Biden executive order pressures Big Business to reform

Business Columnist

July 9, 2021 Updated 4:17 PM PT

Let’s face it: Average Americans wake up every morning in dread at industry’s ability to make their lives a little more costly and a little more painful.

On Friday, President Biden took aim at how businesses from cable TV firms to airlines to drug companies to cellphone makers push the little guy around.

Biden formally announced and signed what has been titled an “Executive Order on Promoting Competition in the American Economy.” The phrase barely hints at the breadth of the order’s 72 recommendations and directives, or their potential to rebalance the relationship between industry and consumers.

For decades, corporate consolidation has been accelerating .... That lack of competition drives up prices for consumers.

— Biden administration fact sheet

The order’s key target is the quasi-monopolistic behavior of consumer companies, which have been permitted by tolerant antitrust enforcers and indulgent regulators to remake the U.S. economy in their own interest.

We’ve been writing about some of these indignities for years, and some of the remedies Biden proposes long have been on the wish list of the Democratic Party’s progressive wing.

The Republican Party didn’t immediately take a position on the executive order, perhaps in part because so many of its components are decidedly consumer-friendly. Consumer advocacy groups were generally positive. “We applaud President Biden for promoting competition to drive true innovation and lower prescription drug prices for Americans,” said Patients for Affordable Drugs Now, which has been pressing for numerous initiatives to reduce drug costs.

The business community also reacted cautiously. “We are concerned about the breadth of issues contemplated in and potential implications of the Executive Order that could undermine rather than enhance U.S. competitiveness,” Joshua Bolten, chief executive of the Business Roundtable, said in a prepared statement. But he didn’t pinpoint any provisions of the order that the Roundtable might consider troublesome.

Biden can’t force some of his proposed remedies into reality on his own. He can order government agencies directly under his jurisdiction to take specific actions.

The order, for example, includes directives to the Department of Health and Human Services to craft measures to control drug prices, to the Department of Agriculture to strengthen enforcement of the Packers and Stockyards Act to combat discriminatory and deceptive treatment of farmers by the food processing industry, and to the Department of Justice to more vigorously enforce antitrust laws by scrutinizing proposed mergers that could drive up consumer prices and limit consumer choice.

In other respects, however, Biden must work via purportedly independent regulatory agencies such as the Federal Trade Commission and Federal Communications Commission. The executive order brims with provisions in which he “encourages” the agencies to act in accordance with his policy preferences. That’s a particular problem with the FCC, which currently labors under a 2-2 deadlock between Democratic and Republican commissioners, because Biden has not yet nominated a fifth member to produce a Democratic majority.

That will at least delay any action on Biden’s proposal to restore network neutrality provisions for internet services, which were eviscerated by the FCC during the Trump administration.

“The executive order is important, but the processes and personnel to actually move ahead on these priorities are not in place yet,” observes Matt Wood, general counsel of the consumer advocacy group Free Press.

Biden did, however, send a clear signal about how he wants government agencies to move. “For decades, corporate consolidation has been accelerating,” reads a fact sheet the White House issued Friday morning. “That lack of competition drives up prices for consumers.”

Biden has signaled his preference for strong action against anticompetitive behavior in other ways. Lina Khan, who was sworn in as chair of the FTC on June 15, is known as a critic of the concentrated power of big technology companies; in 2017 she published a law review article spotlighting the “sustained and growing dominance” of Amazon and ascribed it in part to antitrust enforcement doctrine that tolerated short-term price cuts for consumers but paid little attention to the long-term health of competitive markets.

The executive order establishes a White House Competition Council to oversee the implementation of the policies in the executive order. This reflects an idea championed by Tim Wu, an antitrust expert at Columbia Law School who joined the administration’s National Economic Council in March.

In a paper published last November, Wu and his coauthors called for establishing just such a council to ensure that government regulators “open markets wherever possible, maintain labor market mobility, and act to prevent entrenchment” by incumbents in the industries they oversee.

Let’s take a look at the more important elements of the executive order.

Airlines

The order directs the Department of Transportation to consider clear rules requiring refunds of fees “when baggage is delayed or when service isn’t actually provided — like when the plane’s Wi-Fi or in-flight entertainment system is broken.” The agency must also consider rules requiring baggage, change and cancellation fees to be clearly disclosed to the customer in advance.

This is important, the White House maintains, because airlines have saddled passengers with fees for services that used to be bundled into the price of a ticket — fees to check baggage, fees to carry baggage onboard, you name it. Among the top 10 airlines, according to the fact sheet, fee revenue rose to $35.2 billion in 2018 from $1.2 billion in 2007.

The executive order also fires a warning shot about airline mergers. “Inadequate competition,” it says, “reduces incentives to provide good service” — specifically noting that airlines were late delivering at least 2.3 million checked bags in 2019. Some of the biggest airlines, the product of mega-mergers, have some of the most miserable on-time takeoff and landing records.

Big Tech

Biden effectively backs the growing movement to curtail the power of big technology platforms such as Facebook, throwing in his lot with progressive critics of the technology companies such as Sen. Elizabeth Warren (D-Mass.).

