How to Respond to Monopolies Today

Since the beginning of the Republic, Americans have used antimonopoly policy not only to preserve market competition, but to preserve the economic opportunity of the individual citizen and to guarantee that power and property would not become concentrated in the hands of the few. Indeed, America was born out of rebellion against monopoly. During the Boston Tea Party of 1773, revolutionaries like Samuel Adams struck a blow against the British East India Company precisely because it was a monopoly, which they viewed as “forever dangerous to public liberty.” After a public meeting led by Samuel Adams and attended by thousands of Boston citizens to protest the tax, a group of disguised Sons of Liberty boarded the ships holding tea cargoes in Boston harbor and threw every chest of tea overboard. On the other hand, the Tea Party movement that began in 2009 was a fiscally conservative political movement called for lower taxes and for a reduction of the national debt and federal budget deficit through decreased government spending.

Executives at some of the largest monopolies in the US economy are using their market power to jack up prices on consumers. Their means is market power. There is an opportunity for profit. The opportunity is for CEOs to pocket the revenue from price hikes while blaming inflation on the increases. “The price hikes that we are seeking now are building on decades and decades of disinvestment, corporate consolidation, and deep deregulation,” observes Rakeen Mabud. The history of mergers and acquisitions … has really contributed to the loss of our productive capacity, notes Ron Knox. Monopolies contribute to market failure because they limit the efficiency, innovation, and healthy competition. In an efficient market, prices are controlled by all players in the market because supply and demand swing more toward equilibrium. Society is worse off under monopoly because a monopolist charges a higher price and supplies a lower quality than a perfectly competitive market.

Born in 1866, Elizabeth Magie often spoke out against the railroad, steel, and oil monopolists of her time. In 1904, she invented and patented what she called “The Landlord’s Game”. The original patent on The Landlord’s Game expired in 1921. Parker Brothers then took the hand-made game which had become known simply as Monopoly, and adapted it as the polar opposite of what Magie had intended. Monopolies create a social cost, called deadweight loss, caused by a mismatch between goods consumption and demand, as some consumers who would be willing to pay for the product up to its marginal cost, are not served. In a monopoly there is no supply curve, because monopolists are price setters and not price takers. This is because the monopolist has market power that exploits. The higher price and lower quality contribute to an ongoing deadweight loss for society.

The Sherman Act (passed 1890), the Federal Trade Commission Act (passed in 1914), and the Clayton Act (passed in 1914) are the three pivotal laws in the history of antitrust regulation – to limit monopolies in the market. Today, the Federal Trade Commission, sometimes in conjunction with the U.S. Department of Justice, is tasked with enforcing federal antitrust laws. This newly created Federal Trade Commission enforced the Clayton Antitrust Act and prevented unfair methods of competition. Aside from banning the practices of price discrimination and anti-competitive mergers, the new law also declared strikes, boycotts, and labor unions legal under federal law. There are three main ways in which the Federal antitrust laws are enforced: Criminal and civil enforcement actions brought by the Antitrust Division of the Department of Justice. Civil enforcement actions brought by the Federal Trade Commission. Lawsuits brought by private parties asserting damage claims.

Antitrust laws have to do with regulating monopolies, or companies that grow too large so as to stifle competition and harm consumers. In the 1800s, American firms used legal loopholes to grow larger than they otherwise could have by establishing entities known as trusts. These trusts would then hold assets amounting to, for example, the entirety of the nation’s railways or coal mines. Thus, the laws enacted to break up and prevent these monopolistic entities were called “anti-trust.”  At their core, antitrust provisions are designed to maximize consumer welfare. Supporters of the Sherman Act, the Federal Trade Commission Act, and the Clayton Antitrust Act argue that since their inception, these antitrust laws have protected the consumer and competitors against market manipulation stemming from corporate greed. Through both civil and criminal enforcement, antitrust laws seek to stop price and bid rigging, monopolization, and anti-competitive mergers and acquisitions.

The Federal Trade Commission Act prohibits unfair or deceptive advertising in any medium. That is, advertising must tell the truth and not mislead consumers. The FTC’s Bureau of Consumer Protection stops unfair, deceptive and fraudulent business practices by collecting reports from consumers and conducting investigations, suing companies and people that break the law, developing rules to maintain a fair marketplace, and educating consumers and businesses about their rights. FCC goes after market allocation – a scheme devised by two entities to keep their business activities to specific geographic territories or types of customers. In 2000, the Federal Trade Commission (FTC) found FMC Corp. guilty of colluding with Asahi Chemical Industry to divide the market for microcrystalline cellulose, a primary binder in pharmaceutical tablets. The Commission barred FMC from distributing micro-crystalline cellulose to any competitors for 10 years in the United States, and also banned the company from distributing any Asahi products for five years.

In spite of this existing legislation, the US has become a country of monopolies. Three companies control about 80% of mobile telecoms. Three have 95% of credit cards. Four have 70% of airline flights within the U.S. By 2023 Google handles 90% of all search queries worldwide. In agriculture, four companies control 66% of U.S. hogs slaughtered in 2015, 85% of the steer, and half the chickens, according to the Department of Agriculture. Similarly, just four companies control 85% of U.S. corn seed sales, up from 60% in 2000, and 75% of soy bean seed, a jump from about half. Monopoly capitalism has shifted power from the 99% to the 1% and undermined American democracy, making it harder to tackle their most existential crisis – climate change.

