How to Reclaim Antitrust for Working People with Sanjukta Paul (Episode 87)

Date: 12 Dec 2019 | posted in: Building Local Power, Retail | 0 Facebooktwitterredditmail

Host Stacy Mitchell is joined by Sanjukta Paul, law professor and antitrust and labor expert. They delve into the history of our antitrust laws, and how they were originally written to help working people and small businesses. Over the last several decades, however, antitrust has been weaponized against labor and small firms, while big corporations have been given free rein. They also discuss:

Sanjukta Paul
  • How current antitrust policy gives large corporations powerful “coordination rights” in the economy — but denies these same rights to workers and small businesses.
  • Powerful examples of antitrust enforcement and how economic theory has been used against unions and small businesses in favor of corporate monopoly power.
  • How today’s approach to antitrust harms Uber drivers and other people working in the gig economy.
  • Why regulators must choose to balance competing interests and values, rather than look for a perfect economic equilibrium that may not exist.

 

We have to build a new edifice and the new edifice has to be built by many hands and not by a few hands. And that’s what antitrust law originally came from, was from a mass movement and a popular movement. Basically if we decide that there aren’t these sort of independent ideal theoretical answers that can be given by lawyers and economists, well then we need to give answers to more specific empirical questions, we do need people who are grounded, who are in those particular sectors. That’s how we determine how to govern those markets and sectors.

 

Hibba Meraay: Hey everyone. Welcome back to Building Local Power from the Institute for Local Self-Reliance. I’m Hibba Meraay, communications manager, and today we’re bringing you an interview between Stacy Mitchell, ILSR’s co-director and Sanjukta Paul, law professor and antitrust and labor expert. Zach is with me today to give you a sneak preview of the conversation. Hey, Zach.
Zach Freed: Hey, Hibba.
Hibba Meraay: What I thought was really interesting was that antitrust law doesn’t always work the way it’s designed to work or protect the people it’s supposed to protect. What did you think?
Zach Freed: Yeah, totally. Our antitrust laws were originally written to help workers in small businesses from corporate monopoly power, but if you look around today, small businesses and especially workers and unions are severely constrained by antitrust law. While businesses like Amazon and Walmart had the go ahead to do whatever they want for a long time now, those are really the results of political decisions as professor Paul goes into during the podcast.
Hibba Meraay: Antitrust law really determines kind of who gets to coordinate for a better deal. Another interesting part of the conversation was how Stacy and professor Paul talk about how economics can’t always deliver us the answer in all cases, right? There isn’t really an objective economic equilibrium because what we’re really talking about is how we balance competing interests and even more than that, competing values.
Zach Freed: So if you look at the history of antitrust enforcement, economics has really been weaponized against unions and small businesses in favor of corporate monopoly power. That’s why it’s so great that professor Paul is studying the history of these laws so closely and how they’ve been enforced because if we are going to take back power, we need to know how the other side won, so we can avoid making those same mistakes again.
Hibba Meraay: Awesome. We hope you enjoyed this sneak preview and stay tuned for the full episode.
Stacy Mitchell: Well, Sanjukta. Thanks so much for being on the podcast.
Sanjukta Paul: Hi, Stacy, I’m really happy to be here. Thanks for having me.
Stacy Mitchell: So you started out your career working for many years as a labor lawyer. Tell me how you ended up bumping into antitrust and getting involved in antitrust law.
Sanjukta Paul: I was doing really a mix of labor and civil rights and employment work on behalf of workers and plaintiffs in the Los Angeles area. I was working on essentially, a year long special project with an organizing campaign through a nonprofit, LA Alliance for New Economy, which does a lot of great work in that area, working in the port trucking sector. So the Southern California ports, Los Angeles and Long Beach are know at this point, handle the highest volume of any port in North America. Most of our consumer goods come through that port and there are many, many truck drivers who basically work in on those short haul routes from the ports to all the warehouses that you’ve heard of that Walmart and the big box stores and the other retailers have a little bit inland in Southern California. So that’s actually a pretty large sector in Southern California.
