Live with Heather Cox Richardson

Speaker 1 Welcome, everybody. I am absolutely thrilled to be here today with Professor Lena Kahn, who was the former head of the Federal Trade Commission under President Biden.

Speaker 1 And to my mind, she is one of our most interesting economic thinkers in the country.

Speaker 1 And I am absolutely thrilled to be here and have her have the opportunity to talk some about her work and why it fits into American history and why it is so important.

Speaker 1 So thank you so much for being here, Professor.

Speaker 2 So wonderful to be here with you. Thanks so much.

Speaker 1 So could you start us off with the, I hate to say the history of antitrust in America, antitrust being, of course, your specialty, but really why what you identified

Speaker 1 a while back was so significant to the way America had approached antitrust issues since the Reagan administration.

Speaker 2 So anti-monopoly in this country goes all the way back to the founding in some ways. I mean, when the Boston Tea Party happened, yes, they were revolting against no taxation without representation.

Speaker 2 But at its core, the British East India Company had also been given a monopoly.

Speaker 2 over certain types of tea and you know it was also seen as a form of injustice um fast forward to the industrial revolution and there was a recognition that while the railroads and a whole bunch of technological innovations were creating a lot of progress and opportunity for this country these revolutions this revolution had also concentrated a lot of power.

Speaker 2 And so suddenly you had farmers and small producers and merchants who were at the whims of a single railroad sometimes that could basically sink or swim their business.

Speaker 2 And there was a real sense that this concentration of economic power could be coercive. And it ended up resulting in a movement.
to bust the trusts.

Speaker 2 It resulted in the Interstate Commerce Act of 1887, which created a whole new regulatory regime to make sure that the railroads could not abuse their power.

Speaker 2 And then it led to a series of antitrust laws, the 1890 Sherman Act, the 1914 Clayton Act, the Federal Trade Commission Act, and all the way through the New Deal, there was a recognition that in the same way that the Constitution creates checks and balances in our system of governance, protecting us from political tyranny, that we needed to also apply those principles in our commercial and economic sphere to make sure that we were not being ruled by economic tyrants.

Speaker 2 And if you go back and read the legislative history, how people were talking about this, there was a really deep understanding of the intimate connection between how our markets are structured and whether people can experience real freedom in their lives.

Speaker 2 and a recognition that yes, for real freedom, you need to protect yourself from the arbitrary power of the state, but you also need to protect yourself from the arbitrary power of a monopolist.

Speaker 2 And so this is deeply embedded in this country's history.

Speaker 2 You know, FDR famously said, you know, I'm going to take on Wall Street, the great malefactors of wealth, and I welcome their hatred.

Speaker 2 There was a, especially in the Democratic Party, a pride associated with standing up for citizens against concentrated economic power.

Speaker 2 And that tradition continued all the way into the 60s and 70s until we got to the Reagan Revolution.

Speaker 2 Right.

Speaker 1 And, you know, it wasn't just FDR as a Democrats Democrats coming out against monopolies. It was also Teddy Roosevelt who talked about that as well.

Speaker 1 So things changed dramatically during the Reagan Revolution, during the Reagan years.

Speaker 2 Things changed dramatically during the Reagan years across government.

Speaker 2 And it partly resulted from this multi-decade intellectual effort.

Speaker 2 centered on the Chicago school academics that were initially quite fringe when they started writing their attacks on the New Deal state.

Speaker 2 But gradually, you know, they had a lot of money behind them. Those ideas became much more socialized.

Speaker 2 And by the time President Reagan gets elected, they were well positioned to come into government across all sorts of positions, running agencies, the federal judiciary, and start implementing their radical vision, which dramatically stripped back how we do anti-monopoly enforcement in this country.

Speaker 2 And the important thing to note here is that there was no change in the actual laws on the books.

Speaker 2 There was no decision by Congress to say we're going to repeal the antitrust laws or really limit them.

Speaker 2 This was a unilateral decision by the executive to basically just not pay as much attention to what Congress had asked them to do and to, in some instances, outright flout the law.

Speaker 2 And practically, what did that mean? It unleashed a wave of mergers and acquisitions across Wall Street, across sectors.

Speaker 2 And so when you, whereas you had in all sorts of industries, dozens of competitors back in the 80s, now increasingly you just have a handful.

