(Bloomberg) — For the first time in three decades, Democrats are officially putting big business on notice: Don’t get too big or too powerful.
The party’s platform committee has added a pledge, not seen since 1988, to go after dominant companies seen as abusing market power. Activists are complaining that a small number of players have been allowed to consolidate too many industries like telecommunications and airlines, leaving consumers worse off.
Encouraged by grassroots groups, think tanks and academics, Democrats from Hillary Clinton to Sen. Elizabeth Warren are borrowing a page from Republican President Teddy Roosevelt’s trust-busting a century ago and are using the issue to tap into the populism that’s fueled Donald Trump’s presidential run.
“This is the most significant antitrust moment that we’ve seen in decades — there does seem to be a real hunger for change, and a growing recognition that our antitrust policy has failed,” said Lina Khan, a fellow with the Open Markets Program at Washington-based New America who studies antitrust and consulted with platform committee members on the document’s language. “That failure is partly responsible for some of the major economic ills that we’re now seeing, from inequality to declining entrepreneurship to declining wages.”
Echoing an exec utive order issued by President Barack Obama in April, the Democratic platform set to be approved at the party’s convention July 25-28 in Philadelphia includes a pledge to make “competition policy and antitrust stronger and more responsive to our economy,” mainly by encouraging agencies across government to take up the cause and toughening enforcement by the Department of Justice and Federal Trade Commission.
The decision to include the language in the document, perhaps inspired by the break-up-the-banks mantra that bolstered Sen. Bernie Sanders’s presidential run, garnered broad support and was the result of a grassroots effort, said Warren Gunnels, Sanders’s policy director.
The language originally pitched by progressive groups to be included in the platform went even further, seeking to create antitrust positions in the administration and to use the government’s buying power to foster competition, according to a draft provided by Gunnels. While it didn’t make it into the final version, the Democrats’ intent is clear.
“We’ve got to break up a number of very large multinational corporations that have a stranglehold on a number of industries,” Gunnels said. “We need more small businesses, medium-sized businesses being given the opportunity to compete and offer consumers more choices and lower prices.”
The Justice Department’s antitrust division is defending its record, citing evidence of stepped-up enforcement since the George W. Bush administration. Under Obama, the division has won 39 merger victories -deals blocked by courts or abandoned following government opposition -compared to 16 under Bush, according to statistics provided by the division. Those include a string of blockbuster deals that have been stopped, like Comcast Corp.’s bid for Time Warner Cable and Halliburton Co.’s planned takeover of Baker Hughes.
The division has also challenged anti-competitive conduct in eight cases, including against Apple for conspiring with publishers to fix prices for e-books. That compares to three under Bush, the department said.
The time may be ripe for the new initiatives: a record number of mergers in 2015, voter angst and wealth inequality — all coming together as they did in the Progressive Era under Roosevelt in the 19th century. Democrats are also seeking to counter decades of conservative economic thought exemplified by the deregulation movement under President Ronald Reagan.
“Everyday voters are very concerned about things like corporate power,” said Mike Konczal, a fellow at the Washington-based Roosevelt Institute. Trump supporters are pushing “views about corporations and outsourcing and global trade that fuels a skepticism about big business and big finance,” he said.
In April, the Obama administration’s Council of Economic Advisers released a rep ort outlining evidence of declining competition across the economy, including data that the biggest firms in numerous industries took a greater share of revenue from 1997 to 2012.
Antitrust activists have largely been disappointed in the Obama administration’s performance: a dearth of monopoly cases and little policing of the airline mergers that have left just four major U.S. names in the market.
Warren, in a June 29 speech, mentioned more than a dozen companies, including Google, Amazon.com and Apple as part of the problem. She said tech companies have the power to “snuff out competition” from smaller rivals that depend on their platforms.
The effort from progressives also comes amid growing evidence that merger enforcement is falling short, leading to higher prices and more concentration across industries. Officials have largely stopped challenging deals in all but the most concentrated industries, according to research by Northeastern University economics professor John Kwoka. They are increasingly relying on settlements that allow deals to proceed rather than suing to block them.
From 2003 to 2014, the share of merger investigations by the Justice Department that were settled with remedies like selling a business line rose from 35 percent to 60 percent, according to Kwoka. Meanwhile, those fixes aren’t working, he says. Prices for goods and services charged by companies following deals that were cleared after divestitures rose 7.1 percent, about the same at the 7.2 percent increase for all mergers. Settlements that only imposed conduct requirements on merging firms fared worse, with prices subsequently rising 16 percent.
Kwoka said he’s hopeful the recent attention to rising business concentration will lead to a more stepped-up enforcement agenda, but that will largely depend on who takes over leadership positions at the Justice Department’s antitrust division and the FTC.
“We really need to see more than a plank on a platform,” he said. “We need to see commitments to these things to make them work.”
Renata Hesse, head of the Justice Department’s antitrust division, cautioned that enforcers are always on the lookout for dominant companies that are unlawfully trying to maintain market power like Microsoft Corp. did in the 1990s. If they were to find evidence of similar abuse by another company, they would bring a case, she said, but so far haven’t found it.
“We can’t punish success,” Hesse said. “That would be the worst thing we can do for our economy — to tell people if you get too big we’re going to punish you just because you’re getting big.”
At the same time, the current populist fervor has whipped up enough excitement to make it as good a time as any to bet on bigger antitrust reforms, said Khan.
“The way that we’re seeing the election play out is revealing deep fissures within the parties and a deep sense that there’s this concentration of power that affects both our economy and our politics,” she said. “Given that that same concern was the foundation of antitrust, it makes a lot of sense that antitrust is re-emerging as a potential tool.”