Sanjukta Paul: This was a workforce that was unionized back through the 1970s up through the very, very early eighties and had pretty stable middle-class jobs. It’s a sector where the bottom really dropped out following trucking deregulation and then following just kind of rampant price competition among the trucking companies in the ’80s exactly as big box retailing was actually sort of becoming big. So therefore, the buyers were also becoming more powerful and had essentially controlled that market, the actual short haul trucking market. Anyway, that’s a little bit of the history of it. I got involved in the campaign to basically work on reorganizing into unions, those drivers in that sector. This is several years ago now, and by the time I was involved and for several years prior, these were not good jobs. What had been previously union jobs, stable, pretty mid wage had become definitely low wage jobs way, way over 40 hours.
Sanjukta Paul: So kind of a classic sweatshop labor scenario. In fact, Michael Belzer wrote a great book about trucking and trucking deregulation called, “Sweatshops On Wheels,” which I really recommend. Long story short, I’m working on this campaign and what I learned was that antitrust law had actually played a significant role in the early days of this campaign way before my time in shaping what it could do and what was possible because these drivers were classified as independent contractors. By the time in our campaign, we were working on trying to get them classified as employees. But the reason we were doing that, there were many reasons, but one reason was so important to do that was because any of their organizing activity, any type of collective action to better their wages or working conditions or certainly, to organize and to union, would be if they were not employees, would be conventionally considered by antitrust law to be anti competitive, to be a violation of antitrust law and would subject them to potentially criminal liability and to trouble damages.
Sanjukta Paul: And that in fact, way before my time in the late nineties and early 2000s, that is exactly what had happened; that they had engaged in collective action on their own, strikes and walk offs off the job and had been hit with lawsuits under antitrust law. And in fact, the FTC opened an investigation into worker leaders, just truck driver worker leaders who were trying to make their workplaces a better place for everyone. As a result of that, that shaped everything that happened thereafter. Immediately engaging in collective action was off the table. Stay, that was huge because if you can’t organize people to engage in collective action, it takes a lot of organizing tools off the table.
Stacy Mitchell: Right.
Sanjukta Paul: To come back to I guess how I got into antitrust- I learned about some of that when I was working on the campaign and at the time, I knew nothing about antitrust law. I just filed it away in the back of my brain and thought, “Well, that’s really weird. Antitrust law being used against truck drivers who are trying to make a living wage, this is bizarre.” So then as it turned out kind of unconnected to that, when I sort of finished up that project, I had this opportunity to start a research and teaching fellowship at UCLA and had the opportunity to kind of research anything that I wanted to research and this is what I chose to do and just went down a rabbit hole that I have yet to emerge from partly because… Even though this sort of started out as seeing this as an obstacle to worker organizing, now my perspective is that actually working peoples’ perspective is integral to antitrust law and really originally was inte-
Sanjukta Paul: As you know, is what created antitrust law and it’s actually been massively changed particularly since the 1970s. Also, as I went deeper into this rabbit hole, discovered colleagues and comrades coming at it from different angles and we just learned so much from each other, including meeting you and discovering that actually what I saw as an ops- and is still an obstacle can also be turned into a way of reforming antitrust law in a direction that it really needs to go.
Stacy Mitchell: Yeah. I’m really eager to talk with you about sort of where we go from here and how, as you put it, worker voices can really be part of how we reshape antitrust law and actually make it work for decentralizing power, what it was originally intended to. But before we get there, I want to dig in a little bit on understanding exactly how antitrust impedes workers because I think people are familiar with the idea that we’ve allowed a lot of mergers, that we haven’t been policing Walmart for example, in terms of their predatory conduct. We’ve had this lax attitude; our policymakers have had this lax attitude with applying our antitrust laws to big business. But I think for most people, it will be a little bit of a shock to learn that antitrust has been actually actively going after ordinary people who have no real economic power. Can you give us some examples to help people understand how that happens?
Sanjukta Paul: So certainly the truck drivers I mentioned. This is way before the gig economy or Uber or anything like that. We have a large number of workers in our country now who basically labor beyond the bounds of employment. Some are probably misclassified, some are not, but they are basically workers. They are people who primarily are selling labor or services on the market. Those folks, even though this is totally contrary, in my opinion, to the original intention of antitrust law and what the legislators intended, those folks would conventionally be treated by antitrust institutions and antitrust law today as just independent businesses; so people who are not receiving a W2, but are receiving a 1099. Those folks coordinating among each other to sort of either engaging in joint bargaining with a more powerful buyer or supplier or in the case of the truck drivers, actually going on strike, anything like that would be considered collusion, anti competitive activity under Section I of the Sherman Act.