Speaker 2 That is true of the airline industry, the telecom industry, the meat packers.

Speaker 2 If you go to the grocery store and you go down an aisle, you may see dozens of brands, be it in diapers or laundry detergents, but they're actually just owned by a handful of companies.

Speaker 2 And so we have consolidation all across the economy as a result of the Reagan administration's decision to really strip back checks on economic concentration.

Speaker 2 This wasn't just something that happened in antitrust. It affected how we do banking regulation.
It affected how we regulate telecom.

Speaker 2 And so all across the economy, we have just seen an enormous consolidation of economic power. And one reason is because the Reagan administration's revolution stuck.

Speaker 2 They had, you know, eight years of Reagan, four years of Bush, and by the time the Clinton administration comes along, the stuff that Reagan had put in place

Speaker 2 more or less had become the new common wisdom.

Speaker 2 And so it gained bipartisan currency that we really didn't see in a meaningful pivot away from, you know, until basically parts of the first Trump administration and then Biden.

Speaker 1 Well, let's go back just a little bit.

Speaker 1 Originally, anti-monopoly legislation in the country was designed really to support a certain kind of economy and therefore society in which individuals had a shot at breaking into a business, for example, being entrepreneurs and not being in real trouble with a monopoly that determined how much they would pay, for example, to get their corn to market.

Speaker 1 But when the Reagan administration starts a different policy toward antitrust or toward monopolies, isn't it really focusing on the idea that so long as prices get lower for consumers in the short term,

Speaker 1 that is reason enough to have consolidation, that whole idea that bigger is better and that it will make things cheaper. So there really was not just, well, we don't really care so much about

Speaker 1 the legislation any longer and it's okay for mergers, but rather there's kind of a different ideology there that says, hey, so long as prices are cheaper, we don't care what happens to labor.

Speaker 1 We don't care what happens to society. We don't care what happens to entrepreneurship.
We just want consumers to have cheaper goods. Is that right?

Speaker 2 That's absolutely right.

Speaker 2 I mean, the anti-monopoly laws and tradition represent a certain vision of America, a certain vision of our economy, where, as you noted, independent businesses, small businesses, small farmers, small merchants would all get a fair shot.

Speaker 2 Similarly, workers would have freedom. They would have choice.
They would, you know, be able to choose among employers. If they wanted to go set out on their own, they would be able to.

Speaker 2 And similarly, consumers would not be captive to the whims of a single company to the extent that there was a recognition that in some industries you do have monopolies, natural monopolies, because of the huge economies of scale.

Speaker 2 Sure, we weren't going to have competition there, but then we were going to regulate them to make sure they could not arbitrarily hike prices or cut off people.

Speaker 2 And the Reagan administration's pivot, you're absolutely right, was premised on a new philosophy where they basically said, whereas previously There was a skepticism towards monopoly.

Speaker 2 I mean, it was the anti-monopoly tradition. Monopolies were presumed to result in a whole bunch of harms that made we have to be skeptical of them.

Speaker 2 Now, monopolies almost became presumptively good because there was an assumption that being bigger, having more economies of scale would create efficiencies that these companies would, of course, pass on to their consumers, to their trading partners.

Speaker 2 And the view was that if they started abusing their power, that power would be instantly checked by this flood of new entrants into the market.

Speaker 2 And there were a whole bunch of reasons why those assumptions were deeply flawed. And one of the things that we've seen over the last few decades is just how wrong they got it.

Speaker 2 We've seen, in fact, that bigger is not always better. Bigger can be less efficient.

Speaker 2 And even if they are generating cost savings, they're not going to have any incentive to pass that on to other people.

Speaker 1 Right. And it doesn't help consumers necessarily, and certainly not labor and society and the environment and so on.

Speaker 1 Now, you were an early identifier of the problems with that idea that came, I think, originally from Robert Bork, did it not?

Speaker 2 Yes, Robert Bork became kind of the symbolic, you know, intellectual father of this

Speaker 2 pivot and of owning the idea that bigger could actually be better.

Speaker 1 And you early on identified the problems with that. Now, can you walk us through what you saw as the problems and how you took that understanding into the Biden administration?

Speaker 2 Yeah, I mean, there are a whole bunch of problems. I mean, it starts with lack of fidelity to what Congress has actually said is the purpose of the law.

