In some communities, if you don’t want to go to CVS, you can always to to … another CVS. (Photo: Marty Schladen/Ohio Capital Journal)
Just weeks after Sanford Health and Fairview Health Services called off a mega-merger that would have remade Minnesota’s healthcare system, Cleveland-Cliffs announced its interest in acquiring U.S. Steel, a combination that would remake Minnesota’s Iron Range. The relentless pace of merger news is no anomaly though. In 2021 merger activity set an all-time high helping contribute to a pace of consolidation that would leave the country with one company by 2070.
This merger-driven rise of monopoly power is not inevitable, but rather the product of policy choices in recent decades about how to regulate mergers. A key opportunity to change this now exists as the Biden Administration has proposed overhauling federal merger guidelines, a much needed first step in reining in the corporate concentration at the heart of many of our economic challenges. The revised guidelines would adapt to recent changes in the economy while undoing the damage done four decades ago when the guidelines were transformed to unshackle monopoly power.
The merger guidelines are produced by the two key federal antitrust agencies, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) and act as a guidebook for the agency in interpreting and enforcing the Clayton Act. Passed in 1914 and later strengthened in 1950 by the aptly-named Celler-Kefauver Antimerger Act, the law is meant as a preventive measure, stopping monopolies from forming in the first place, and it worked.
A 1978 Congressional report detailed the ways strong enforcement of the Clayton Act, coupled with the first-ever merger guidelines in 1968, “prevented merger-induced increases in market concentration.”
This changed in 1982 when the Reagan Administration, without a single change to the law, radically changed the guidelines to focus on short-term consumer prices and economic efficiency. This focus on so-called consumer welfare, at the expense of market structure and competition, created a more lax approach to mergers both by enforcers and the courts.
There is plenty of research demonstrating the past several decades of mergers have been harmful, but one need look no further than the experiences of Americans themselves. Over two thousand public comments have been submitted to the FTC-DOJ on the merger guidelines with a range of stories on how monopolists are squeezing them.
Nanci Dudley of Phoenix, Ariz. shared her experience working for a non-profit blood bank that has acquired and merged with 18 local blood banks across the country. These acquisitions have hurt blood bank workers as “the mergers were used to break union contracts, fire union staff, and overall get rid of unions and unionized employees” according to Dudley.
In Vermont Julia Russell has felt the pinch of consolidation among drug manufacturers. While waiting for a generic drug to become available, she learned the brand name manufacturer had acquired the generic producer. Instead of seeing the price of the drug drop it got significantly more expensive.
Despite living on opposite ends of the country, Carolyn Boudreau of Massachusetts and Bob of Oakland, Calif. have both seen their communities impacted by the chain pharmacy giant CVS. Bob shares that the 2008 acquisition by CVS of local drug store chain Longs Drug Stores resulted in higher prices and fewer product choices. When Bob switched to the pharmacy of retail giant Target, CVS bought its pharmacy business. CVS also dominates Carolyn’s community with six stores near her home and workplace, not including the one at the local Target.
Paul Myrick in Mississippi and Margarett Timmerman of Wisconsin have seen how monopoly power has harmed rural communities. Myrick writes about how meatpacking consolidation has left family farmers and ranchers struggling to earn a fair price. Timmerman details how her region has been left dependent on Walmart, which drove a local grocery store out of business. “Since Walmart is based in Arkansas, its profits return to that state,” Timmerman writes. “Nor do they support the local community the way the previous, local store did.”
The months-long strikes by writers and actors has shined a light on consolidation in the film and television industry. Clare Sera is a veteran screenwriter in California who has seen the opportunities to sell scripts continue to shrink and wonders if it will end with “one film studio to rule them all?”
This is just a sampling of the stories that have been shared, but it provides a snapshot of the ways four decades of unchecked merger activity have taken their toll. The good news is now there is a proposal to start doing something about it. Improved merger guidelines are not a silver bullet, but it represents a clear break from four decades of bipartisan consensus among policymakers that bigger is always better.
The FTC and DOJ are accepting public comments until Sept. 18. People across the country have shared their merger story already, make sure to share yours.
This column was originally published in the Minnesota Reformer.
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