Gerald Herbert/AP Photo
President Obama with members of his economic team in March 2009
Last week, Joe Biden announced that he would not succumb to deficit hysteria in crafting his plan to lift millions of people out of pandemic-caused economic crisis. “With conditions like the crisis today, especially with such low interest rates, taking immediate action—even with deficit financing—is going to help the economy,” Biden remarked to press at a transition event.
It was an important moment that showed the president-elect’s ability to adapt to changing evidence. After 2008, the incoming Obama administration pivoted too soon to deficit politics and austerity, causing significant harm and slowing the recovery. Biden appears to have learned from this mistake, and is determined not to repeat it.
He has the ability to learn a lot more, particularly about the Obama administration’s relationship to corporate power. A detailed report from the American Economic Liberties Project, fittingly called “The Courage to Learn,” painstakingly documents how the Obama team failed to stop a wave of consolidation across the economy, and enabled a crisis of untrammeled corporate abuse against workers, against competitors, and against the broader economy.
Many of those same people who presided over that failure are up for jobs in the key antitrust agencies of the Biden administration. Many of them signed on to a separate transition report on competition, to which AELP’s report could be seen as a response. Many of them are talking differently about the reality of corporate concentration and the need to police it. But those Obama-era enforcers haven’t wrestled with their own culpability. “It’s OK to be wrong, everyone is wrong sometimes,” said Matt Stoller, one of the authors of the new report. “You just have to admit it, and then it frees you to pursue a different path.”
IT WAS LITERALLY HARD to relive the Obama years through this report. The young president campaigned on breaking up concentrations of power, and was immediately faced with a financial crisis spurred on by an interconnected and unreachable banking industry. But the people whom Obama charged with tackling these questions were wedded to a failed theory about antitrust law.
The report describes Obama’s advisers as part of the “post-Chicago School,” separating them from the largely libertarian conservative Chicago school (so named because of multiple links to the University of Chicago). The Chicago school rewrote antitrust law without changing a word of statute, changing the interpretation of the signature Sherman Antitrust Act to allow for mergers if they benefit “consumer welfare.” As long as prices go down, corporate giants can form.
If this theory was ever contested, it might not have held for 40 years. But the post-Chicago school, liberals who populated the Clinton and Obama administrations, “attacked the … models used by [conservative] antitrust enforcers but accepted the ideological narrowing,” the report explains.
As a result, while Obama’s administration played with economic models and showed little appetite for aggressive action on corporate power, the nation’s economy fell further under the sway of a handful of giants. In Obama’s two terms, antitrust agencies only bothered to investigate 376 out of 11,056 large merger transactions, a little over 3 percent. There were no major monopolization cases taken. Not a single merger from Amazon, Google, Facebook, or Apple was challenged, and not a single bank merger was blocked. Illegal mergers were waved through, and investigations into business giants were dropped. Sectors like agriculture, airlines, e-commerce, defense, online advertising, health care, telecom, and media publishing severely concentrated, with next to no resistance. You can read about much of this in my book Monopolized; but the report has additional details.
The 2010 merger guidelines adopted by Obama implied that agencies would only take action if mergers led to markets consolidating from four major participants to three, or fewer. Successes near the end of the administration’s tenure, like blocking two major health insurance combinations or the attempted Comcast/Time Warner merger, reflect this hollow impulse. “If you block the last two companies in the economy from merging, that’s not a successful antitrust policy,” Stoller wryly noted.
To that point, the Obama regime stopped extreme concentration while failing to deal with the oligopolies that remained in place. For example, Office Depot and Staples tried to merge when they controlled 79 percent of the business office supply market. The Federal Trade Commission (FTC) challenged the merger and won. But a couple of years later, the two firms were at 81 percent market share; nothing was done to break up that duopoly. (Office Depot and Staples are now trying to merge again.)
“In general, questions of fair competition, market power, and monopoly were not in the bloodstream in the broader Obama administration until the very end,” said Sarah Miller, executive director of the American Economic Liberties Project and another author of the report. She characterizes previous Democratic practitioners of antitrust as adherents of a failed philosophy.
These failures come from a mindset that presumes good faith from businesses and efficiencies from mergers.
The Ticketmaster case is a good example. Live Nation was a dominant concert promoter and talent manager; Ticketmaster, a dominant ticket broker. Critics argued that those two companies put together would lock down the live-event market. The Justice Department’s Antitrust Division said consolidation in this industry was not a problem, and approved the merger. (Then–White House chief of staff Rahm Emanuel’s brother, talent agent Ari Emanuel, was on the Live Nation board at the time.)
The agency added conditions, a typical move in the Obama era to try to manufacture competition instead of just blocking consolidation. Ticketmaster had to sell a ticketing subsidiary to Comcast to create new competition, and the merged company had to promise not to retaliate against venues or force them to use its services. This didn’t work at all. The Comcast competitor only retained 2 percent of the market, and the promises were routinely and repeatedly violated. Just a couple of weeks ago, Ticketmaster had to pay a $10 million criminal fine for hacking into a competitor’s computer system to “choke off” their business. The company controls 80 percent of the ticketing market.
These failures come from a mindset that presumes good faith from businesses and efficiencies from mergers. Mathematical models and economic theory take precedence over what’s happening in the real world. Miller commented on the “lack of curiosity in understanding how commerce is working. There was a lack of studies, a lack of real data that tries to figure out how markets are structured and how they’re working and who for.”
More data, through “line of business” studies and retrospective reviews, is among the many recommendations in the report. One of them sticks out. In April 2016, a perhaps regretful President Obama signed Executive Order 13725, which directed all federal agencies to focus on fostering competition in the respective industries they oversaw. This executive order could be a trigger to a wholesale reimagining of competition policy, beyond just merger enforcement. “Every agency has to submit what they’ve been doing,” Stoller said. “Presumably there’s a bunch of papers sitting around on things they can do. One question for all Biden Cabinet members is ‘What are you going to do about that executive order?’”
The Biden team has some big early tests. It must prosecute the big monopolization cases against Google and Facebook, which revealed collusion in muscling competitors out of the online advertising markets. It has a number of consent decrees, where companies vowed to adhere to various guidelines, that have been violated. Stoller argued that Biden’s enforcers could take one broken consent decree and make an example of that company with a big fine or other action, comparing it to President Reagan firing the air traffic controllers. That signaled that capital would be favored over labor. “The Biden team can do that in reverse,” Stoller said.
Who will take the helm of the key agencies involved, none of which have a nominee? There has been speculation about two names for the head of the Antitrust Division: longtime Biden confidant and former FTC commissioner Terrell McSweeny, and former antitrust lawyer and Big Tech opponent Jonathan Kanter. This choice reflects many of the issues in the report. McSweeny signed on to a legal brief opposing the city of Seattle when it enabled collective bargaining for Uber drivers. It was an example of Obama-era enforcers weaponizing antitrust against working people, going after workers and professionals when they sought to organize but doing nothing when businesses merge to squeeze labor.
McSweeny could learn from this mistake. The Biden team could pick Kanter and signal a new era for corporate concentration. Or they can follow the failed path of the past. That doesn’t seem sustainable now. “I don’t think there’s any going back to what we described in the report as a whole,” said Miller. “The hope is we do see this courage to learn and reflect. And a broader cohort of people listened to.”
