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    Sunday, March 19, 2017

    Monopolies, Gorsuch, And Building A Narrative For The 2018 Elections

    Last summer, Elizabeth Warren gave a wonderful speech decrying the oligopolies that control America's business. There are whole books devoted to trying to explain why, over the last 40 years, productivity has increased, albeit at a slower pace, while worker's wages have remained stagnant. But the increased level of concentration and proliferation of small oligopolies that control large sectors of the American economy is certainly one of the primary reasons.

    Oligopolies may provide huge economies of scale that drive up profits but that is clearly at the expense of both workers and, in fact, consumers. Perhaps one of the clearest examples of this is Wells Fargo, one of the five big financial firms in the US. For over a decade, Wells Fargo employees opened up bogus accounts in their customers' names and without their customer's authority. They did so in order to boost account fees charged by the bank and under immense pressure from management to reach absurd sales goals. Whistleblowers who brought these abuses to light within the firm were ignored or even fired. Management clearly knew what was going on but had no interest in cracking down on the problem because the firm and the executives were all making too much money to stop.

    When the scandal finally broke last year, Wells Fargo at first blamed it on overly-aggressive employees, a bunch of "bad apples". That particular excuse fell apart when whistleblowers who had been fired came forward and told of their informing the firm of the abuses as they occurred. The firm then tried to minimize the time frame of the illegal activity, but that was also soon proven to be a lie. In the end, the CEO, John Stumpf, was finally forced to resign but that didn't stop Wells Fargo from still trying to avoid responsibility for their illegal activity as they tried to force customers who had their money stolen into arbitration in order to get their money back.

    You would think that the executive management in the company might pay a heavy price for this kind of illegal behavior. But, under present law, they are virtually untouchable criminally and, as part of the oligarchy, will never face any real punishment. Sure, they might be fined, but, as Stumpf said, that is "just the cost of doing business" for stealing from your customers. The New York Times reports that Stumpf presciently converted 1.5 million stock options as the scandal unfolded and was able to walk away from Wells Fargo with an $83 million payout from those options. In addition, Stumpf already held other shares of Wells Fargo stock, leaving him with a total package of nearly $150 million. His successor, Timothy Sloan, despite promising to forego salary and a bonus, actually saw his compensation rise by about $2 million simply to take the job. That's a pretty nice racket for stealing your customers' money - one guy gets a huge payout to leave and the next guy gets a big raise to take over. Meanwhile, workers haven't seen pay raises in over a decade and customers have to fight tooth and nail to get their money back.

    This is an area that is ripe for progressive attacks. The failure of government to even provide minimal antitrust enforcement to stop the formation of these oligopolies has gone on for decades and, while Democrats have been slightly better than Republicans, both parties are really at fault. Now is the time for the Democratic party to take a firm stand on increased antitrust enforcement. The current oligopolies are harmful to consumers, to workers, and to real competition that drives capitalism. The barriers to entry are so high, competition is stifled. Without that real competition, there are fewer jobs and those that remain are easier to outsource. The oligopolies can keep wages for workers depressed in either silent or active collusion while keeping prices higher for consumers, only lowering them temporarily to drive a competitor out of business. And these companies have no fear of being called to account for their illegal behavior - they are simply too big to fail, as the failure to break up or prosecute firms on Wall Street has shown.

    And there is no better time to start that attack than on Monday when the hearings to confirm Neil Gorsuch to the Supreme Court begin. Democrats have every right to filibuster Gorsuch simply because of the way Merrick Garland was treated and they should do so. But the hearings give Democrats an opportunity to show that Gorsuch is both outside of the mainstream in jurisprudence while setting up a narrative for a political attack in the 2018 election. Martin Longman points to insightful article by Sandeep Vaheesan that describes just how extreme Gorsuch's views are when it comes to antitrust enforcement.

    Vaheesan cites two opinions that highlight Gorsuch's actually flipping the intent of antitrust laws on its head. In Four Corners Nephrology Associates v. Mercy Medical, a hospital contracted with one set of doctors in order to kick-start its nephrology practice. It was an exclusive contract and it was challenged by another doctor who also wanted to practice nephrology at the hospital. He was denied that opportunity by the hospital and sued the hospital, alleging that is was creating an unfair monopoly by doing excluding him. Gorsuch ruled for the hospital and said this in his opinion, "Without some confidence that they can control access to their own property real or intellectual, how many firms would be deterred from undertaking the risks associated with, say, a significant new endeavor or facility?" And he went on to quote another ruling by Antonin Scalia, saying, "The opportunity to charge monopoly prices—at least for a short period—is what attracts ‘business acumen’ in the first place."

    The second case involved Novell's suit against Microsoft over Microsoft's breaking its promise to share the technology to allow Novell to develop a word-processing program for Windows 95, thereby unfairly favoring Microsoft Word. Again, Gorsuch rule in favor of Microsoft and his opinions set up an absurd precedent that, since Microsft did not lose any short-term profits by favoring Word, it was not unfairly competing with Novell.

    Both these rulings are actually in direct contradiction of what antitrust laws actually state. the whole point of antitrust law is to prevent monopoly power, period, not simply restrict it to a "short period". Gorsuch also seems to believe that business will ONLY invest in new products when success is guaranteed. And it is ridiculous to think that anti-competitive practices have to rely on losing money in order to drive your competition out of business in order to be in violation of antitrust law. By making sure Novell could not provide a word-processing program while offering its onw product, by definition Microsoft would not lose money.

    Vaheesan summarizes, "Gorsuch’s record on antitrust law is limited but discouraging. Thus far, he has displayed no awareness of how concentrated economic power concentrates political power. He ignores the effects of monopoly on competitors and open markets. If a monopolist uses its muscle to exclude smaller rivals, this marginalization concerns the courts only if consumers are hurt in the short term by, for instance, higher prices—and even then under only very limited circumstances."

    The Gorsuch hearings will give the opportunity to Democrats to create a basis for opposing Gorsuch simply beyond the unconstitutional treatment of Merrick Garland. And there is plenty of ammunition to oppose him based on his position on torture, and his opinions on Hobby Lobby, reproductive rights, and voter suppression, all of which are important issues. But it also gives Democrats the opportunity to attack Gorsuch and Republicans for supporting monopoly power that hurts workers and consumers and actually inhibits the creation of new jobs. Can you imagine how many jobs would have been created if the big banks had been broker up in the wake of the financial crisis? Along with Republicans' desire to deny healthcare to 24 million people and Trump's vindictive and draconian budget, breaking up the oligopolies will be an effective theme to run on in 2018. Let's hope Democrats can take advantage of this opportunity and start the narrative to win the 2018 elections.



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