Sanjukta Paul: So that would include, as I said, any independent contractor worker, really anyone, whether it is a truck driver, or a hairstylist, or a court reporter, or a translator or you know, any of those folks. It would also include sort of what we now consider gig economy workers or platform workers; so Uber drivers, task rabbit, anything like that. Then finally, I would give a final example, which would include small businesses and franchisees and other kind of micro enterprises. Obviously, there’s different definitions of small business, but oftentimes that category also includes people who might have a few employees, or it might be a few people together in a partnership, or it might be someone who has some capital investment. Maybe they own some land or maybe they own a truck or they own something else that’s from amount of capital investment, but they’re really primarily still bringing their labor or services, their effort to market. They’re not primarily managing a bunch of other people or hiring a bunch of other people to work in a factory or some other type of capital investment. Right?
Sanjukta Paul: Those folks too, often as you know, don’t have a lot of power in our economy. Franchisees are a great example and economist, Brian Kolachi who’s done great work on this, has shown how franchisees did try to organize and at one time, it was actually considered as a policy solution for them to have kind of NLRA style, labor style collective bargaining rights and that was rejected. But you can see a lot of the rationale for them having those collective bargaining rights. In the absence of all of that and in the presence of the proliferation of kind of work beyond the bounds of the legal employment relationship, we really have antitrust law increasingly functioning as an obstacle to the organizing efforts of frankly, the very people that antitrust law was originally intended to help, even as antitrust law as you know, has been rendered somewhat impotent as to what it is actually supposed to do, which is to go after the powerful actors in the economy who may not be using that power very responsibly.
Stacy Mitchell: It’s really astonishing when you think about it. I ran into this myself a few years ago and I was sort of surprised. The example I ran into is that independent bookstores… So if you add up all the independent bookstores across the country, they are maybe 15% of the book market, something like that. But they have to be careful. They can’t band together and negotiate with publishers. They can’t say, “Okay, we’re all going to feature… We’ve, as a group have sort of decided that these 20 books that are coming out this month are really great and we’re going to feature them and we want to ask publishers to help support that with additional marketing dollars, or we want to negotiate over prices.” That gets them into hot water with antitrust and yet, you have Amazon, which captures half of all books sales, right? They can go negotiate with a publisher and there they are. They’re sitting there with three times as much market share. They can have an internal meeting and set prices or do anything, and antitrust has nothing to say about that.
Sanjukta Paul: That’s 100% correct and just such a perfect example. That is exactly right and that is why I think these two things are actually deeply connected.
Stacy Mitchell: Tell me a little bit about that link and the history of how we got here.
Sanjukta Paul: As we were kind of both talking about before, when antitrust law was actually passed, when the first federal antitrust legislation was passed, the Sherman Act in 1890, that was really the product of a farmer labor coalition and is widely acknowledged by historians who study the topic. When you read the legislative record of the Senate discussions, which is what I spent a chunk of my summer, this last summer doing, how many times they actually referred to that fact. The senators would say, “Well, it’s the farmers and the workers who have sent these cries, these pleas up to us and ask us to act on this.” Right?
Sanjukta Paul: It’s pretty clear that that is the coalition that drove that version of the anti monopoly movement that resulted in the Sherman Act and it was absolutely not on the table that cooperation among farmers or among workers and farmers, if you think about it, were clearly very much like your independent book sellers that you’re talking about. These are people who definitely work for a living, but who do you have some investment. They do own that land and might have some employees and workers. In addition to pushing for antitrust legislation, this coalition was also really fostering cooperation and solidarity among themselves. Now, that didn’t always go perfectly; movement does, but it was one of their aims, right? It was
Sanjukta Paul: Cultivating solidarity among working people and among just ordinary people went alongside breaking up power structures that were seen as harmful. So those two were always supposed to go together, and the push for this … and the senators acknowledged that and you see them time and again talking about that. And actually, when you carefully read the debate, what you discover is that they talked about how they should write the bill to avoid the courts interpreting it against workers and farmers. So they talked about that. They were worried that the courts would do that for reasons that already had to do with the dynamic between courts and the congress at the time. We were just entering what’s called the Lochner era in kind of our legal history, which is of course the era in which courts struck down things like minimum wage legislation, maximum hours legislation in kind of the emerging industrial workplace on the basis of “freedom of contract”, which really was more about expanding the property rights of the people who were winning in that economy, the people who owned the factories and the railroads and so forth.
