Monday, December 27, 2021

"Biden Turns to Antitrust Enforcers to Combat Inflation"

A fascinating look at the thinking in the West Wing. Either they, and Senator Warren (and others) truly believe that corporations are at the root of the inflation the country (and to a lesser extent, the world) is experiencing or they don't believe it but have decided to go with the story anyway. Last week's talk about "big grocery" from Senator Warren would point in the latter direction. From her letter to Kroger, Publix, and Albertson's:

"While many Americans faced the loss of jobs, homes, and loved ones during the COVID-19 pandemic, 
grocery companies like yours saw immense gains through record sales and profits," 

Many, many years ago I was counseled not to ever waste a minute analyzing low-margin businesses, and the grocery stores with their ~2% profit margins were the example used. 

So the questions become: Is this blame-shifting? An attempt to jawbone businesses into eating any cost increases from their suppliers, government mandates and employee wage and benefit increases? Is it a soft version of Diocletian's Maximum Price Edict? So many questions.

From the New York Times via MSN:

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.”....


The simplest explanation for the price increases we have seen is the fact that the lockdowns smashed both supply and supply lines at the same time stimulus was shoveled into the hands of the populace and political cronies, including incentivizing and making whole - Federalizing the costs - those states and municipalities, school districts etc. that went with the most draconian lockdowns. 

More money chasing fewer goods and services is, well, you know.

If interested here is an English translation of the Edict on Maximum Prices.

TL;dr: it didn't work.