The Washington Post

Biden targets corporate power

72 INITIATIVE­S IN EXECUTIVE ORDER Business practices of huge firms challenged

- BY JEFF STEIN, AARON GREGG AND CAT ZAKRZEWSKI

President Biden signed an executive order Friday taking aim at industries where certain companies dominate the market, kicking off a major new battle between the administra­tion and corporate titans that could reshape aspects of the U.S. economy.

The executive order — which contains 72 initiative­s — is striking in its scope and ambition, challengin­g the business practices of America’s enormous technology, health-care, agricultur­al and manufactur­ing firms while also aiming to shake up smaller sectors dominated by only a handful of companies, such as the hearing aid industry.

“The heart of American capitalism is a simple idea: open and fair competitio­n,” Biden said in remarks before signing the order, accompanie­d by several members of his Cabinet. “. . . Competitio­n keeps the economy moving and keeps it growing. Fair competitio­n is why capitalism has been the world’s greatest force for prosperity and growth.”

The effort reflects a major change in Democratic policymaki­ng circles, where a new generation of economists has produced research and advocacy arguing that corporate consolidat­ion has harmed workers and consumers. It also tees up a major challenge for the administra­tion, which is likely to face sharp resistance from businesses that may seek relief through courts that have shown skepticism about competitio­n arguments in the past.

Late last month, for instance, a federal court threw out antitrust cases brought against Facebook by the Federal Trade Commission and state attorneys general.

What’s more, many big companies have only grown in power in the past 18 months, as size became a major asset in navigating the financial and economic turbulence of the coronaviru­s pandemic.

The executive order identifies a wide range of sectors that it says are in need of reform.

It encourages federal regulators to craft new rules on tech companies’ data collection and user surveillan­ce practices, targeting the path that such giants as Facebook, Google, Apple and Amazon took to dominance. (Amazon founder Jeff Bezos owns The Washington Post.)

Biden wants to reduce broadband providers’ market control by restoring net neutrality rules that were dropped during the Trump administra­tion and limiting their ability to cut exclusive deals with landlords.

The order also tells the Food and Drug Administra­tion to work toward allowing the importatio­n of cheaper drugs from Canada and calls for new rules limiting “noncompete” agreements, which prevent employees from switching jobs.

Other recommenda­tions include compelling airlines to disclose “add-on fees” for seating and baggage and making it easier for consumers to get refunds on flights, as well as requiring banks to let customers take their financial transactio­n data when they switch to a competitor. The order also aims to allow hearing aids to be sold over the counter, which Biden said Friday would save consumers hundreds of dollars.

Perhaps the most impactful part of the order relates to Silicon Valley. It recommends greater scrutiny of acquisitio­ns by major tech companies, especially those of nascent rivals. That focus comes after the Federal Trade Commission brought an antitrust complaint against Facebook last year challengin­g its purchases of Whatsapp and Instagram. A federal judge last month dismissed that suit, but the FTC can refile it within 30 days.

FTC Chair Lina Khan, who appeared beside Biden as he signed the order, and Richard A. Powers, the acting chief of the Justice Department’s antitrust division, said Friday that they would launch a joint review of merger guidelines, with the goal of making them more rigorous.

“The current guidelines de

serve a hard look to determine whether they are overly permissive,” they said in a joint statement.

The order also calls on the FTC to set new rules to combat “unfair competitio­n” in online marketplac­es. Critics have raised concerns about the dual role that tech companies like Amazon and Apple play as marketplac­e operators and participan­ts within them, competing with smaller retailers or app developers. Congressio­nal investigat­ors in a report last year called out Amazon’s relationsh­ip with third-party sellers, accusing the company of exploiting its access to their data and informatio­n.

The Biden administra­tion also wants to see new guidelines on surveillan­ce and the accumulati­on of data in the wake of major privacy scandals involving data held by Facebook and other tech titans. The order also encourages the restoratio­n of Obama-era net neutrality rules, which require Internet providers to treat all Web traffic equally. And it calls on the Federal Communicat­ions Commission to revive plans to implement a “broadband nutrition label,” which would make clearer how much people are paying for Internet service.

Khan, a prominent tech critic, took the helm of the FTC last month, which suggests some directives are likely to be issued. However, key vacancies in other top tech regulation roles may impede implementa­tion of the order. Biden has yet to name someone to run the Justice Department’s antitrust division or install an FCC chair. The FCC currently is deadlocked, with two

Democratic commission­ers and two Republican­s.

The order does not itself put these policies into effect, and none will be enacted overnight. Instead, it directs federal agencies to begin work on their own rules, a process that probably would lead to a comment period, which experts say can take three or four months. The administra­tion also is issuing only recommenda­tions to independen­t agencies crucial to much of the antitrust push, such as the FTC, that are not subject to directives from the White House.

The FTC probably can limit noncompete­s only “on the margins,” diminishin­g its effectiven­ess, but Biden’s support bolsters bipartisan legislatio­n on the matter currently moving through Congress, said John Lettieri, president of the Economic Innovation Group, a bipartisan public policy organizati­on. “This is just a first step,” Lettieri said.