Speaker 2 I mean, just the radical pivot and the ability to not just ignore the antitrust laws, but actually to use them in the service of facilitating monopolies rather than checking them was a unbelievably radical and ideological move that

Speaker 2 had no basis in what Congress had actually said the purpose of these laws was or the text of the laws was. And so candidly, you know, pretty flagrant lawlessness in certain regards.

Speaker 2 And when the Bork revolution first started happening, you absolutely had commentators, sometimes even judges saying, this seems lawless in certain ways.

Speaker 2 The other main criticism was that the core assumptions they were making did not correspond to reality. The way that markets actually work are not reflected in their models and theories.

Speaker 2 And so we started to do more and more research showcasing the huge gap between how Bork said markets would work and what would happen when monopolies were formed and what actually happened, which is that prices were often higher.

Speaker 2 There's been an increase in the profit margins that firms have been earning as their markets have become consolidated. Oftentimes, workers have less power.

Speaker 2 As a result, oftentimes they're making less or their wages are more stagnant.

Speaker 2 New business formation will fall. Newer firms have less opportunity to enter markets.
Innovation can also fall. Markets also become more fragile.

Speaker 2 And we saw this during the pandemic, where a single shock or a single supply chain issue can have cascading effects because when you're concentrating production, you're also concentrating risk.

Speaker 2 We saw this even with infant formula a few years ago, where there was a single contamination in a single factory of one company.

Speaker 2 And that meant we had nationwide shortages of infant formula in the United States in 2022.

Speaker 2 And so it really showcases all sorts of downsides that the Bork models just don't account for and don't model for.

Speaker 2 And I think that huge gap between their theories and what reality shows is what created more momentum to really do a pivot and correct for their mistakes.

Speaker 1 Well, and on that pivot, can you walk us through that? Because your tenure in the Biden administration was, again, to my mind, one of the most fascinating moments of economic policy in our history.

Speaker 1 What you did and why you did it and the effects that it had were really game changers. And I'm not sure most people were aware of that.

Speaker 1 Can you walk us through what you were trying to do and some of the ways in which you went about it?

Speaker 2 Yeah, I mean, at the end of the day, we were trying to both be faithful to the laws that Congress actually wrote and also make sure that we were enforcing the laws based on how markets actually work rather than these kind of theoretical conceptions of them.

Speaker 2 And so we were very focused on healthcare markets, for example, and making sure that we were stopping big pharmaceutical companies from gobbling up their competitors in ways that have resulted in higher prices.

Speaker 2 We were focused on agriculture markets, suing companies like John Deere.

Speaker 2 that were using their monopoly power to make it difficult for farmers to even repair their own products.

Speaker 2 We were focused on tech markets, noting that digital monopolies like Facebook and Amazon could make things worse for their trading partners, both consumers and sellers, without suffering any consequences.

Speaker 2 Amazon, because of its power, can now charge businesses one out of every $2 that they make. So they take a 50% cut, which is just staggering.

Speaker 2 And so we brought a whole set of enforcement cases that resulted in real benefits for real people's lives.

Speaker 2 We were very focused on labor markets, which was something that antitrust enforcers had basically neglected for decades.

Speaker 2 We found that these non-compete clauses that employers tuck into their contracts that basically say that workers can't go to a competitor, even if they're laid off or fired, these are enormously coercive.

Speaker 2 They result in all sorts of abusive situations.

Speaker 2 And so we passed a law, we finalized a rule that would basically eliminate these non-competes. The Trump administration has stepped that back.

Speaker 2 So that rule is not currently in effect, but we also brought a whole set of lawsuits.

Speaker 2 So we were really firing on all cylinders, trying to understand what are the biggest pain points that Americans are facing across the economy.

Speaker 2 In what instances are those pain points a result of corporate abuse? And how can we make sure we're using the full set of the FTC's toolkit to take that on and make life better for people?

Speaker 1 So can you explain to people why the non-competes matter?

Speaker 1 Because most people think about the non-compete requirements as being something that you would have in a creative situation, like if you worked for a creative company, for example, and they didn't want you to take insider information to another company.

Speaker 1 But that's not really what you were targeting, and it mattered dramatically in terms of people's pay, right?

