“Big Is Bad”: unpacking of Biden’s economic executive decree
On July 11, 2021, President Joe Biden signed an executive order “promoting competition in the US economy”. The order comprises seventy-two policy initiatives focused on agribusiness, health sector and information technology sector. Many of these policy initiatives will aim to encourage “vigorous” antitrust enforcement in industries and professions and “rigorous” reviews before mergers and acquisitions by the Federal Trade Commission (FTC) and the Antitrust section of the US Department of Justice. (DOJ). Other initiatives are regulatory in nature, focusing on labor market reforms and consumer protection reforms.
The Biden administration is concerned that “in more than 75% of US industries, fewer large companies now control more activities than twenty years ago.” The administration’s emphasis on corporate consolidation and “big is bad” is reflected in President Biden’s favorable remarks on antitrust enforcement efforts by former Presidents Theodore Roosevelt and Franklin D. Roosevelt . Biden sees an America “after 40 years of letting giant corporations accumulate more and more power” resulting in “less growth, weakened investments, [and] fewer small businesses.
Under the ordinance, DOJ and FTC antitrust enforcement efforts will focus on labor markets, agricultural markets, healthcare markets (including prescription drugs, hospital consolidation and insurance) and the technology industry. The administration wants to “challenge previous bad mergers that previous administrations had not challenged before.” Finally, the Biden administration will establish a White House Competition Council that will monitor progress in finalizing these initiatives and coordinate the administration’s response to the rise of large corporations in the economy.
Other regulatory initiatives by federal agencies include: banning or limiting employer non-compete agreements and eliminating unnecessary professional licensing requirements that hinder economic mobility; support state and tribal programs that import safe and cheaper pharmaceuticals from Canada; authorize the purchase of “over-the-counter” hearing aids in pharmacies; reduce internet costs by prohibiting excessive early termination fees and terminating owners’ internet exclusivity agreements; prevent manufacturers from prohibiting self-repairs or third-party repairs of products that void warranties; allow customers to transfer their financial transaction data from bank to bank; put an end to the abusive marketing practices of certain meat processors towards farmers; and the promotion of increased competition (including small businesses) through the purchasing and spending decisions of federal agencies.
The ordinance’s antitrust initiatives reflect a return to the earlier (pre-1980s) “structural” approach to antitrust policy, whereby government intervention in industry-specific markets is aimed at improving economic performance. and promote social objective of limiting the concentration and abuse of economic power. Through the application of the antitrust policy, the unfair treatment of competitors, consumers and society is conspicuously contained. This structural approach views the performance of markets as determined by the conduct of participants, which is primarily determined by the structure of the industry, consisting of the number of competitors and the existence of barriers to entry into the market.
For example, the ordinance focuses on the hospital and Big Tech mergers and the resulting “damage” to patients and the “undermining” [of] competition and reduction of innovation ”in the technology industry. The “greater scrutiny” mentioned in Biden’s executive order “encourages the Department of Justice and the FTC to review and revise their merger guidelines.” This use of language to pressure antitrust agencies for “further scrutiny” appears political in nature and does not reflect the work in the “New Industry Organization (IO)” approach to antitrust policy.
The New IO Approach rejects the Chicago School’s proprietary static market approach and focuses on the strategic behavior of the industry and thus incorporates the static and the dynamic efficiency of the market in its analysis. In addition, the new approach to IOs addresses the potential for anti-competitive market behavior, such as that found in information technology, characterized by network externalities and where compatibility and standardization are required. The question remains: will the review and revision of merger guidelines be based on sound economic research or a politically motivated “big is bad” antitrust philosophy?
Other major “competitive” initiatives include a call for Congress to pass the Right to Organize Protection Act, characterized as a law “to guarantee workers a free and fair choice to join a union and to bargain collectively ”; new legislation offered to appease a political ally, organized labor, despite long-standing labor laws guaranteeing such activities of employee organizing and collective bargaining. In addition, another initiative encourages the Federal Communications Commission (FCC) to restore “net neutrality,” which classifies broadband Internet as a “public operator” and regulates it as a public service. As Susan E. Dudley, director of the Center for Regulatory Studies at George Washington University, notes: “The FCC’s 2017 rule on ‘restoring Internet freedom’ offered in-depth economic analysis showing that a light regulation is more conducive to completion, innovation and consumer welfare than regulation as a public service. The “doomsday” predictions of the detrimental effects of the implementation of the “restoration of Internet freedom” rule have not materialized.
While the Biden Ordinance has all of the major requirements expected of central planning (and additional rules-based regulation), there is a theme among the regulatory initiatives that will improve “transparency” to improve price comparison. services by consumers and inform decision-making. These include the fact that the United States Department of Health and Human Services (HHS) supports existing hospital pricing transparency rules and that the United States Department of Transportation is considering issuing rules that require that fees be charged. baggage, modification and cancellation of commercial airlines are clearly disclosed to their customers. However, as Dudley astutely points out, the initiative to order the HHS “to standardize plan options in the national health insurance market so that people can compare more easily” could limit the ability of insurers to offer insurance. coverage options that meet various situations and needs. “With this initiative, insurers should also offer the additional option of requested personalized insurance plans.
The Biden Order will undoubtedly receive major political opposition from the biopharmaceutical and information technology industries. For example, in a recent statement from the Computer & Communications Industry Association, the association announced that “Biden’s Executive Order ignores dynamic technological competition and the value it adds for SMEs (small and medium-sized enterprises) and consumers. “. This is just the start of a major lobbying campaign to politically weaken the regulatory reach of the federal government.
Thomas A. Hemphill is professor of strategy, innovation and public policy in the School of Management at the University of Michigan-Flint.