Stacy Mitchell: And this is like the 1890s, turn of the century? Is that the right period?
Sanjukta Paul: Yeah, I think technically the Lochner era started sometime during the 1890s and then through the 1920s basically. But yeah, that was definitely already happening at the time that they were deliberating on this bill in 1889 in 1890, so I think they saw the writing on the wall and they were worried about drafting the statute in a way to avoid that. And so in fact, I think that, in fact, the bill went through different versions and they actually rewrote the bill at one point because one, Senator Platt gave a speech saying that, “Look, if we go forward with this bill as it is now,” and that was an earlier version of the bill that isn’t what got passed, “Then we really can expect the courts to interpret it this way against farmers and workers and also against just small dealers and small sellers in general.”
Sanjukta Paul: What’s really interesting is that they’re having that whole discussion and debate, but it’s evident that they all want to avoid that result. There’s almost just basically zero debate about that. We all want to avoid that result. How do we avoid it? And then right after Platt gives that speech, they send the bill back to committee and they rewrite it into pretty much the version that we have today of the Sherman Act. It’s my belief and certainly earlier scholars who studied this issue also concluded the same thing, that they rewrote the bill and thought they had taken care of the problem, right, and that they had taken out sort of this language about passing on the cost to consumers and full and free competition. They’d take an out that language. I thought that was going to be what possibly would lead the courts to interpret it against kind of smaller actors in the economy.
Sanjukta Paul: And of course, as we now know, the courts just went ahead and did that anyway, right? And without getting into why they did that so much and the reasoning they use, they did that in a few early cases, and essentially the Sherman Act was turned into a strike breaking tool for the federal government at a time when the labor, industrialization in production had really just taken off. And so the industrial working class was growing. And so just to explain the link, and then at the same time, the act was used in a very limited way against sort of actual corporate monopoly.
Sanjukta Paul: And I think the two things are linked in the law that the judges developed at the time, because essentially what judges did in some of those early cases is they focused on property rights, so that same thing that was such a big deal in the Lochner era in general, they basically said … and they went back and forth a little bit, so not all the justices agreed, but they ultimately sort of said that “Shareholders have a kind of property right in the corporation,” or they they extrapolated from that, “And we can’t really interfere with that,” effectively is what they said.
Sanjukta Paul: And so what grew up around that is what I actually have started calling the firm exemption, or we could call it the trust exemption, the antitrust, right, so that basically if you’re a firm, if you’re a corporation, anything you do … not quite anything, but certainly a lot of things that you just would not be able to do outside the corporation are just presumptively legal inside of it. And that sounds maybe in some sense obvious now, right? Because we’re so, so used to that idea that of course, firms can just set prices. But this is not what they were contemplating.
Sanjukta Paul: So at the same time that I told you what they were saying, the legislative history about workers, at the same time, they’re talking about the Standard Oil Company and John D Rockefeller, and it is so interesting because the trust that they were targeting … and it’s why it’s called anti-trust legislation, right? The trust that they were targeting were actually these effectively large firms, right? The only reason they weren’t single firms, the only reason the Standard Oil Trust wasn’t a single firm in 1889 was because state corporate law basically made that still pretty difficult. State corporate law was changing and state corporate law previously had made interstate asset acquisitions and mergers much more difficult than it would be now.
Sanjukta Paul: And so it was almost like state corporate law was functioning as a type of antitrust law through much of that time, but it was changing actually under the same forces, and so there are legal historians who have written about this and also sociologists, how the rise of financial capital that was happening at the same time in New York City resulted in the rewriting of New Jersey’s corporate code. And now we think of corporations are all headquartered in Delaware. Well, New Jersey was the first Delaware, and effectively it was the first Wall Street lawyers who really rewrote that corporate code. Charles Yablon has written a great article about this and William Roy as well, a sociologist who wrote a book called Socializing Capital, if people want more information about that topic.
