Take Care is pleased to present a series of posts offering thoughts on how Congress might address key issues in antitrust law.
By Sandeep Vaheesan | Open Markets Institute
Federal antitrust enforcers’ sins of omission have become too clear to ignore and are now topics of public debate. The Department of Justice (DOJ) and Federal Trade Commission (FTC) routinely permit mega-mergers and are presiding over another wave of consolidation. The agencies haven’t successfully sued a major monopolist in more than 20 years.
Often overlooked, however, are the agencies’ sins of commission. As they have tolerated and even welcomed corporate consolidation and monopolization, the DOJ and the FTC have directed their legal fire at workers and small proprietors who organize. Applying antitrust’s hard prohibition on horizontal coordination among “independent” economic actors, the DOJ and especially the FTC have brought suits against a range of small players, including electricians, ice skating coaches, organists, and public defenders.
For Americans seeking to stop the misuse of antitrust against the 99%, the first Gilded Age offers a legislative template on which to build. Much like today, antitrust enforcers and the courts a century ago used this body of law, intended to curtail the power of capital, against farmers and workers seeking to build power through collective action. As Nathan Schneider and I explain in a working paper, the 1922 Capper-Volstead Act offers a model for removing the antitrust threat and permitting and promoting socially beneficial cooperation today. Congress should enact a Capper-Volstead Act for all the small players—workers, professionals, consumers, and small enterprises—in the contemporary political economy. This new charter for cooperation would allow these actors to build power against large corporations in the near term and potentially set the stage for a democratic transformation of the economy in the longer term.
Antitrust enforcers, implementing the “consumer welfare” model of antitrust and relying on some dubious economic theories, have taken a hands-off approach to mergers and monopolies. The antitrust agencies have adopted a posture of passivity toward mergers and have not litigated a significant monopoly case since the Microsoft case twenty years ago. As a result, sectors from agriculture to airlines to hospitals to railroads are highly concentrated. The consequences of corporate monopoly and oligopoly include high prices for health care, depressed wages and rates of firm creation, and corporate capture of political institutions.
Whereas the antitrust agencies have been passive toward corporations, they have been active against workers, professionals, and small firms in the economy. Collusion (or coordination) between independent competing actors, whether they are individual professionals or large corporations, is condemned by the Supreme Court as “the supreme evil of antitrust” and categorically illegal. While workers in a traditional employee-employer relationship are protected by a statutory antitrust exemption, other workers and professionals, including many participants in the so-called gig economy, fall outside of this protection and potentially violate antitrust law when they engage in organizing and other concerted activity. An FTC official, in a 2015 blog post, stressed that the FTC would not distinguish between large corporations, on the one hand, and individual professionals and proprietors, on the other, in enforcing the antitrust prohibition on collusion.
Exploiting this gap in protection from antitrust for small players, antitrust enforcers (and the FTC in particular) have brought many cases against workers, professionals, and small businesses for engaging in collective action to raise their incomes. In recent years, the FTC has filed complaints against (among others) associations of electricians, ice skating coaches, and organists. It sued these associations for adopting codes of ethics to restrain competition among their members and raise their incomes. In effect, the FTC, under the rubric of protecting competition, has practiced twenty-first century union busting.
In response to similar antitrust threats to farmers a century ago, Congress enacted an antitrust immunity for cooperation in agriculture. Like associations of workers, professionals, and small firms today, farmers who engaged in cooperative activity (whether it was joint marketing of their crops, processing of their output, or manufacturing of foods) faced significant antitrust risks from both government and rival corporate players. In first the Clayton Act and subsequently the Capper-Volstead Act, Congress created an express antitrust exemption for the cooperative activities of farmers. The Capper-Volstead Act protects farmers cooperatives so long as they are “operated for the mutual benefit of members thereof” and either follow a “one member, one vote” principle or cap annual dividends. These requirements encourage farmer cooperation on relatively egalitarian and democratic lines (as opposed to the hierarchical, top-down structure of investor-owned firms). Importantly, the Capper-Volstead also establishes an oversight process by which the U.S. Department of Agriculture (USDA) can take legal action if a farmer cooperative is unduly raising prices through monopolistic or restrictive practices.
A Capper-Volstead Act for workers, professionals, consumers, and small firms would redistribute power from the 1% to the many. Granting this right to undertake cooperative action would help to remedy the yawning inequality in power that characterizes the United States today. When buying and selling services, workers, consumers, and small firms would no longer have to face monopolists and oligopolists as atomized individuals and could confront them as a collective with real power.
A successful effort to strike a better deal can lay the groundwork for more transformational change. Consider the potential for cooperation among Uber and Lyft drivers. In the short term, ride-sharing drivers, through collective bargaining, would be able to obtain higher pay and better terms of work from Uber and Lyft. Over a longer period, drivers could build on this first stage of collective action. They could develop their own ride-sharing apps and run them on democratic cooperative lines, capturing power and control from the financier-driven apps they work for today. This is not utopian dreaming either: drivers already use their own ride-sharing apps in cities around the world.
In looking to the Capper-Volstead Act for guidance, Congress should seek to perfect it, not just mechanically expand its coverage. At least three areas call out for improvement. First, whereas the text of the Capper-Volstead Act is imprecise on who can form a protected cooperative, Congress should make clear who is in—workers, professionals, individual consumers, and firms below a certain asset and revenue threshold—and who is out. Vagueness over who can avail themselves of this protection creates the risk that corporate giants would use the new congressionally-blessed cooperative form to launder their otherwise illegal mergers and cartelistic, exclusionary, and predatory practices.
Second, while the Capper-Volstead Act does not mandate democratic cooperation, Congress should require that all protected cooperatives follow the “one member, one vote” principle to ensure that members actually control the co-op. Without this democratic DNA, cooperatives can become much like shareholder-owned businesses in which a few exercise control and prosper at the expense of the many. (Indeed, some agricultural cooperatives today suffer from chronic self-dealing by managers.) Third, in recognition of the poor record of USDA monitoring of farmer cooperatives, Congress should create a strong price oversight function and house this authority in an agency that can be counted on as a vigorous defender of the consumer and public interest.
Tolerance of monopoly and oligopoly and antagonism toward the powerless define contemporary antitrust in the United States. The antitrust agencies have permitted economywide consolidation and monopolization and neglected their Congressional directive to police corporate power. At the same time, antitrust technocrats condemn pro-social cooperation and solidarity among the many as “collusion.” Congress should not tolerate this twisted status quo any longer. Among a suite of reforms, Congress should look to the century-old Capper-Volstead Act as a template for protecting the rights of the 99% to band together. It should create a charter of liberty for democratic cooperation among the powerless in the United States political economy.