dEverything old is new again, and that’s turning out to be true in the case of a growing drumbeat to use antitrust tools to rein in big technology companies like Apple, Amazon, Meta, and Google. But as a new policy report from the Pelican Institute points out, expanding the enforcement powers of antitrust agencies will do more harm than good—and an existing approach to protect consumers and producers, while encouraging innovation, is the better path forward.
In their report “Antitrust & Enforcement: Letting Markets Work without Empowering Government,” Ted Bolema, Ph.D., J.D., Antitrust and Competition Fellow at the Innovators Network Foundation, and Vance Ginn, Ph.D., Chief Economist at the Pelican Institute, write that while the current frustrations with the size of large tech companies and censorship practices may be warranted, giving government enforcers and bureaucrats more power is not the answer. Instead, existing antitrust laws and the consumer welfare standard are still the best tools for protecting competition and consumers.
“For the last 50 years or so, scholars and courts have operated with a consensus about the goal of antitrust enforcement: the consumer welfare standard, which asks, ‘does the conduct in question make consumers better or worse off?’” Bolema and Ginn write. “Antitrust enforcement based on the consumer welfare standard protects one of the most important outcomes of the competitive market process and is worth preserving.”
Bolema and Ginn also note that calls to create new antitrust tools in response to conduct by “Big Tech” are misguided and will do far more to empower politicians and government bureaucrats than to prevent abusive conduct by technology companies.
“Expanding the enforcement powers of antitrust agencies — as many on the left and some on the right now wish to do — harkens back to an older ‘big is bad’ approach,” they write. “Rather than promoting competition, such a retrograde approach undercuts the competitive market process which provides more innovation, cheaper prices, and better-quality goods and services necessary for continued human flourishing.” Bolema and Ginn say that the consumer welfare standard—and putting power in the hands of consumers and producers— is the tried and true path to ensuring their best interests.
“As history has proven, empowering people in the marketplace rather than bureaucrats in government results in more efficient and effective outcomes and better supports liberty and prosperity,” Bolema and Ginn conclude.
You can read the full report, “Antitrust & Enforcement: Letting Markets Work without Empowering Government,” here.
Originally published by Pelican Institute.
In a desperate attempt to garner public favor before the midterms, President Biden set his sights on a new target to distract Americans from the pressing inflation problem: overdraft fees. Those low-percentage charges issued by banks to customers who use more money than they have in their accounts are apparently dire.
Biden tweeted: “My Administration is making clear that charging Americans for a bounced check they deposit or an overdrafted bank account isn’t just wrong. It’s illegal.” In the official White House statement, he refers to these charges as “hidden fees,” discounting that bank account holders voluntarily sign off on the possibility of overdraft fees when they open an account.
Unlike Biden, most people understand that what’s illegal is using someone else’s funds without permission, not issuing a penalty for doing so.
Eliminating overdraft fees would disempower personal responsibility through government overreach and reduce the opportunity for some to open an account. Charges are a practical price for using an institution’s capital to support money mismanagement, and an underreaction, one could argue, to theft.
As it turns out, nothing is free, including using the bank’s money when you’ve overspent yours. This is bad enough, as people have begun to think that scarce things are free, but Biden says he isn’t stopping at overdraft fees.
He’s also going after what he’s branded as “surprise” fees, such as family seating fees issued by airlines, switch fees from internet and cable services, and service fees from concert and sporting venues.
Notably, he claims that these charges are more menacing than typical add-on fees and that “firms should be free to charge more to add mushrooms to your pizza.”
So, what’s more menacing about concert venues charging a service fee to cover operational costs than Pizza Hut charging for extra toppings so they can still turn a profit? There isn’t a difference.
What’s malicious is that Biden wants to penalize businesses for trying to stay profitable in a recession that he’s prolongingby addressing “problems” like these instead of the 40-year high inflation that’s removing purchasing power from consumers and hurting families.
Biden insists that these “junk fees” are undetectable by consumers and therefore unfair, and that this makes it impossible for people to compare the real costs between service providers.
Those seeking to promote more government involvement in businesses,almost always undermine individual agency. The reality is that consumers can fight against fees, take their business elsewhere, or choose to pay them if they think it’s worth it. That’s what prices in a free-enterprise system of capitalism are all about: allowing people to improve their lives.
There are always trade-offs in life, and if the Biden administration successfully removes all these fees, we can expect to see another kind of trade-off instituted in its place.
Nothing scarce is free. Every decision we make gives up something else, which economists call opportunity costs. Politicians too often think they can ignore this fact, but they do so at the peril of the people whom they serve.
This kind of overreach isn’t just insulting to Americans, it’s harmful to a free-market system that operates best with limited government. By convincing people that they’re powerless to manage their money or find the best service provider because they’re helpless against “big scary businesses,” the government creates enough public concern to justify stepping in where they have no business doing so.
The economy is suffering enough under Biden’s overregulation, Congress’ overspending, and the Fed’s overprinting; the last thing it needs is another barrier to growth and organic competition.
Biden can quit trying to kid the American public that overdraft fees, which make up less than one percent of annual household spending, are the culprit for this lackluster economy. Instead, he should scrap his failed policies and promote free-market solutions that let people prosper.
Originally published at AIER
Everyone is feeling the pinch at the supermarket these days, as inflation—measured by the decline in the purchasing power of money for a basket of goods and services—recently hit a 40-year high. From eggs to milk, it is getting harder to bring home the bacon. Nowhere has that been more visible than in the prices for beef.
While inflation has contributed to the increase in the price of beef, the scary truth is there is a more nefarious reason for this: excess regulation.