Sanjukta Paul: But so basically what happened with state corporate law was what was transforming, and then also the Supreme Court in the Lochner era was going to put limits on state’s ability to impose those limits. And then finally, even if there hadn’t been those kinds of legal limits and changes on state corporate law, there was a limit to what an individual state could do in a market that was becoming a national market, right? So if the threat was that if Ohio, which by the way continued to have pretty progressive radical corporate law until pretty late, had just stood out there in the wind and continued to take this position, right, the idea is, “Well, you can just go incorporate in Delaware or New Jersey and just lose all this business.” And that was a lot of the impetus for federal antitrust legislation, that, “Okay we need to have the federal government do this.”
Stacy Mitchell: Right, because we start to sort of have these corporations that are spreading across state lines at that point, in some ways a new thing, railroads as well. And so at that point, the ability of states to keep corporations in check is really waning.
Sanjukta Paul: It happened earlier in the railroads and then it started happening in material production after that because there was a period of time when we had sort of railroads operating in the national market, but material production, manufacturing basically, had not moved over into sort of a national corporate model at all. It was still done in workshops and things like that.
Sanjukta Paul: Sherman and the other senators were very much talking about Standard Oil and the Sugar Trust and these other trusts that basically were in name only multiple firms. The brilliant innovation of the trust was, “Okay, we’re going to get around state corporate law by creating this board of trustees that is centralized.” It’s basically just like the board of directors in a corporation now. That’s what they are, right?
Sanjukta Paul: And so in the Standard Oil Trust, you have all these different little standard oils, and then all the shareholders, and all those different little standard oils basically give over their voting power to this board of trustees that then holds their share certificates in trust for the actual shareholders, right? But then now they’re exerting the control. And so John D Rockefeller is on that board of trustees, and it’s just like he’s the chairman of the board, right, in a corporation state.
Sanjukta Paul: So effectively, the Standard Oil Trust is operating as a corporation, and yet the senators, that’s whose power they wanted to break up, basically what was effectively a single corporation, and they even talked about single companies as well. I don’t think they had an idea of the firm exemption as we know it today. And then those exact same trusts, because as state corporate law did get liberalized through the 1890s, particularly in New Jersey and in other places too, they just went ahead and incorporated.
Sanjukta Paul: So then they just got rid of the board of trustees and they just engaged either in directly acquiring shares of the constituent corporations or asset acquisitions. They did it in different ways, but then essentially those did become, in most cases, single firms, sometimes with a holding company structure and sometimes just directly through asset acquisitions. And those were the entities that the Sherman Act was aimed at.
Sanjukta Paul: So even though today I think if we don’t stop and think about it, it might seem like, “Oh well, of course Amazon can do that,” what you were saying, like have that internal meeting, of course they can do that, that’s just sort of normal and natural, but that is exactly I think what Sherman was talking about when he was talking about Rockefeller sitting there with the board of trustees, very similar to that internal meeting that Amazon can have. Meanwhile, antitrust law is being turned, as you said in that example, against the independent booksellers who are just trying to keep a foothold in that market.
Stacy Mitchell: Okay. We’re going to take a short break. We’ll be right back.
Stacy Mitchell: Hello everyone. Thanks so much for listening to Building Local Power. I wanted to ask as we get here towards the end of 2019 if you might consider making a donation to support ILSR’s work. We’re a nonprofit organization and we depend quite a bit on donations from individuals to make our work happen. If you can kick in a few bucks, that would be great. This is the time of year as we close out the calendar where we’re really hustling to meet our fundraising goals and so it makes a big difference. It’s a great help to us and it really will help us kick off 2020 in a big way.
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Stacy Mitchell: Okay, we’re back. One of the things I really like about the papers that you’ve written on this and the article you did for The American Prospect … We’ll link to all of that on the show page for this episode … is really a great way of helping people step back from the assumptions. The world we live in is not … There isn’t necessarily a logic to things that we just assume that’s the way it is. So I want to jump ahead here because we’ve done a few podcast episodes where we’ve covered the history of antitrust policy, so that period after the Sherman Act when the courts are very much using it, not as you point out in the way that Sherman and other lawmakers at the time intended, but the courts are then interpreting in exactly the opposite direction, allowing corporate power to grow using these laws against worker organizing.
Stacy Mitchell: Then we have the New Deal and things shift around for a few decades and then we come to the ’70s and ’80s and we sort of enter the era that we’re in now really driven by kind of a return in many respects to some of the thinking that was the early part of the 20th century that you were talking about the Lochner era, and we have Bork right in the middle of all of this and his thinking about antitrust.
