The World Turned Upside Down: Lina Khan's FTC Fights for Domestic Cattle Ranchers
The Federal Trade Commission can now investigate swaths of the economy. And the USDA and FTC are helping domestic cattle ranchers with new Made in USA labeling.
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Something weird and confusing is happening in the politics of market power. Yesterday, the FTC, under new Chair Lina Khan, held its first open meeting in decades, and pushed through a bunch of important regulatory changes, everything from changes to meat labeling requirements to allowing the staff to investigate tech firms. Every item was voted on by the 5 commissioners, and every resolution passed 3-2, with the Republicans opposed. Politico’s Leah Nylen wrote that Khan delivered on progressives’ “wish list,” which is what one would assume. After all, Khan is a 32-year old unabashed progressive.
And yet, that characterization of the politics of what happened is simply wrong. The very first thing the Khan did was pass a final rule on Made in USA labeling fraud, which is something that Donald Trump supported. Shortly thereafter, Khan withdrew Obama’s 2015 FTC guidance on how to regulate fair competition across the economy. It’s hard to see how reversing Obama’s policies is some sop to progressives. Then, dozens of business leaders, from pharmacists to restaurant owners to grocers testified about how they need FTC action to protect free and fair markets from monopolists. Are independent businesses the base of the Democratic Party? If so, that would be news to, well, everyone.
The politics get even more confusing when examining perhaps the most immediately impactful action enacted yesterday, which is the Made in USA standard on labeling. Democratic commissioner Rohit Chopra, an ally of Khan, took special care in discussing the comments the commission got from domestic farmers and ranchers, noting their ‘considerable interest’ and requests for stronger standards regarding meat labeling. Domestic ranchers live in rural areas and are not, to say the least, a Democratic leaning group. But it is a group that wants action on monopolies. In 2019, the U.S. Cattlemen Association, which leans quite conservative, petitioned the government to redo its Made in USA meat labeling standards. And recently, Republican politicians, responding to their voters, asked the Biden administration to investigate the meatpackers.
The reason is simple. Back in May, I interviewed cattle ranch lobbyist Bill Bullard, who told me about how beef prices for consumers are incredibly high, even as cattle ranchers are getting paid too little for their product. What meatpackers are doing, Bullard said, is importing 3 billion pounds of beef from abroad - Argentina or Uruguay or Namibia - and then selling it domestically, often labeled as Product of USA. This is because the Agriculture department had standards that said that you can label imported cattle as a Product of the USA, as long as cattle is processed in America. This allows meatpackers to drive down the price paid to domestic ranchers, because they can deceptively market beef from Brazil as American beef.
The FTC and the U.S. Department of Agriculture share jurisdiction over how meat is labeled, and what “Made in USA” means. The FTC, however, had no rule against Made in USA fraud, and the USDA allowed deception in its rule for what the label could mean. For decades, there was a bipartisan consensus against enforcing on Made in USA. But then, in 2018, Democratic Commissioner Rohit Chopra broke with this consensus and pushed his fellow commissioners. Republican Commissioners fought back, even as Trump’s White House supported Chopra.
Yesterday, the Federal Trade Commission took steps to put a stop to this sleazy and harmful activity. The Made in USA rule itself goes far beyond meat labeling, but Chopra noted that for the FTC, to qualify, the meat must be born and processed domestically. He called the current USDA standard “misleading,” and encouraged the Ag Department to update its rule. “Unqualified “Product of USA” claims for meat products,” he said, “are only appropriate when the animal was born, raised, and slaughtered in the United States.” The same day as this meeting, the USDA announced a “top-to-bottom review” of Made in USA meat labeling standards, acknowledging its standards are deceptive.
The shared jurisdiction creates a weird dynamic in cattle markets. Up and down the supply chain stakeholders look to the USDA, not the FTC, as their primary regulator. But when the FTC begins to enforce, and as the USDA updates its rules, the packers will have to change their business operations. Made in USA beef will now mean domestic cattle, raising the prices that domestic producers get from packers. If the USDA goes as far as the FTC, then it’ll radically change cattle markets.
It’s hard to know whether cattle ranchers will shift towards a less hostile stance to the Democrats from this, but it does show the politics of antitrust reflect a different way of understanding the possibility of change. A lot of eyebrows went up when Lina Khan got 22 Republican Senate votes confirming her to the FTC. But there’s a reason she got those votes, despite skepticism from parts of the right. Republicans in rural America are upset about consolidation across the economy, not just meatpacking, but concentration in general. It comes up in the politics of meat because the pressure being brought to bear on ranchers is particularly painful, and targets an organized group. But it’s pervasive, and shows up in GOP polling. (It is after all Republican J.D. Vance whose first Senate ad references Jeff Bezos, Google, and offshoring).