The beef industry can be categorized into three sectors: cow-calf, stockyard, and slaughterhouse operations. Slaughterhouses have long been allowed to operate in what’s considered an oligopoly, as they’re heavily regulated by the United States Department of Agriculture (USDA) and Federal Drug Administration (FDA).
A century ago, the Packers and Stockyards Act aimed to fix what was considered to be a market failure. It broke up the five major slaughterhouses controlling the beef industry. Yet today, only four slaughterhouses control 80% to 85% of America’s beef.
Now, the Senate Agriculture Committee has passed two bills that aim to do that exact thing the Packers and Stockyards Act was supposed to do. That begs the obvious question: Is more regulation really the answer to this bloody mess?
The proposed legislation of the Cattle Price Discovery and Transparency Act would require slaughterhouses to buy more cattle on the cash market. And the Meat and Poultry Special Investigator Act would require the USDA to investigate and prosecute anti-competitive practices.
Cow-calf producers and stockyards are margin operators in one of the most complex markets in the world, and often fall victim to unpredictable forces like fluctuating demand, adverse weather, and disease. Of course, there are inherent risks in every market, and participants accept those risks.
The issue here is these operators can appear to be unfairly squeezed by slaughterhouses that seem to be manipulating prices. These practices include utilizing market strategies such as forward contracting and retaining ownership.
Forward contracting allows buyers and sellers to complete transactions months in advance to price in risk of the cash market. This strategy was intended to be a risk management tool for producers, giving them better control over their profit margins.
Secondly, slaughterhouses have taken advantage of the “retained ownership” principle by purchasing their own stockyard inventory. Cattle in stockyards are typically owned outright by the yard or owned by cow-calf producers that retain ownership and pay on a per-head or per-day rate.
So, in the event of unforeseen demand changes like, perhaps, a pandemic, inflation, drought, or mysterious cattle deaths, slaughterhouses can pull up their own inventory and mitigate any cost of buying cattle ready to be slaughtered at the cash market value.
Put plainly, the new legislation would limit slaughterhouse’s ability to slaughter cattle they own in hopes of forcing them to offer producers higher prices. But this can only go so far. And likewise, there’s only so much regulation that can be implemented to correct issues created by overregulation.
Threatening prosecution for market manipulation violations doesn’t break up the oligopolies because it addresses the wrong problem. Instead of trying to impose regulations to attempt to remedy the power disparity, eliminating the regulations that create barriers to entry in the first place would break up packer conglomerates naturally.
In short, the answer to eliminating unfair pricing schemes does not lie in implementing additional regulations to an already heavily regulated industry.
According to a 2022 report by the USDA, 900 slaughterhouses are federally inspected and 1,900 plants are not. The non-federally inspected plants that meet their states’ inspection standards can only sell or transport beef intrastate, barring them from being in direct competition with the Big Four. State inspections are required to meet criteria “at least equal to” federally inspected facilities.
One solution is to add competition by deregulating the inspection requirements, which would result in more competitors for the slaughterhouses, helping achieve what as the two proposed bills aim to do through market forces instead of government regulation. Continued regulation of a market at this level is identical to how many experts believe India and many African countries fell into complete food dependence on their government.
Congress’s signaled sympathy for cattlemen the past three years is probably all in vain—especially considering its legislation created the problem in the first place. Most importantly, consumers are about to feel even more pain at the meat counter come this fall.
Without substantial deregulation of the beef industry, sly slaughterhouse owners and confused senators may enjoy their prime rib dinner, while the rest of us settle for chicken—or worse, “plant-based proteins.”
Published at TPPF with Livia Lavender
Today, the Texas Public Policy Foundation released five papers that together form a responsible strategy for the state’s immediate and long-term economic growth.
“These five approaches make for good economic policy anytime,” said TPPF Chief Economist Vance Ginn, Ph.D. “But they are especially important as the state recovers from government-imposed shutdowns. Together, these strategies will help return Texas to the prosperity we saw before COVID-19 and help get us there fast.”
The Five-Step Strategy is:
“During the shutdown, the state suspended some rules and regulations, proving they weren’t essential for health and safety in the first place,” said Rod Bordelon, TPPF’s Policy Director for the Remember the Taxpayer Campaign. “Instead of waiting for the crisis to end to re-evaluate these regulations, we should repeal them now and review others in an ongoing basis so that Texans aren’t held back by unnecessary restrictions.”
The Responsible Recovery Agenda also stresses that budget writers should avoid seeking additional state revenue through increased fees and taxes.
“Raising taxes is a costly endeavor — even more so in a recession because it distorts behavior at a time when the economy is weak, delaying recovery and leading to even greater economic stress,” said Benjamin Priday, Ph.D., Economist at TPPF. “Legislators should close budget gaps first by strategically employing the Rainy Day Fund and by trying to find ways to reduce spending.
The Responsible Recovery Agenda is a comprehensive approach to addressing the budget challenges Texas faces in the wake of COVID-19 shutdowns while also preserving the success of the Texas Model, which has strengthened the state’s economy.
For a historical look at the budget and other ways to improve the budget process, the Foundation also released The Real Texas Budget report.
Overview of the President’s Executive Order on Regulatory Relief to Support Economic Recovery & Path Forward
On May 19, 2020, President Trump signed the Executive Order on Regulatory Relief to Support Economic Recovery. In Section 6 of the EO, titled the “Fairness in Administrative Enforcement and Adjudication,” it includes ways to improve the institutional framework of how federal regulations are enforced. The EO should help empower people to be protected from undue, expensive, unclear regulatory overreach by the federal government that costs Americans trillions of dollars over time.
Vance Ginn, Ph.D.