Stacy Mitchell: So one of the things I wanted to ask you about is sort of how the notion of efficiency fits into all of this, or even consumer welfare, because I think one way that people have thought about it is like, “Well, if you have a bunch of small producers like farmers or you have a bunch of small merchants or you have a bunch of workers in an industry and they get together and they band together in order to get a fair wage or a decent price for their work, that might mean that consumers are paying prices.”
Stacy Mitchell: Some of the logic, at least that we’ve internalized around corporations being allowed to do that is that we sort of picture Walmart is driving a hard bargain. It’s like it’s driving a hard bargain with workers and it’s driving a hard bargain with suppliers, demanding the lowest prices and in the end consumers get something out of that. How does antitrust think about efficiency? Do you think there’s good efficiency and bad efficiency and is that part of what maybe is missing in the law?
Sanjukta Paul: That brings up, I think, so many things that I think that we need to work through. If we are going to remake antitrust law, I think we need to sort of honestly grapple with some of these things. But let me say a little bit about why I think that certainly what we have is not at all obviously true or right. I don’t think that the lowest consumer prices were the goal of the law at all. And I’m not the only person certainly who thinks that. I think an honest reading of the legislative history, again, shows that legislators were just as concerned about monopolies increasing prices on consumers
Sanjukta Paul: … As they were with actually forcing down the prices of small suppliers and farmers and workers. They say that repeated times. So it is really more about that power than it is about the lowest consumer prices. So they repeatedly say driving down the prices of suppliers is an antitrust harm. And the thing is, that’s recognized today as well. Even within the kind of dominant framework that’s still exists in antitrust law in this sort of idea of monopsony, which of course you’re familiar with. The idea of of there being buyer power as well as seller power. But the problem is…
Sanjukta Paul: Sort of I feel like where the debate is now, at least I think a number of people would say, well of course that can also be a harm and that the goal is competitive prices. Not the lowest possible prices, but competitive prices. But then what I try to argue in the, one of the papers that I think you looked at, is that this notion of a competitive price, it’s not this sort of independent social scientific principle that we can just sort of have experts figure out what it is and then that should be the standard for antitrust harms.
Sanjukta Paul: I guess actually two things before I say why that is. One point though, is that even if that were the case, even if you could somehow arrive at that, that is not what antitrust law is doing as a day to day matter. You might have as a matter of theory people saying that that’s what, oh, of course, first you say consumer welfare standard, then if you’re pushed on monopsony point, then it becomes, “Oh no, no, no, it’s not the lowest possible price. It’s the competitive price.” But that’s not what most decision makers are actually acting on.
Sanjukta Paul: And the way that we know that is that when you look at briefs and other decisions that are filed on a daily basis in the antitrust space, that you do see sort of a direct uncritical reference to sort of just what lowest consumer prices. An example of this that comes to mind is that recently the DOJ antitrust division filed briefs in these consolidated cases involving no poach agreements between, that franchisors imposed upon franchisees regarding hiring each other’s worker. So this clearly is not good for workers. It decreases their mobility.
Stacy Mitchell: It would be like McDonald’s, for example, I don’t know if they’re one of the companies, saying to different McDonald’s restaurants, you can write a no poach so that an employee at one McDonald’s can’t go work at another.
Sanjukta Paul: Exactly. For the record, I don’t think McDonald is part of that particular consolidated case, but exactly. That’s exactly right. So what’s so interesting is that the DOJ and the antitrust division, which at the same time is saying that, okay, we’re really interested in the labor market. We’re really interested in enforcing antitrust in the labor market and we do take into account worker harms, et cetera, et cetera. They have been saying that, and they filed a brief on basically arguing that the court should consider efficiencies and pro-competitive benefits of these no poach agreements, which are, and it’s extremely speculative, so I can’t even say exactly what their theory is, but their theory is 100% couched in terms of consumer benefits. Which I think are speculative in any case and I don’t think ultimately consumers benefit from that.
