A White House executive order issued today to push back against monopolistic mergers and consolidations is getting mixed grades from industry voices, earning praise from small business groups but criticism from corporate trade associations.
According to the Biden Administration, the order is intended “to promote competition in the American economy, which will lower prices for families, increase wages for workers, and promote innovation and even faster economic growth.” It would do that by ordering 72 initiatives at more than a dozen federal agencies, including a call for the two top antitrust agencies—the Department of Justice (DOJ) and Federal Trade Commission (FTC)—to enforce antitrust laws vigorously and even consider challenging prior mergers.
The order, titled “Promoting Competition in the American Economy,” also calls out to the Department of Transportation (DOT), saying that the air travel, freight rail, and maritime shipping sectors are dominated by a few, large corporations.
In examining airplane operators, the policy focuses mostly on the passenger travel segment, saying that the top four commercial airlines control nearly two-thirds of the domestic market, leading to reduced competition and increased fees for baggage and cancellations. The order could lead to better disclosure or refunding of those charges under some conditions.
For the rail market, the order says the number of “Class I” railroads has shrunk from 33 in 1980 to just seven in 2021, and four major rail companies now dominate their respective geographic regions. Under those conditions, “Freight railroads that own the tracks can privilege their own freight traffic—making it harder for passenger trains to have on-time service—and can overcharge other companies’ freight cars,” the order says. In response, the order encourages the Surface Transportation Board “to require railroad track owners to provide rights of way to passenger rail and to strengthen their obligations to treat other freight companies fairly.”
Finally, in the maritime shipping segment, the largest 10 shipping companies controlled 12% of the market in 2000 but control more than 80% today. Armed with that much leverage, container shippers have been charging exporters exorbitant fees for detention and demurrage time when freight is sitting waiting to be loaded or unloaded, the White House said. To address that, the order encourages the Federal Maritime Commission to ensure vigorous enforcement against shippers charging American exporters inflated charges.
According to the Main Street Alliance, a national coalition of small business owners, the executive order would help tip the scales against “monopolistic market practices” often deployed by huge corporations. “For policymakers interested in a robust, competitive small business economy, passing new anti-monopoly laws must be a key federal priority in 2021. Antitrust regulation is one place where we can look to build a more resilient and fair economy coming out of the pandemic,” Main Street Alliance Executive Co-Directors Chanda Causer and Stephen Michael said in a release.
But change may be slow to come. The “massive consolidation” of ocean and rail providers over the last 20 years has indeed contributed to the historically tight freight capacity and high costs now pinching shippers, according to the supply chain visibility platform provider FourKites. But the regulatory solutions proposed by this executive order face an “uphill train ride with many bumps” before they could provide any relief, Glenn Koepke, senior vice president of Customer Success at FourKites, said in an email.
“Each presidency brings a shift in policies, and with the Trump era a lot of the focus was around a strong push to protect the American economy by implementing tariffs and other duties, which caused immediate challenges for operators to get goods in when needed,” Koepke said. “The Biden era presidency has been placing a strong focus on supporting competition and introducing policies that may make it harder for larger companies to continue to dominate their trade. Major companies all have lobbyists in DC helping to push certain agendas. So on the surface, while this seems like a potential relief valve, shippers will continue to see a volatile market for as long as demand remains high globally.”
Trade groups representing corporate interests were even more skeptical, with the National Association of Manufacturers saying its members were already keeping their promise to invest, hire, and grow wages. “Some of the actions announced today are solutions in search of a problem; they threaten to undo our progress by undermining free markets and are premised on the false notion that our workers are not positioned for success,” National Association of Manufacturers President and CEO Jay Timmons said in a release. “We have challenges, to be sure, which is why we are advocating infrastructure investment, competitive tax rates, immigration reform, ensuring availability of lifesaving cures, expanded export opportunities, and more.”
Small biz are applauding @POTUS— Main Street Alliance (@mainstreetweets) July 9, 2021
Biden's Executive Order Promoting Competition in the American Economy - It will support #smallbiz across industries that have seen corporate consolidation rise for too long! It's what #SmallBizNeedsNow @RisingSmallBiz