This week, the American Medical Association formally asked the Department of Justice to block two health insurance mergers (Aetna’s purchase of Humana and Anthem’s acquisition of Cigna) that would reduce that industry to effectively three participants. Left unmentioned was the significant consolidation among health care providers that has helped spur the monopoly formation on the insurer side. After all, insurers lose bargaining power on prices when facing giant medical conglomerates, and regain it when they grow themselves.
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This week, Anheuser-Busch InBev and SABMiller completed their $106 billion plan to combine, forming the world’s largest brewery, responsible for 30 percent of global beer sales. The new company said it would sell its stake in U.S. bottler MillerCoors to show regulators its commitment to competition. But it’s selling that stake to Molson Coors Brewing, its joint partner in the MillerCoors venture, diminishing its monopoly only by bolstering a large oligopoly partner. Molson Coors would instantly become the second-largest brewer in the U.S., right behind Anheuser-Busch InBev.
This week, Apple, Google and Amazon joined forces in a lobbying venture to promote technology-based financial services, or “fintech.” All the founding members of Financial Innovation Now have investments or outright subsidiaries in the fintech space. The teaming of three of the most powerful Silicon Valley firms to exploit a gap in financial regulation represents at least the appearance of collusion between companies nominally thought to oppose one another. It comes at a time when the same tech giants, along with Facebook and Microsoft, have entrenched control over the entire Internet infrastructure, from search to messaging to advertising to video and audio distribution to applications to storage.
Despite all these shifts in the economy, all moving toward greater market concentration, influencing every major issue for workers and consumers, the nation has met these changes with virtual silence. None of the major-party debates have posed a question about antitrust policy. Republican candidates talk around issues like high drug prices without mentioning that they are the by-products of monopoly. Stories pass through the news — like T-Mobile giving preferential treatment to a handful of companies for streaming services — without any recognition of how large companies get the benefit of a narrow market.
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That story, and others like it, show how the new Gilded Age allows monopolists to help other monopolists, carving up the pie together and keeping out everyone else. I wrote a long piece in The American Prospect about monopolies that featured a company called Retractable Technologies, which made a groundbreaking syringe that would prevent health care workers from accidentally sticking themselves with used needles. But Becton Dickinson, the monopoly leader in syringes, controls 70 percent of the total market, and it prevented Retractable from breaking in. Surprisingly, no other medical supplier has ever tried to threaten Becton Dickinson. As Thomas Shaw, founder of Retractable Technologies, said, “Johnson & Johnson told us, (Becton Dickinson) doesn’t sell Band-Aids and we don’t sell syringes.”
This undermining of competition has severely negative effects for consumers and workers. Large outsourcing firms can dominate the H-1B visa program, preventing startups from a crack at skilled workers and driving well-paying jobs overseas. Prices rise when monopolies go unchecked, as groundbreaking research by Northeastern University’s John Kwoka has shown. This also affects quality of service: Why should United Airlines or Comcast or AT&T bother to deliver a good product if consumers have no real alternative?
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The stratification between big and small companies has impacted inequality. Several studies show that the gap between the most-profitable and least-profitable companies can explain much of the increase in inequality over the past couple decades. Big companies that dominate markets can extract more profits relative to smaller companies fighting it out amid competition, and those profits inevitably go to high-paid workers and executives, accounting for much of the income gap.
This is especially true in concentrated industries like tech and health care, where monopolists use patents and other barriers to entry to segregate competition among a few friends. That’s why startups are starting to devalue as market concentration erects hurdles to their success.
But highly concentrated markets are everywhere, not just high-tech and prescription drugs. Harold Meyerson recently laid out the significant merger activity just in the few months since I finished my American Prospect article, making it nearly obsolete. A small footnote to the Anheuser-Busch InBev/MillerSAB acquisition points to one reason: No less than 11 banks and eight corporate law firms advised on that merger, all earning fees. Just a tiny piece of the $4 trillion in mergers to date this year equals enormous profits for Wall Street.
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To their credit, Bernie Sanders and Hillary Clinton have talked about monopolies while on the presidential campaign trail. Sanders wants to block the Time Warner/Charter Communications merger. Clinton has called for a merger review of health insurers and said she’ll go after “monopoly power” in pharmaceuticals. But another presidential candidate talked a good game on antitrust: Barack Obama. His administration has largely been a disappointment, only making moves to fight monopolies when the concentration was painfully obvious.
To cite a recent example, the Justice Department won’t intervene in a case seeking to reverse Obama’s own FCC rulings on municipal broadband, which allow communities to go outside the Internet provider oligopoly and provide access directly to their citizens. When DoJ sues to block a few extra landing slots for United at Newark Airport, what’s left unsaid is their relative passivity in watching United and American swallow up competitors.
But behind this reticence to use the laws on the books to prevent market concentration is a lack of outside pressure clamoring for it. In other words, we’re the problem.
In the absence of a movement against monopolies, governments seeking the path of least resistance have no reason to do anything to prevent market concentration. White papers and even essays like this will do little to fill this activism gap. People need to understand that their anxiety in the modern economy derives from a few rich companies taking control and divvying up profits. The major economic issues we face all revert back to this point.
We’ve seen periods like this before in America, and they only ended when citizens banded together, from the Granger movement to the Progressive era. “Leaders who can disenthrall themselves from the sway of super PACs will find a ready audience for breaking up the money combines,” Meyerson writes. But that might get things the wrong way around. Maybe the people have to come together first, and show the self-appointed leaders which direction to go.