The executive order sets forth a policy of “greater scrutiny of mergers, especially by dominant internet platforms, with particular attention to the acquisition of nascent competitors.”

That could include some of the mergers that Warren specifically assailed, such as Facebook’s takeover of the social media firms Instagram and WhatsApp, and Google’s acquisition of the advertising platform DoubleClick, the home appliance company Nest and the traffic app Waze.

Biden warns that just because some of these mergers have been approved, that doesn’t mean they can’t be unwound. Antitrust law, he states, allows federal regulators to “challenge prior bad mergers that past administrations did not previously challenge.”

He also urges the FTC to craft rules limiting the accumulation of personal information by Facebook and other platforms under the guise of providing users with “free” services.

Right to repair

A burgeoning consumer movement has been challenging manufacturers that prevent consumers from performing do-it-yourself repairs on their own possessions.

Apple, for instance, has become renowned for making its computers and phones difficult — even impossible — to repair without resorting to an authorized technician.

Its newest desktop iMac computer, introduced in May, got a “repairability score” of only 2 out of 10 from ifixit, which distributes free repair guides for thousands of consumer products and sells replacement parts and tools. In part that’s because so much of the iMac’s innards are soldered in place and not replaceable.

Other manufacturers block consumer repairs through software that requires proprietary codes to unlock or specialized equipment. That’s the heart of a battle between farmers and John Deere & Co., which farmers say imposes too many obstacles to tractor repairs. Repair restrictions also contribute to solid waste, as they often prompt consumers to discard inoperable devices rather than getting them fixed.

Under the executive order, the Federal Trade Commission is “encouraged to limit powerful equipment manufacturers from restricting people’s ability to use independent repair shops or do DIY repairs — such as when tractor companies block farmers from repairing their own tractors.”

Net neutrality

The Trump administration gave internet service providers vast new ability to interfere with competitors, including providers of competitive content, in 2017.

That’s when the Trump-controlled Federal Communications Commission repealed network neutrality rules, which had effectively barred internet service providers from blocking websites or services, degrading their signals, slowing their traffic or, conversely, providing a better traffic lane for some rather than others.

As more ISPs merged with content companies — the cable firm Comcast acquiring NBCUniversal, for instance — the opportunity for such conflicts of interest mushroomed.

The Biden order asks the FCC to “Restore Net Neutrality rules undone by the prior administration.” Consumer advocates warn that this won’t be easy in the short term, however: The FCC is currently deadlocked 2-2 between Democrats and Republicans.

That’s an artifact of the 2020 lame-duck GOP Senate, which confirmed a Trump nominee to the commission on the eve of Biden’s inauguration; without that action, the FCC would have a 2-1 Democratic majority today.

In related internet issues, Biden’s executive order also asks the FCC to limit early termination fees by ISPs, which interfere with competition, and to prohibit exclusivity deals between ISPs and landlords, which reduce tenants’ choices for service.

Healthcare

Biden’s order takes a run at this most intractable feature of the U.S. healthcare system. It prompts the Food and Drug Administration to work with states and tribes to allow the importation of prescription drugs from Canada, where they often cost a fraction of their U.S. prices.

The order also asks the FTC to ban “pay for delay” arrangements, in which manufacturers of brand-name drugs pay generic drug makers to keep their cheaper versions off the market, thus preserving the brand-name firms’ excessive profits.

The order also gives the Department of Health and Human Services 120 days to promulgate rules allowing hearing aids to be sold over the counter. Currently, obtaining the devices requires a consultation with a doctor or specialist, which the White House says contributes to driving the average cost to $2,500 or more.

Congress passed a law in 2017 to allow over-the-counter sales, but Trump’s FDA never got around to issuing the required regulations.

Biden’s order also shines a spotlight on hospital mergers. As the fact sheet notes, “thanks to unchecked mergers, the ten largest healthcare systems now control a quarter of the market.” Many experts have found that these often result in higher prices and less choice for patients. Biden wants the Department of Justice and the FTC to tighten their scrutiny of mergers in this space.

Labor mobility

The order aims to make it easier for workers to change jobs. Biden wants the FTC to ban or limit noncompete agreements, which currently handcuff as many as 60 million workers.

Biden also urges the FTC to take a closer look at occupational licensing rules, which currently apply to more than 25% of all workers, up from 5% in the 1950s. Some of this licensing aims to protect the public from untrained employees in risky jobs, but other rules apply to services that don’t pose a direct threat to the public “even if a practitioner is unqualified,” according to a 2019 report by the National Conference of State Legislatures.

In some of those cases, licensing requirements are merely a means for incumbent practitioners to raise the bar against new entrants by mandating costly training programs and qualification exams.

There’s much more to the executive order, and even more than that to be done to rein in big business. Indeed, what may be most dispiriting about an executive order that aims to place the consumer back in the forefront of commercial relationships is that it barely scratches the surface of all the ways businesses take advantage of their customers and other stakeholders. But it’s a start.