the Federal Trade Commission and the Antitrust Division of the Department of Justice jointly announced a request for public comment on how the two agencies could modernize antitrust enforcement against mergers. Just that step alone was transformative. For the past four decades, the general public has not been brought into policy debates about corporate power; in fact, elite economists actively plotted to keep them out, by arbitrarily raising the standards for challenging mergers. Government agencies simply asking ordinary people to explain how monopolies have caused them harm was a paradigm shift.
Yet typically, so-called “public comment” periods on federal regulatory matters are dominated by industry groups and other lobbyists who shape the final product. During a previous merger guideline rewriting in 2010, only 32 comments were submitted. One was co-signed by Verizon, the Biotechnology Industry Organization, the Financial Services Roundtable, Microsoft, the National Association of Manufacturers, and the Chamber of Commerce. Meaning they all shared the same interests.
But this time, the FTC/DOJ public comment request has almost 4,000 comments as of April 14. The deadline for comments is April 21. So what’s driving this resurgence of public input?
Part of it is due to the new leadership at the agencies. But the American Economic Liberties Project, a D.C.-based anti-monopoly organization, has also solicited comments from the public, bringing an obscure process to the grassroots level. That it has taken off suggests a broad-based desire to do something about monopoly power.
UNDER FTC CHAIR LINA KHAN and DOJ Assistant Attorney General for Antitrust Jonathan Kanter, there’s been a renewed commitment to rejuvenate the competitiveness of American markets through antitrust regulation and enforcement. Khan and Kanter are rebuilding their respective institutions with the capacity to analyze markets as they actually are, and not just how lobbyist groups wish to shape them.
On January 18, Kanter said in a speech announcing the modernized merger guidelines, “The views of consumers, workers, innovators, and others on the ground feeling the harms of market concentration present an incredibly valuable perspective for our efforts. Here is our message to [the] entire American public: please share your views—we need your input and we care what you think.”
The FTC and DOJ have also organized several listening forums on anti-competitive effects on food and agriculture, health care, media and entertainment, and technology. But their aims go further than just listening to what’s happening on the ground, which would already be a huge overhaul from how the agencies previously operated.
Since 1982, the antitrust agencies have used the “consumer welfare standard” to assess whether mergers should be allowed. Rather than looking at whether a merger would monopolize an industry, harm workers, or stunt innovation, the main question antitrust agencies ask under the guidelines is whether consumers would benefit, primarily through lower prices. This standard appears nowhere in antitrust statutes like the Sherman or Clayton Acts; it was just imposed upon the law by libertarians in the Reagan administration.
As Kanter explained at a recent American Bar Association conference, the consumer welfare standard isn’t even a standard. The biggest names in antitrust recently contributed to an interminably long Twitter thread where even they couldn’t agree on what consumer welfare encompasses.
Moreover, given that economics is a notoriously inexact science, companies can always find expert testimony claiming that their deal will create efficiencies and reduce consumer costs. At a virtual event to the New York State Bar Association Antitrust Section, Kanter said, “We must be mindful that economics—and expertise, more broadly—are merely tools to understand facts relevant to a particular case.” This turns competition policy into a question of competing economic models rather than a question of power. Kanter continued, “Courts should use economics and industry expertise to address questions of fact, not to resolve questions of law.” As economist Hal Singer wrote in the Prospect, “the consumer welfare standard has been used to thwart many attempted interventions.”
Northeastern University economics professor John Kwoka has shown empirically through retrospective studies that mergers typically lead to increases in price, meaning that the conservative belief that mergers always enhance consumer welfare doesn’t even hold up on its own terms. But in addition, the consumer welfare standard ignores how consumers can also be producers, workers, entrepreneurs, and small-business owners.
A growing amount of scholarship has shown how the anti-competitive effects of corporate power extend into the labor market, for example. Earlier this year, the Department of the Treasury released a report titled “The State of Labor Market Competition,” which detailed how in the labor context, monopsony power, when a single firm is the dominant employer, takes hold. The report found a 20 percent decrease in wages, with some industries and jobs experiencing greater decreases.
THIS IS WHY THE new leadership at the antitrust agencies is trying to change the merger guidelines and move away from consumer welfare. Robyn Shapiro, communications director at the American Economic Liberties Project, explained to me that merger guidelines are more than just articulations of policy; they possess persuasive authority because courts cite them. “[Khan and Kanter] are transforming how merger policy works because they see what so far has been done is a total failure,” Shapiro said.
When attempting to redefine the merger guidelines, Shapiro explained, immense data collection on anti-competitive effects can find patterns and reinforce where policy should go. It creates a blueprint for future improvements for new and updated antitrust regulation and enforcement that will last beyond their time within the agencies.
The American Economic Liberties Project has aided these efforts. On AELP’s website, there’s a template for people to voice their concerns, and quickly submit them to the FTC’s docket, which can otherwise be a cumbersome experience. “Have you been through a merger?” the AELP call to action asks. “What was it like? Are mergers a good or bad idea in general? Do you think the government should be more aggressive in stopping mergers?”
Shapiro explained that AELP’s goal is to remove the barriers for public input and make it easier for their voices to be heard.
ONE OF THE PUBLIC COMMENTS on the merger guidelines came from an anonymous anesthesiologist who detailed how their practice lost contracts to two private equity–backed anesthesia organizations, TeamHealth and NorthStar Anesthesia.
The Prospect previously reported how former COVID coordinator Jeffrey Zients acquired NorthStar Anesthesia while he was CEO of the private equity firm Cranemere Group. Before Cranemere acquired NorthStar, the company had already been accused of “gross medical malpractice and overt surprise billing.” Zients resigned from Cranemere before he joined the Biden administration.
“The model [private equity brings] is a heavy nursing (CRNA) model, this will destroy what little quality service exists,” the anonymous anesthesiologist wrote in the comment. “[T]he goal is simple, profits at all costs.” The commenter also detailed how an unnamed CEO led a Zoom meeting with an anesthesia group with a prayer, then fired them shortly thereafter.
On Thursday, during the FTC/DOJ listening forum on health care, Joe Thon, a registered nurse who’s worked for St. Joseph’s Medical Center in Wilson, Idaho, for 17 years, similarly detailed the effects of hospital mergers on workers, patients, and degradation of industry standards. In 2015, St. Joseph was acquired by Capella Healthcare, a health care system owned by a private equity firm in Chicago. Two months after the acquisition, Capella was sold to an Alabama real estate firm. Unknowingly to Thon and his colleagues, “these transactions had somehow left our hospital under the control of a company, RCCH, that was owned by a New York private equity firm, Apollo Global Management.” St. Joseph would experience two more ownership changes after 2015.
The constant shuffling between portfolios left Thon and his colleagues severely understaffed, a drop of more than 1,000 employees to around 700 employees. This led to more responsibilities placed on the remaining workers, resulting in less time that could actually be used for adequately treating their patients. “It’s chaotic on a daily basis,” said Thon.
The immense concentration of corporate power over the American economy structures nearly every facet of daily life. Consumers pay exorbitant fees each year to concentrated companies that control airlines and tickets for concerts, for example. Ten companies control just about every major food and beverage brand on the planet.
We see this today, as corporate profits have risen to record highs, yet consumer prices rise and worker wages drop. Both in Washington and among the public, dots are being connected, as the explosion in public comments on these issues shows. “It means that antitrust law belongs to the public, not the insiders,” said Matt Stoller, research director at AELP.
Changes to the merger guidelines could help reduce corporate power and influence. Rare for government regulatory campaigns, this movement is being driven by ordinary people, making comments on how monopolies affect their lives.