Sanjukta Paul: But regardless, it shows that it’s not symmetrical. That even if antitrust law institutions today, like the ones that have been sort of still shaped by the 1970s revolution, say that they’re taking, looking at the labor market symmetrically, it’s not the case. There’s still applying a consumer centric standard. So I think that’s the first problem is that even if they say, oh, it’s really competitive prices, in fact, we’re still looking at consumers at the expense of everyone else. And then as many others have pointed out, in many, many, many cases, it’s not even beneficial for consumers. There’s no guarantee at all that any of these cost savings, if there are cost savings, are getting passed down to consumers, as opposed to just going to shareholders or profits or executive salaries or whatever it may be. So there’s empirical evidence on bat that’s emerging.
Sanjukta Paul: But beyond all of that, even if we didn’t have all of those problems, what I try to argue in that UCLA paper that you mentioned is that the very idea that there’s a competitive price that we can just have economic experts come in and say this is competitive or not competitive, I think really breaks down if you look carefully at the way that antitrust law… Basically the way I put it in the paper is that it allocates economic coordination rights. And it has always done that. The legislators wanted us to do it in a particular way.
Sanjukta Paul: I think the original legislative history and the purpose of the act was to allocate economic coordination rights in a way that balances those rights. In other words, John D Rockefeller had too many economic coordination rights, that it’s dangerous for the economy and for society to have those coordination rights concentrated in one person or in one room full of men, as I think Senator Sherman put it at one point, and that we really need to disperse those coordination rights. And that’s exactly what giving small farmers or independent booksellers or workers coordination rights would do is that it would balance and disperse those rights.
Stacy Mitchell: So what you’ve found and really documented with this research is that there’s kind of a built in bias within antitrust where it favors bigness. It gives companies internally kind of free reign to exercise that kind of market power, and very much disfavors smallness and decentralization. If you’ve got this sort of hierarchical company with this centralized ownership structure, it can do it at once. But a collection of individuals coordinating in some fashion is treated in a completely different manner. Also I think what, the other aspect of how you’ve been describing this is also just sort of reminding everybody that it’s not as though economics can deliver us the answer in all cases, because really what we’re talking about is how do we balance competing values and interests. And what are the principles that we’re going to use to balance those things so that we can get to a fairer kind of society first?
Sanjukta Paul: First of all, so this is kind of at the meta level, and this is what I think should replace the consumer welfare standard. I don’t know that I have the exact name for it yet, but I think what should replace the consumer welfare standard is sort of two sets of ideas. One is the idea that antitrust law should work to disperse economic coordination rights rather than to concentrate them. So that entails, first of all, acknowledging that that’s what it’s doing, and then basically saying that the bias that it has toward hierarchy and bigness should be reversed.
Sanjukta Paul: And that that doesn’t mean that there’s not places where it really does make sense that there’s one network or something, or public utilities, or then maybe they should actually be public. So that doesn’t mean that there’s not going to be very sector specific things that we need to look at even in those contexts, by the way. You can disperse coordination rights in more than one way. If you have a public utility, then you can disperse coordination rights by giving the public through sort of the legislature and other mechanisms a say in how that’s run. It doesn’t have to be ten different utilities.
Sanjukta Paul: So I think you have to look at different ways to disperse economic coordination rights and mechanisms to do that. I absolutely think encouraging small business and producer cooperatives and worker cooperatives is one big part of that, but I also think public coordination of markets at the, permitting that to happen at the local level… Another thing that the antitrust establishment really is generally wanting to do is to clamp down on the state action exemption, which makes it more difficult for states and localities to engage in local management of their markets. So I think we have to encourage that and that can be another mechanism.
Sanjukta Paul: But I think that’s all one. So I think reverse that principle. But I think there’s a second element actually, because I don’t think it’s all just about dispersing coordination rights. I think that antitrust law is also about fair competition. So we need to reverse our criteria for allocating coordination rights so that we’re dispersing rather than concentrating, and I think we need to be honest that there are already limits on competition in the form of the corporation, in the form of big firms, in the form of property rights, which is what essentially the courts used in the Lochner era and then really again in the Borkian era to build upon certain biases that now aren’t called property rights, but they’re ultimately built upon that. So that’s already a limit upon antitrust law.
Sanjukta Paul: What I and I think others are saying is that let’s be honest about what kind of limits we do want upon competition because that will then be our rules of fair competition. Do we think that fair competition should include not undercutting each other on living wages for workers, or something like that. And I think there’s much more to it. But coming up with rules of fair competition. So I think those two things should be kind of the guiding meta principles for antitrust reform going forward. And then of course lots of policies and directions that would then flow from those principles.
