Make Antitrust Democratic Again!

Make Antitrust Democratic Again!

The response to the next recession should put economic power back in the hands of the people.


EDITOR’S NOTE: Editor's note: We published this series in the fall, not knowing when the next big economic downturn would hit. Needless to say, we didn't anticipate a global pandemic setting it off—but many of the recommendations our authors and experts proposed at the time remain relevant to our current economic situation. 

Corporate monopolies and oligopolies heighten the risk of a recession—and they certainly don’t help matters once a downturn is underway. They create a vicious cycle, transferring wealth upward and moving the disposable income and wages of the many into the investment accounts of the few. Wave after wave of consolidation has shuttered plants, stores, warehouses, and transportation hubs around the country. Together with fiscal austerity and low union density, concentrated corporate power weakens Americans’ purchasing power, decreasing the demand for goods and services. Weak consumption by households, in turn, impedes full employment and increases the likelihood of recessions.

That’s why, if reform can’t happen sooner, we ought to seize on the next recession as a moment of crisis in which to remake antitrust law and restore its historical purpose: to redistribute economic resources and power to the people. A more equitable distribution of income and clout would make our economy more stable and less susceptible to sudden downturns, as well as empower all citizens.

US law regulating monopolies was intended to put a check on the likes of John D. Rockefeller and J.P. Morgan, who monopolized industries like oil refining and steelmaking. Now, though, its aim of preserving competition helps large companies while hurting small businesses, workers, and consumers by allowing corporate behemoths to merge and preventing groups of independent workers and small firms from building power through collective action.

To understand the upside-down nature of the law, consider the gig economy. This sector has become a significant source of employment (albeit precarious and badly paid) since 2008. And as far as antitrust law is concerned, large corporations like Uber and Lyft have enjoyed the freedom to set prices for hundreds of thousands of putatively independent drivers. Meanwhile, the gig workers do not have the right under existing antitrust law to organize to raise their wages and demand better terms of work. When Uber engages in price coordination, it’s legal. When gig workers do, they’re considered to be acting collusively.

Not only is this a legal paradox; it is also the making of economic disaster. When the next recession hits, Uber will be tempted to slash its drivers’ incomes further, and drivers will have no remedy through collective action. Moreover, this Uber antitrust paradox is playing out across the economy more broadly. Currently, antitrust law’s official purpose is to promote competition, yet it uncritically allows and even blesses the economic coordination that takes place within big firms. Demanding that antitrust law promote only competition is not a tenable solution. Competition is not categorically good. Indeed, we take many of the current limits on competition for granted, from patents and property rights more generally to business corporations themselves, all of which antitrust law recognizes as legitimate. The fact is that both pernicious and socially desirable forms of competition and cooperation exist. A cartel of large pharmaceutical corporations fixing the prices of lifesaving medicines has consequences radically different from a group of workers or small firms confronting a powerful purchaser. Yet antitrust law today treats these two cases as legally indistinguishable.

This bias against cooperation among smaller players comes up in the context of small business, too. Small entrepreneurs, such as fast-food franchisees and independent professionals, aren’t allowed to cooperate to better their bargaining positions: They have to either accept domination by powerful corporations or join them (think of the physicians who have become employees of large hospital chains). Similarly, consumers likely don’t have the right to engage in collective action to obtain better terms and service from powerful companies. The Supreme Court has implied that consumer boycotts for purely economic (as opposed to political) ends, such as obtaining lower prices on unaffordable bread, could be challenged using antitrust and other laws regulating business conduct.

Why don’t nontraditional workers and other individuals build power by incorporating? The answer is complicated. The Supreme Court has made clear that establishing a corporation is insufficient to escape the antitrust ban on collusion. In his final antitrust opinion, delivered in 2010, Justice John Paul Stevens wrote on behalf of a unanimous court that a corporation is illegal “when the entity [is] controlled by a group of competitors and serve[s], in essence, as a vehicle for ongoing concerted activity.” In other words, independent competitors cannot legalize their collusive conduct under antitrust law by forming a corporation.

This means that to escape the price-fixing hammer, Uber drivers would have to centralize ownership and control rights over their labor in a single corporate entity, which is likely neither feasible nor attractive. For consumers, meeting this test is even harder.

It’s within our reach to make antitrust law a friend rather than a foe of progressive movements. Despite its current bias toward big business, these laws have always had a democratizing strain. That’s what inspired the Sherman Act of 1890 and the progressive- and New Deal–era exemptions for employees and farmers. Antitrust law today is in need of a ground-up reconstruction that recaptures its original aims.

A democratic antitrust policy must include curbing corporate power through direct public controls on mergers and predatory practices. It should progressively allocate economic coordination rights, both by restricting the ability of large corporations to control and dominate other market participants and by allowing workers and small firms to organize or counterorganize. It should seek to balance power in society rather than exacerbate existing imbalances.

Think of the possibilities for cooperation among consumers and smaller players if they were freed from the threat of antitrust. Gig workers, freelancers, and small producers who often experience precarity and poverty could bargain collectively for better contracts, much as if they belonged to a union.

In the longer term, this collective action could support the creation of alternatives to existing investor-driven firms. Uber drivers or writers on Fiverr could build on collective bargaining and form their own cooperatively owned and operated platforms. These cooperatives would answer to the members—the providers of labor, skills, and ingenuity—rather than to venture capitalists and investment banks.

Similarly, allowing cooperation among consumers, whether they’re buying groceries or cable TV subscriptions, could lay the groundwork for democratizing utilities. For example, residents of a county or municipality could build collective power to strike a better deal with a poorly regulated, investor-owned utility and use this as the foundation for building a distributed-energy co-op.

Rebuilding antitrust law is an essential element of the progressive economic policy agenda. Antitrust should be part of a suite of reforms in the Green New Deal—something that we sorely need, no matter when or how hard the next recession hits.

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