Monsanto is an American agrochemical and agricultural biotechnology corporation that was founded in 1901; generally known for producing genetically modified organisms (GMOs), having a bad environmental record, using dangerous pesticides, and clashing with local farmers. Monsanto was one of the original producers of both Agent Orange (dioxin), a toxic herbicide that caused serious health issues after use during the Vietnam War, and DDT, a pesticide that’s devastating environmental effects were detailed in the best-selling book Silent Spring. The new crop system developed by Monsanto and BASF was designed to address the fact that millions of acres of US farmland have become overrun with weeds resistant to Monsanto’s glyphosate-based weedkillers, best known as Roundup. Both Monsanto and the German chemical giant BASF were aware for years that their plan to introduce a new agricultural seed and chemical system would probably lead to damage on many US farms.

Glyphosate, the active ingredient in the world’s most popular herbicide is literally everywhere: our soil, our water, our air, our food, and in our bodies. Chronic toxicity – the effects of continually ingesting glyphosate residues in food – is cause for concern. Glyphosate interferes with fundamental biochemical reactions and may predispose humans to obesity, Alzheimer’s, Parkinson’s, and other health problems. It’s easy to overlook these effects. For example, brain glyphosate correlates with increased TNFα levels, suggesting that exposure to this herbicide may trigger neuroinflammation in the brain, which may induce changes that are seen in neurodegenerative disorders. One cause of European opposition to GMOs is that the advantage to agriculture and food production is often considered weak or non-existent, while the risks are considered substantial. Roundup is banned in more than 20 countries because the herbicide has been linked to an increased risk of non-Hodgkin lymphoma and other types of cancer.

Monopolies, of course, raise prices. This reduces the purchasing power of households, or the value of their income. But monopolies, in fact, reduce the purchasing power of low-income households much more than high-income households. Society is worse off under a monopoly because a monopolist charges a higher price and supplies a lower quantity than a perfectly competitive market. This is because the monopolist has market power that it exploits. Excluded from markets by both excessive cost of conventional goods and elimination of substitutes, the poor suffer doubly. The higher price and lower quantity result in a deadweight loss for society. Never the less, the march goes on. Between 1995 and 2015, 60 US pharmaceutical companies merged and became just 10. Some 25 years ago, 10 corporations controlled 40% of the global seed market; today it is just two. The five biggest corporations together earned more than the income of the poorest two billion people – or nearly a quarter of the world’s population.

To date, the most famous United States monopolies, known largely for their historical significance, are Andrew Carnegie’s Steel Company (now U.S. Steel), John D. Rockefeller’s Standard Oil Company, and the American Tobacco Company. American monopolies date back to colonial administrators who awarded large companies exclusive contracts to help build the New World. From the late 19th to the early 20th century, the three organizations mentioned above maintained singular control over the supply of their respective commodities. Without free-market competition, these companies could effectively keep the price for steel, oil, and tobacco high. AT&T, once deemed a monopoly, was forced by the U.S. government to spin off most of its assets. 2022 has been a big year for enforcement of the antitrust laws against tech companies, with the five largest (Apple, Google, Meta/Facebook, Amazon, and Microsoft) all facing lawsuits or investigations in the US.

A second reason these firms have become dangerous is that they control the flow of ideas and information – an arrangement no democracy can tolerate. They mediate our interactions, and they decide which sites show up when we search; which news stories, real and fake, we encounter in our feeds; and which books we run across. Surveillance is a central strategy of all three of these tech monopolies. And they all use the extensive data they’ve gathered about us to hinder upstart competitors, keep us tuned into their services, and otherwise sustain their dominant positions. For example, these pervasive digital platforms constitute an existential danger is that they control the fates of so many other businesses. Retailers and manufacturers at once compete with Amazon and depend on it to reach the market. Media companies are beholden to the algorithms of Facebook and Google. Google has used its control of search to privilege its own travel and shopping services, while marginalizing those of rivals.

It seems strange, but it shouldn’t. Governments and central banks around the world took exceptional measures to support the financial system during the pandemic, and it worked to excess. Fantastic amounts of money were made in stocks, housing, cryptocurrency and more during a pandemic that killed 6.2 million people and rocked the global economy. Billionaires’ wealth has risen more since COVID-19 began than it has in the last 14 years. At $5 trillion dollars, this is the biggest surge in billionaire wealth since records began. A one-off 99 percent tax on the ten richest men’s pandemic windfalls, for example, could pay: to make enough vaccines for the world; to provide universal healthcare and social protection, fund climate adaptation and reduce gender-based violence in over 80 countries. All this could be done, while still leaving these men $8 billion better off than they were before the pandemic.1

Government backed monopolies are’t just a statement about income inequality in the U.S. today. It’s also an acknowledgement that the 1 percent largely controls the government and is therefore able to rig laws, taxes and regulations in its favor. Despite the free-market ideologues’ rhetoric about “big government” pitted against “big business,” the truth is that big business has always found it useful to invest in politicians and their political parties to influence government policies that improve their bottom lines. Because of their control over the key institutions in U.S. society, the power elite need not resort to harsh physical coercion in order to maintain their interests and achieve their goals. Only by reclaiming, breaking, decentralizing and dispersing this power can we hope to make democratic decisions that are in the public interest. It is necessary to preserve the economic opportunity of the individual citizen and to guarantee that power and property not become concentrated in the hands of so few.

1 https://www.oxfam.org/en/press-releases/ten-richest-men-double-their-fortunes-pandemic-while-incomes-99-percent-humanity

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