And this brings me to the problem this presents to the Republicans at the FTC. The two Republican commissioners, Christine Wilson and Noah Phillips, were visibly angry at yesterday’s FTC event. Phillips began by complaining that they had to sit in an open meeting watched by the public. Throughout, both expressed outrage over various procedural nits, but in reality they were just upset Khan is putting them in positions that make them politically crosswise with their base. Phillips argued bitterly *against* the interests of cattle ranchers and opposed the Made in USA rule, as he had under the Trump administration. Meanwhile, Wilson constantly lauded Obama for his 2015 statement on Fair Competition.
In other words, it was the Democrats going populist and sounding pro-business and Trump-y, and the Republicans embracing Obama and corporatism. The world turned upside down.
If you’ve been reading me for awhile, this dynamic won’t be a surprise. Noah Phillips has been in the center of the political collapse of the corporatist Republicans for awhile, as he voted against bringing a Facebook antitrust suit and opposes any meaningful regulations on big tech. Republican Judiciary Committee Chair Jim Jordan, who is trying to protect big tech while seeming to oppose it, doesn’t have a lot to work with when he has to deal with people like Phillips as part of his team.
The new FTC, however, also creates a problem for Democrats. While the policy apparatus on the Democratic side is increasingly focused on the problem of market power, the political apparatus doesn’t really know how to market arguments against monopoly on a political level, and doesn’t particularly understand what it means to do things that are good for honest businesses. Democratic pollsters and operatives do not want to test rhetoric on market power questions, because they don’t want to learn about markets and don’t respect commerce, preferring cultural arguments that excite their upper class donor base. Meanwhile, Democratic voters are confused about whether business questions are even a part of politics.
It is this political dynamic that is, at the core, the paradox of the anti-monopoly movement. It is Republican voters who want to take on monopolies, yet it is Democratic policymakers who know how to do it. Yesterday it was Republican Commissioners praising Obama’s corporatist policies that facilitated offshoring and consolidation, while Democratic ones advocating for the domestic ranchers and businesspeople who have traditionally been part of the conservative coalition. At the same time, Democratic politics is highly organized around cultural questions, even if Democratic FTC commissioners are focused entirely on market power.
The pro-monopolists on the right and left exploit this dynamic. The strongest argument from the pro-monopoly faction of the Republican Party is to call antitrust ‘woke,’ to try to make reducing concentrations of market power seem like they are part of a left-wing culture war. Jordan, for instance, used that line constantly during the hearing over bills to rein in big tech, and he often attacks new FTC Chair Lina Khan as part of a radical left takeover that has been happening since the Obama era. Meanwhile, Silicon Valley Congressman Eric Swalwell used left-wing cultural attacks throughout hearings on antitrust, simply to sabotage any attempt to constrain big tech power.
Ultimately, I don’t really think this distraction game is going to work, and more reflects that the neoliberals have lost the argument and the anti-monopolists are getting stronger. When Amazon demanded this week that Khan recuse herself from any decisions about the firm simply because she had studied Amazon as a scholar, commentators mocked the ecommerce giant. And conservative Republican Josh Hawley made it clear that he saw the allegations of conflicts of interest not as a problem, but as a qualification. Amazon’s outlandish demand, he tweeted, showed “precisely why she was a good choice for the FTC.”
Been a bit since I talked to you (I believe). I was resurrecting a piece I had done on Malheur, the concentration of the meat packing industry, and how the ranchers were fighting the wrong battle. Not much has changed since then. Congress pretty much killed any activity to open the market back then. It remains to be seen whether McConnell's Repubs will work with Dems to open up the meat packing business.
People seem to forget what occurred in 2008-2009. I was working at the time for a German company manufacturing Automotive products for Chrysler, Audi, BMW, Mercedes, Skoda, etc. When the collapse of Wall Street occurred, MainStreet was impacted greatly as was automotive. The business closed up. Companies canceled their orders for chips and the Infineons, NXPs, OnSemis, etc. stopped growing wafers to be packaged into semiconductors at different facilities. This results of lasted 1-2 years before the industry recovered and supply was adequate again.
I remember Gettelfinger testifying to Congress about Labor and the results of direct labor in a product was less than 10%. He was correct and as a one time consultant, it was our findings too. Congress had it in for Labor as the cost causing automotive issues.
If automotive had maintained their orders, the product manufacturers would have made product. The Fords, GMs, Chryslers, etc. of the world will penalize a company with too much inventory and make them pay for it. Chrysler had delayed payment to our company until the owner told them he would close the plant and take operations back to Germany.
My point? Similar is occurring today. And more so as the pandemic is hazardous to Labor. Except, you do not need much labor to grow wafers. Companies have a habit of blowing themselves up to avoid costs for inventory, operations, and labor to pursue the holy grail of JIT.
I write for Angry Bear along with Dan, etc. I believe at one time I talked to you about may be doing an article or two there. You may have been busy with Yves then. I am better known as run75441.
Good article and on point when written and even more so now.