As Prices Rise, Biden Turns to Antitrust Enforcers

 

As Prices Rise, Biden Turns to Antitrust Enforcers

 

A wide-ranging presidential order helped block a railroad merger and tackle supply-chain problems, and it is planting the seeds for bigger actions.

 

Jim TankersleyAlan Rappeport

By Jim Tankersley and Alan Rappeport

Dec. 25, 2021

https://www.nytimes.com/2021/12/25/business/biden-inflation.html

 

WASHINGTON — As rising inflation threatens his presidency, President Biden is turning to the federal government’s antitrust authorities to try to tame red-hot price increases that his administration believes are partly driven by a lack of corporate competition.

 

Mr. Biden has prodded the Agriculture Department to investigate large meatpackers that control a significant share of poultry and pork markets, accusing them of raising prices, underpaying farmers — and tripling their profit margins during the pandemic. As gas prices surged, he publicly encouraged the Federal Trade Commission to investigate accusations that large oil companies had artificially inflated prices, behavior that the administration says continued even after global oil prices began to fall in recent weeks.

 

The push has extended to little-known agencies, like the Federal Maritime Commission, which the president has urged to search for price gouging by large shipping companies at the heart of the supply chain.

 

The turn to antitrust levers stems from Mr. Biden’s belief that rising levels of corporate concentration in the U.S. economy have empowered a few large players in each industry to raise prices higher than a more competitive market would allow.

 

 

Corporate culpability for rising prices remains unclear. Inflation is at a 40-year high because of pandemic-related factors such as broken supply chains and high demand for goods from consumers still flush with government-provided cash. But as the price increases have spread across sectors, including food and gasoline, the administration has come under increasing pressure to find ways to respond.

 

White House officials concede that their antitrust moves are unlikely to reduce costs for U.S. businesses or consumers immediately. The efforts, they say, will be more effective down the road. But the rise of inflation has given the White House an opportunity to take action that Democrats have long encouraged, and that Mr. Biden made an early focus of his tenure: using the power of government to break up monopolies and promote economic competition.

 

In July, before the recent run-up in prices, Mr. Biden issued an executive order that included 72 directives for cabinet and independent agencies to more vigorously enforce antitrust laws and to pursue specific actions to promote competition, such as eliminating noncompete agreements for workers and forcing tech companies like Apple to allow consumers to repair their own products.

 

He has also tapped antitrust crusaders for key roles, including Lina Khan to be chairwoman of the Federal Trade Commission, and Jonathan Kanter, an adversary of Facebook and Google, to lead the antitrust division of the Justice Department. Tim Wu, a proponent of breaking up Facebook and other large companies, was brought on as a special White House adviser to Mr. Biden on competition issues.

 

White House officials say fighting inflation was not the initial motivation for Mr. Biden’s competition agenda. But, they say, the push has given the president some of his most powerful tools to take action against rising prices, and it will play a central role in federal efforts to reduce costs for consumers over the long term.

 

That role could grow even more prominent if Democrats lose control of the House or Senate in next year’s midterm elections and Mr. Biden is forced to rely on executive actions to advance his economic agenda.

 

The administration’s focus on increasing competition “will spawn more innovation, more disruption, more start-up businesses in the U.S.,” said Brian Deese, who heads the White House’s National Economic Council. And, he added, it “will deliver lower prices for Americans right away.”

 

The president’s efforts to promote competition and potentially break up large players have rattled big companies and angered prominent industry groups in Washington, at a time when businesses are already grappling with supply chain problems, higher input costs and labor shortages.

 

The U.S. Chamber of Commerce has accused the Biden administration of interfering with the work of independent agencies even as it threatened litigation against the Federal Trade Commission, an independent consumer protection agency.

 

Neil Bradley, the executive vice president and chief policy officer for the chamber, said in an interview that the measures would do little to blunt inflation.

 

“It’s a fundamental misunderstanding of inflation and frankly a poorly dressed-up political argument,” Mr. Bradley said, adding that inflation had been very low in the last decade during a period of corporate consolidation. “Did they get soft concentration all of a sudden and in nine months it produced rampant inflation? Of course not.”

 

Much of the business community concern is aimed at the F.T.C., which, empowered by Mr. Biden’s executive order, has targeted companies without looping in the White House.

 

An F.T.C. official said that the agency was pursuing its own agenda under Ms. Khan.

 

Late last month, the commission ordered nine large retailers, including Walmart, Amazon and Kroger, to turn over detailed information to help root out the sources of supply chain disruptions that were “harming competition in the U.S. economy.”

 

The demand for documents was news to the White House, which had arranged for Mr. Biden to meet that same day with a group of retailers to discuss the administration’s efforts to relieve backlogs at the nation’s ports and to highlight the companies’ promises that their shelves would be well stocked for the holiday season. Among the top executives attending the White House event were officials from Kroger and Walmart.

 

Overall, though, White House officials say they are pleased with the zeal federal agencies have shown for Mr. Biden’s antitrust efforts. Administration officials say the biggest successes so far include blocking the merger of a large American railroad, Kansas City Southern, with a Canadian counterpart and the merger of two large insurance companies, Aon and Willis Towers Watson, which officials say could both have resulted in higher costs for consumers. They also cite a regulation allowing hearing aids to be sold without prescriptions and the auctioning of some gate slots at Newark Liberty International Airport to low-cost airlines.

 

More dramatic results could emerge from a Justice Department fight against consolidation in the sugar industry and new efforts by the White House’s Office of Management and Budget to require that future federal regulations be evaluated, in part, based on how they might affect competition in regulated industries.

 

The Agriculture Department has distributed $500 million to help seed new entrants in the meatpacking industries to challenge the small group of corporate giants that dominate it.

 

What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation costs and toys.

 

What causes inflation? It can be the result of rising consumer demand. But inflation can also rise and fall based on developments that have little to do with economic conditions, such as limited oil production and supply chain problems.

 

Where is inflation headed? Officials say they do not yet see evidence that rapid inflation is turning into a permanent feature of the economic landscape, even as prices rise very quickly. There are plenty of reasons to believe the price burst will fade, but some concerning signs suggest it could last.

 

Is inflation bad? It depends on the circumstances. Fast price increases spell trouble, but moderate price gains could also lead to higher wages and job growth.

 

How does inflation affect the poor? Inflation can be especially hard to shoulder for poor households because they spend a bigger chunk of their budgets on necessities — food, housing and especially gas.

 

Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.

 

The Federal Maritime Commission has investigated the handful of corporate shipping alliances that effectively control the flow of goods across the world’s oceans and that have raised prices as much as ninefold during the pandemic, according to data from the freight-tracking firm Freightos. The commission’s analysis determined that market forces — particularly the rising demand for furniture and other items by consumers who have cut down on travel and dining out — are driving the increases, said Daniel B. Maffei, the former New York congressman who is chairman of the commission.