Date Posted
15 May 2024 12:05 BST
Article Author
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The new fight against monopoly power

If you smash a milk bottle in a supermarket, you may feel an odd mix of embarrassment and gratitude when they clear up your mess and don’t charge you.  This may not be generosity on the supermarket’s part, though: it may force the milk supplier to pay for your clumsiness.

This reflects a “Breakage Allowance,” Item 14 in a list 40 conditions that Oxfam Germany discovered were being imposed by dominant supermarkets on their suppliers, typically small and medium-sized businesses. Suppliers are also made to pay for supermarkets’ lobbying costs (Item 15); and even (Item 27) to pay for the cost of supermarkets’ mergers and acqusitions (M&A) – handing the dominant supermarket yet more power to squeeze them.

survey of farmers in the United Kingdom last October found that nearly half of fruit and vegetable farmers expected to go out of business within a year, with many blaming domineering supermarkets as a leading threat to their livelihoods. For many suppliers a supermarket contract is life or death: if they lose that business they are bankrupt. The supermarket can kill their business overnight, which instils fear: the supermarket can impose arbitrary conditions and the supplier has to suck it up.

The core problem to address here is corporate power. This power problem is everywhere, whether it’s Uber drivers forced to accept algorithmic pricing, third-party sellers on Amazon forced to pay exorbitant fees to get their products into the ‘Buy Box’ or musicians having to accept pennies for hits. “I counted 50 million views of a video for a song I’d written on Youtube,” said Crispin Hunt, former singer in the band Longpigs: “and I got paid £158 for that, over three years. I made more money busking in an afternoon in Bath [a tourist town in southern England].”

 

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Source: "Taken, not earned"

It’s not just producers who are being squeezed: it’s consumers too, typically via excessive “markups,” where prices of products sold rise far above the costs of producing them. In a January report Taken, not earned, the Balanced Economy Project, SOMO, LobbyControl and Global Justice Now showed how this monopoly power has been growing steadily, for years, as dominant firms can increasingly use their power to jack up prices for no productive reason and levy what are in effect private taxes on most things we buy now; the price-gouging got even worse in the pandemic. Smaller firms, trapped in the monopolists’ undertow, can’t do that.

 

So how do we tackle corporate power?

There are a few proven ways to tackle corporate power. First, build power from below, as trade unions or collectives can. Second, let raw competition rip, hoping that “creative destruction” will take down the monopolies. Third, get governments to tame or break them.

But as any pro-union gig economy or Amazon worker will tell you, to build countervailing power from below, you won’t get far without government tackling corporate power from above. And if you just let raw competition rip, experience shows that the most powerful and most unscrupulous players tend to grow fastest and markets often tip towards predatory monopoly: creative destruction often fails. For example, the firms that are rapidly monopolising AI today are the old incumbents: Google, Microsoft or Amazon. To have healthy competition in the public interest, government is needed, to keep it fair.

There’s no getting around it: tackling corporate power needs government to step in. Governments are already active in many areas that address corporate power: tax, trade rules, privacy regulations, labour laws, and more. But these are indirect approaches, whose primary goals are elsewhere: fiscal redistribution, say, or curbing hate speech, or better employment conditions. If we don’t strike directly at the root of all these problems – corporate power, which blocks us from regulating or taxing them, and from which all these harms flow – then we’ll continue to be like terriers, yapping at the heels of giants.

The tool that can strike directly at corporate power is antitrust, or competition policy: potentially one of the most powerful tools a government possesses. Yet this has been heavily influenced, even captured: by an ideology that promotes ‘bigness’ and concentrations of power, and also by a “system of monopoly” – the high priests of economics, law firms, economic consultancies, highly-paid academics, and captured regulators who all speak the same elite and impenetrable language, and who rarely saw a merger they didn’t love.

The main ideological insurgency that brought the monopolists to power is called Consumer Welfare, led by a Chicago School professor called Robert Bork. He made a simple pitch to market regulators. Forget the interests of workers, or of communities, or of citizens, or of the broad public interest, he argued, and forget power. Focus instead on two other things: the interests of consumers and the internal ‘efficiency’ of corporations. Size means economies of scale and scope, he argued, and these “efficiencies” would trickle down to consumers, and since we are all consumers, all would be well.

These ideas spread to Europe, especially from the 1990s, and more widely around the globe. They had to adapt to local contexts and legal systems, but the core idea prevailed that big is efficient, mergers are good, breakups are bad, and let’s avoid looking at the elephant: power.

Today, many people think the European Commission, with its billion-dollar fines of big tech firms, is a doughty fighter against monopoly. But reality is different: of nearly 6,500 corporate mergers notified to the Commission since 2005, only 14 were blocked, which is 0.2 percent.

 

Why competition policy matters 

What can civil society do to change this picture? Most immediately, by disrupting a vicious circle. It works like this. Competition policy has been captured, distorted into pro-monopoly forms and it also often promotes unhealthy forms of market competition.

As a result, civil society tends to ignore competition policy as just another vector of neoliberal ideas, injecting pitiless competition into everything. Thus ignored, the ideology and the priesthood are rarely challenged. And so, unchallenged, the pro-monopoly ideology remains unreformed and the circle is complete. Coming to the antitrust table, and disrupting the elite dinner, is an essential first step to breaking this vicious circle.

There is good news here. First, the ideology is a house of cards starting to show signs of collapse. A new US anti-monopoly movement, which emerged around 15 years ago, mounted a major intellectual challenge to the paradigm, focusing heavily on antitrust law, and has achieved remarkable traction.

For example, a 2017 article entitled Amazon’s Antitrust Paradox by Lina Khan, a leading member of this movement, broke decades of orthodoxy in recommending the breakup of Amazon to tackle conflicts of interest and predatory behaviour. Four years later the Biden Administration appointed Khan to chair the U.S. Federal Trade Commission (FTC), making her, at 32, the youngest-ever appointee to this role. Her agency has launched a major lawsuit which seeks, among other things, to break up Amazon along those very lines.

A nascent anti-monopoly civil society movement is now starting to emerge outside the United States and is notching up successes. Powerful voices inside the competition establishment are starting to question the old orthodoxies and open up taboo subjects such as breaking up dominant firms along smart lines, to break their power. Because of civil society’s relative lack of engagement in antitrust, regulators are in some senses running ahead of broad civil society in terms of radicalism. There is a real void here, waiting for civil society to enter in earnest, to push regulators and the public further and faster along this path and in line with the public interest.

To grasp anti-monopoly fully, both through direct measures to tackle corporate power via competition policy and indirectly through tax, trade, privacy and other measures, is to embrace an agenda that can find wide appeal across the political spectrum and which can bring innovative new alliances, such as between labour unions and small businesses, which aren’t always obvious bedfellows. And it can tap directly into the anxieties and feelings of powerlessness which are now being exploited by resurgent hard-right forces.

Nicholas Shaxson is a co-founder of the Balanced Economy Project and the author of “Treasure Islands”.

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