Stacy Mitchell: What do you think the prospects are? It seems to me that part of what has to happen for those changes to happen are for working people, especially small businesses as well, to actually be engaged. For a long time antitrust has been this technocratic affair that happens behind closed doors and it’s run by specialist lawyers and economics scholars. And if that continues, we’re not going to really get any change, except maybe at the margins. To do the kind of fundamental change in direction and rethinking of first principles that you’re talking about is going to really require a much broader set of people. It’s going to require everybody to be at the table. I feel like that’s a challenge, both for how policymakers operate, but also just how do we engage people? How do you think about that?
Sanjukta Paul: I think that’s exactly right. Whether it’s by design or not, I tend to think sometimes these things aren’t really a matter of individual intentionality, but more like kind of group intentionality. But it’s absolutely right that there’s a logic to this whole system that, oh, there’s this objective social scientific result and really, so you need really specialists, economists, and then maybe a few lawyers to translate what they’re saying for judges. And that’s what antitrust is.
Sanjukta Paul: But the promising thing is, so I think first we have to break that down. I’m trying to do a little bit to do that and I think others are trying to work to break that down and to break down that edifice. But then you are absolutely right that breaking down the edifice is not enough. We have to build a new edifice and the new edifice has to be built by many hands and not by a few hands. And that the involvement, and that’s what antitrust law originally came from, was from a mass movement and a popular movement, and that… I threw out my sort of two ideas for replacing the consumer welfare standard. Maybe others have others. Basically if we decide that there aren’t these sort of independent ideal theoretical answers that can be given by lawyers and economists, well then we need very… To give answers to more specific empirical questions, we do need people who are grounded, who are in those particular sectors. That’s how we determine how to govern those markets and sectors.
Sanjukta Paul: For example, in your state, the Maine Lobstering Union is that just something, a cooperative that eventually became affiliated with the union and was able to use the sort of obscure antitrust exemption for fisheries to be able to do that. But so we need people who know how that market works, both the people who are out on the boats, but also the people who are working up the supply chain. I think that you would need that kind of involvement from workers, from small businesses, from people who understand a particular market, a particular supply chain, a particular distribution chain, to help actually govern that market. And of course it needs to be in the public interest as well. And so of course we do need consumer representatives to make sure that it’s fair and everyone’s interests are represented. So I think that’s the direction we need to go. I don’t necessarily have, I’m afraid, a blueprint for exactly how to get there, but I think that’s what has to happen.
Stacy Mitchell: Well, I’m encouraged by just all the growing interest in antitrust law and the fact that the word monopoly is back in our vocabulary. And the fact that we’re talking a lot more about structural solutions and this idea that people who work for a living really should be at the center of economic policy making as opposed to just completely disempowered by sort of this corporate run system. It does seem like there’s a shift going on. So I hope we continue down this road. And may the Maine Lobstering Union become a blueprint for a new kind of economy that could be much more, involve people really having control over their own labor and benefiting from the fruits of it.
Stacy Mitchell: It’s been so much fun. This has really been a really enlightening conversation and great to have you on. I really appreciate it.
Sanjukta Paul: Thank you so much for having me.
Stacy Mitchell: Thank you for listening to this episode of Building Local Power. You can find links to what we discussed today by going to our website, ilsr.org and clicking on the show page for this episode. That’s ilsr.org, and while you’re there, you can sign up for one of our newsletters or click the donate button to support our work. If you like this podcast, please consider rating and reviewing it on iTunes or wherever you get your podcasts.
Stacy Mitchell: This show is edited by Lisa Gonzalez and produced by Lisa, Hibba Meraay, and Zach Fried. Our theme music is Funk Interlude by Dysfunction Al. For the Institute for Local Self-Reliance, I’m Stacy Mitchell. We’ll see you again in two weeks for the next episode of Building Local Power.

 

 

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Audio Credit: Funk Interlude by Dysfunction_AL Ft: Fourstones – Scomber (Bonus Track). Copyright 2016 Licensed under a Creative Commons Attribution Noncommercial (3.0) license.

Photo Credit: AFGE via Flickr

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Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and designs policy to counter concentrated corporate power and strengthen local economies.