Speaker 2 That's right. Non-competes started off in the boardroom, mostly just applying to the C-suite.
But in the last few decades, they have proliferated in all sorts of nooks and crannies of our economy.

Speaker 2 So, we now have security guards, janitors, nurses,

Speaker 2 people making minimum wage, fast food workers that have non-competes in their contracts. And it can lead to all sorts of horrendous situations.

Speaker 2 There's absolutely research showing that it can suppress wages.

Speaker 2 You know, oftentimes the way that an employee will be able to try to get a raise from their employer is by going and getting another job offer.

Speaker 2 And if the employer is systematically systematically blocking them from being able to go and get that other job offer, they're not going to have that leverage.

Speaker 2 So it systematically reduces workers' leverage. It also can just result in all sorts of abuse.

Speaker 2 I mean, we, when we first proposed this rule, got 26,000 comments from Americans all across the country from all walks of life.

Speaker 2 We heard stories, for example, from a Florida bartender who was suffering sexual abuse and harassment at her job.

Speaker 2 And so when she went to go get another job at a different restaurant, she suddenly got hit with a lawsuit from her current boss for tens of thousands of dollars. And so she had to wonder,

Speaker 2 do I want to kind of continue getting harassed at my job or am I going to risk a multi-thousand dollar lawsuit that could bankrupt me?

Speaker 2 We heard from people who had such broad non-competes that they had to go and fly across the country to get a different job and commute every week.

Speaker 2 And people shared stories about how it meant they were missing out on precious time with their family and watching their kids grow up.

Speaker 2 And so there are very much material economic impacts here in terms of people's wages, but it also just fundamentally goes to people's quality of life and their core freedoms.

Speaker 1 So did you find that the changes that you made, you could track the differences that they made during your tenure in the Biden administration?

Speaker 1 Because of course, one of the things we knew about that administration was that people at the bottom end of the economy had very high increases in their rate of pay, for example.

Speaker 1 There were also obviously lower drug prices and so on. Could you track what the different approach, really quite an old approach in a way, to anti-monopoly and antitrust organizations

Speaker 1 meant?

Speaker 1 to people in the time in Biden's administration?

Speaker 2 Yeah, absolutely. I mean, because we were so focused on drug prices as a result of some of our work, people saw their out-of-pocket cost of inhalers go down.

Speaker 2 And so asthma inhalers have been around for decades, but generics have not been able to enter the market.

Speaker 2 And so Americans are still paying hundreds of dollars out-of-pocket, even as people in other countries pay as little as $7.

Speaker 2 And we discovered that was in part because the asthma inhaler companies were issuing patents with the FDA for all sorts of trivial parts like the plastic inhaler cap or the dosage counter.

Speaker 2 And so we challenged that. And three of the four companies said they were going to reduce the cost to just $35 down from hundreds.

Speaker 2 And I would run into people sometimes as I would travel the country who said, I'm already seeing a difference. You know, last month I was paying hundreds of dollars and now I'm just paying 35.

Speaker 2 We also blocked the Kroger-Albertsons merger, which would have been the largest grocery merger in U.S. history.

Speaker 2 The FTC had actually allowed previous big grocery mergers to go through, and it had resulted in layoffs, it had resulted in food deserts, it had resulted in higher prices.

Speaker 2 And so we wanted to make sure we weren't repeating those mistakes. And so we successfully blocked that merger, and it was a big win for both consumers and workers.

Speaker 1 So for what it's worth, I read about the asthma inhalers in a donut shop in Cincinnati. So if you're wondering if people were really paying attention, at at least one person really was.

Speaker 1 That was a pretty amazing moment. So what has happened to the kind of work that you were doing in this present administration?

Speaker 1 I assume it has not continued what you were trying to do and has gone back to a different form of what they think of as anti-monopoly or perhaps not even anti-monopoly.

Speaker 2 There has certainly been real backsliding and a kind of retreat to some of the Borkism, especially in how the administration reviews mergers.

Speaker 2 And this is, you know,

Speaker 2 it's almost quaint to try to say what antitrust philosophy is the administration following because so much of this has now become mired in just rank corruption, where whether a merger is getting through is less based on the legal analysis and more based on whether the companies are hiring the right lobbyists with the right connections to the White House.