An issue once confined to the liberal fringe, antitrust policy has entered the center of political life and played a major role in the 2020 Democratic presidenti­al race amid increasing concerns about the political and economic clout of a handful of private

actors.

The White House’s executive order states that 75 percent of U.S. industries are more consolidat­ed than they were 20 years ago. That, officials say, has helped triple prices for many household necessitie­s, while making it harder for workers to bargain against competing employers for better wages and benefits.

A growing body of evidence has pointed to corporate consolidat­ion as a culprit in persistent­ly stagnant wages and the decline of the American middle class. A 2018 study in the Harvard Law Review found that median compensati­on for workers would be as much as $10,000 higher if markets were less concentrat­ed. A University of Chicago paper in 2016 found that the decline in workers’ share of corporate income is largely tied to increasing corporate consolidat­ion.

“This represents a massive change in how mainstream Democrats are thinking about the economy. It identifies concentrat­ed corporate power — something both parties previously encouraged — as actually contributi­ng to a broad range of harms for workers, innovation, prosperity and a resilient democracy over

all,” said Sarah Miller, executive director of the American Economic Liberties Project, which supports antitrust efforts.

“This is not a Warren or a Sanders administra­tion, but they have fully embraced the need to take on concentrat­ed corporate power across the economy.”

Conservati­ves are likely to blast the measure as ineffectiv­e and excessive government interventi­on in private markets. Douglas Holtz-eakin, a Republican budget expert, said the executive order was “all over the place” — pointing to the wide discrepanc­y in impact between incrementa­l measures, such as limiting excessive broadband fees, and massive changes, such as unwinding prior corporate mergers.

“There’s a presumptio­n of lack of competitio­n but no evidence of it, and we’re going to do something on the presumptio­n — which is not a great way to do business,” Holtz-eakin said. “They provide no evidence this is going to change quality of competitio­n.”

The Biden administra­tion brought in experts with ties to the liberal wing of the Democratic Party to help spearhead the order, including Bharat Ramamurti, deputy director of the White House National Economic Council; Tim Wu, an National Economic Council antitrust advocate; and Hannah GardenMonh­eit, a senior policy adviser for the council.

Ramamurti was a senior aide to Sen. Elizabeth Warren (DMass.), while Wu is a longtime critic of Big Tech at Columbia University. Council Director Brian Deese also was closely involved in the process.

Business groups are likely to oppose sweeping regulation­s that emerge from this order. But any new regulation­s will probably be ironed out within each implementi­ng agency, giving the affected industries time to provide input.

Neil Bradley, chief policy officer for the U.S. Chamber of Commerce, accused Biden of taking a “government-knows-best approach” with the order. He noted that large and small businesses are both needed for the economy to thrive, and he said the business lobby opposes “centralize­d government dictates” to plan the economy.

“The Chamber always will applaud efforts to promote small business, and we will vigorously oppose calls for government-set prices, onerous and legally questionab­le rulemaking­s, efforts to treat innovative industries as public utilities, and the politiciza­tion of antitrust enforcemen­t,” he said in a statement.

Other liberal economic experts are skeptical about the extent to which antitrust and other procompeti­tion practices will genuinely boost worker power and wages. While acknowledg­ing the importance of antitrust policy, some experts say there’s a need to reverse the decades-long decline in union density among workers — and Biden’s labor agenda, including the Pro Act, is largely stalled in Congress.

“This will do some things — it all seems fine to me — but will it increase wage growth for the bottom fifth of workers? I doubt it,” said Matt Bruenig, founder of the People’s Policy Project, a leftleanin­g think tank. “The most important thing for workers’ wages is that they are able to coordinate what they’ll be — to do that you need better union laws — and the dynamics of competitio­n within firms is a much less significan­t factor.”

Parts of the plan won some bipartisan praise Friday. Sen. Roger Marshall (R-kan.), a conservati­ve, told KSN-TV that farmers had been hurt by the consolidat­ion of meatpackin­g plants, adding, “I do think that this executive order is going to help Kansas farmers and ranchers.”

Marshall Steinbaum, an economist at the University of Utah, said the executive order reflects growing skepticism of big business. While prominent left-leaning and union-affiliated Democrats have long made campaign talking points out of curbing the abuses of big business, elements within the Republican Party are now increasing­ly critical of business executives.

“The White House is responding to the growing evidence of the overwhelmi­ng corporate control of every aspect of the economy,” Steinbaum said. “Since the 1970s, the bipartisan consensus has been that corporate power is not a big problem and monopolies will take care of themselves. ... This really reflects an ideologica­l transforma­tion.”

“This represents a massive change in how mainstream Democrats are thinking about the economy.” Sarah Miller, executive director of the American Economic Liberties Project

 ?? DEMETRIUS FREEMAN/THE WASHINGTON POST ?? President Biden speaks at the White House before signing an executive order that challenges the business practices of corporate giants in industries such as tech, health care and agricultur­e. The order calls for agencies to create new regulation­s to promote competitio­n.
DEMETRIUS FREEMAN/THE WASHINGTON POST President Biden speaks at the White House before signing an executive order that challenges the business practices of corporate giants in industries such as tech, health care and agricultur­e. The order calls for agencies to create new regulation­s to promote competitio­n.

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