By Emma Nitzsche
On Wednesday, the U.S. Congressional Joint Economic Committee held a hearing on concentrated corporate power. Chairman Rep. Donald S. Beyer Jr. (VA-D) presided over the hearing and introduced four witnesses from various economic policy backgrounds. The central focus of the hearing was to discuss the best ways to foster competition under concentrated corporate power.
“We are here today because corporate concentration imperils shared prosperity and exacerbates economic inequality,” said Rep. Beyer in his opening statement.
He cited research that shows lack of competition caused the median American household to lose $5,000 each year from reduced wages and higher prices. One cause of the lack of competition, according to Beyer, was an explosion of mergers and acquisitions that have proceeded at an unprecedented pace over the past 40 years.
Two committee members, Sen. Mike Lee (UT-R) and Sen. Amy Klobuchar (MN-D), spoke before the witness’ testimonies. Sen. Lee urged the committee to refrain from automatically assuming a big business is harmful to the U.S. economy. Instead, Sen. Lee said the policy needs to spotlight small businesses and encourage more companies into the market.
Sen. Klobuchar discussed her newest book, Antitrust, and gave practical ideas for tackling what she believes is “America’s monopoly problem.” For instance, one of her ideas involved reforming Apple’s App Store to give more control to app creators who need to use the platform for marketing their software.
The first witness to testify was Dr. Thomas Philippon, a Professor of Finance at New York University’s Stern School of Business. Dr. Philippon divided his testimony into two parts: evidence of unbalanced market power and its resulting consequences.
Dr. Philippon cited concentration in the market and weak investment from high-profit firms as proof of an unbalanced market. Regarding consequences, Dr. Philippon noted that “prices in the U.S. are higher today than they would be if competition were as healthy as the late 1990s. If we could return to higher competition, GDP would increase 5 percent, which would have the same effect on American households as cutting taxes.”
Sen. Klobuchar questioned Dr. Philippon on how he would recommend spurring innovation in a concentrated market. His answer highlighted a broad approach that focuses on price transparency and low barriers to market entry.
The next witness was Dr. Kate Bahn, who serves as the Director of Labor Market Policy for the Washington Center for Equitable Growth. Dr. Bahn spoke on the concept of monopoly, or a monopoly of labor buyers. Her testimony included the workers’ perspective and argued that concentrated markets lead to worse labor environments and limited raises, pushing for an increased minimum wage.
“Building the foundation of workers impacts their wellbeing and builds the foundation of better working environments through improved job matches and higher incomes,” said Dr. Bahn.
When Sen. Klobuchar asked Dr. Bahn if updated antitrust laws would address market concentrations, Dr. Bahn praised any new legislation that would codify, clarify, and strengthen antitrust workers.
Echoing the sentiments of Sen. Klobuchar, Stacy Mitchell, the Co-Director for the Institute for Local Self-Reliance, said “America has a monopoly problem” in her testimony. Mitchell discussed the dangers of predatory pricing as it relates to large technology companies such as Amazon. She questioned the ethics of allowing Amazon to become so big where small businesses are forced to sell their products on the site, where Amazon takes a cut of the sales and could steal the creative ideas.
“If Congress does not act to check Amazon’s outside power, we are allowing them to act as a private government that regulates and taxes other’s commerce,” Mitchell said.
Dr. Mitchell emphasized future actions of congress when Sen. Klobuchar asked if the president’s executive order aimed at promoting competition would be sufficient in the long term.
The final witness testimony came from Chris Edwards, Director of Tax Policy Studies at the Cato Institute. Edwards argued that America has a history of building up startups to displace corporate giants.
“Back in 1980, a company could sit on the S&P 500 list for an average of 30 years. Today, companies stay on the S&P 500 list an average of 20 years,” Edwards explained.
Edwards cited Tesla and Spotify as examples of companies that began as startups but now act as leaders in their industries. He urged the committee to turn away from big business regulation and find ways for policymakers to support startups. Edwards highlighted deregulation as an example that would help both businesses and consumers. When the government deregulated the beer industry, hundreds of beer makers were able to challenge the top companies by producing quality goods at a lower cost.
Sen. Lee used most of his question time asking Edwards to expand on any policy proposals that would encourage more startup companies. Edwards praised the American system that gave funds to startups but noted that there are still regulatory problems in all three levels of government. For instance, Edwards argued airports should be privatized to allow for more competition instead of the government dictating the economic decisions for multiple airports.
The video of the hearing can be found here.