Speaker 2 So we're seeing a descent into some of that pay-to-play.

Speaker 2 They have not retreated from all of our cases. In fact, the vast majority of the cases that we brought are still continuing.

Speaker 2 And I think this mixed picture reflects the fact that so far we have seen somewhat of a factional dispute between the more populist wing of the party to the extent it exists and the more pro-corporate, pro-oligarchy wing of the party.

Speaker 2 I think the pro-oligarchy wing of the party has been racking up more and more wins, and the populists are now on their back foot.

Speaker 2 But that tension and the fact that even this administration and the vice president had talked critically about the big tech monopolies, for example, has meant that the retreat has not been as wholesale as we've seen in some other parts of the government.

Speaker 1 That's really interesting.

Speaker 1 Is there a way to encourage that, that populist angle toward anti-monopoly?

Speaker 1 Because that seems to me really to reflect the kind of country that you were embracing, the idea of entrepreneurs being able to break into a market, for example, or of fast food workers being able to switch from one company to another without threat of a lawsuit.

Speaker 1 That seems to me to be much closer to the idea of the American dream of being able to work hard and prosper than the idea of concentrating power at the very top in the hope that it might lower prices.

Speaker 2 That's right. And there is a ton of popular support for this work across the FTC's initiatives.

Speaker 2 We would hear routinely from people about how sometimes they had been lifelong Republicans, but they would say, you know, if the FTC takes this anti-monopoly action, it'll be the best thing that government has done in my life.

Speaker 2 And what's interesting about this moment is that we seem to be seeing more and more electoral candidates that are embracing anti-monopoly positions.

Speaker 2 Be it, you know, Dan Osborne in Nebraska, who's talking about how unfair repair restrictions are to the meat packer monopoly and how it's depressing wages.

Speaker 2 We're hearing this in New York City. We're hearing it in Iowa.

Speaker 2 So it's really something that seems to be reflected in the political mood across this country, just in terms of how, what kinds of campaigns are catching momentum.

Speaker 2 But we're going to have to wait and see. I think for the administration,

Speaker 2 you know, they've taken a whole bunch of actions recently that are really bad for parts of their base. I mean, they're giving a huge bailout to Argentina

Speaker 2 and, you know, engaging in trade practices that are basically undermining American ranchers and saying we're going to import Argentinian beef.

Speaker 2 I mean, there are all sorts of economic policies that are really hurting people who voted for this administration.

Speaker 2 And I think the more that we can surface that and expose those contradictions and hypocrisies, the better.

Speaker 1 It is interesting how this moment looks so much like the 1890s when this whole move against monopolies really took took off and gave us the kind of legislation that you were relying on.

Speaker 1 I like that idea of a society that puts economic success back into the hands of entrepreneurs and workers.

Speaker 1 If there is one thing that you, or not even one thing, if there is something that people who care about this issue should do to get involved, what would you suggest that would be?

Speaker 2 Well, right now, there is a lot of interest at the local and state level.

Speaker 2 We're hearing a lot from state legislatures, sometimes even from city council members who are thinking about how can they buff up anti-monopoly tools at the local level.

Speaker 2 And so I think engaging with those efforts, showing support for those efforts, state attorneys general across the country can and are bringing major antitrust cases, so finding ways to show support.

Speaker 2 I think the other thing just stepping back is recognizing that there is a huge coalition in waiting, right?

Speaker 2 I mean, we have to remember that the New Deal coalition spanned workers, farmers, and small businesses.

Speaker 2 And similarly, we see today that many of the problems that monopolies create are analogous across these different communities.

Speaker 2 And so finding ways to better organize to showcase just how big the population is that would stand to benefit if we crack down on this corporate abuse is something else that we could do.

Speaker 1 That's a really good point.

Speaker 1 People tend to forget when you think about the New Deal that a big push behind the creation of that legislation was small business people and entrepreneurs who felt that they could not break into the system the way it was at the time rigged.

Speaker 1 So it's lovely to think about bringing that back into a coalition in the present.

Speaker 1 Listen, thank you so much for being here. It's been a real pleasure, and I look forward to seeing what you do in the future.

Speaker 1 I read everything that you write, and I hope that we'll be able to do this again in the future.

Speaker 2 Thank you so much for having me, Heather.

Speaker 1 Take care.