Welcome to BIG, a newsletter on the politics of monopoly power. If you’re already signed up, great! If you’d like to sign up and receive issues over email, or become a paying subscriber, you can do so here.

This is the last issue of 2022. I’m very excited for next year, because the move for more enforcement is picking up steam. Turning on enforcement is not like a light switch. It takes time, but it also carries momentum. Investigations can take months or longer, which means a bunch of stuff launched in 2021 and 2022 will bear fruit this year.

For this issue, I’ll look both back and forward. I’m going to trace the broad trends in monopoly-related commerce and policy over the last year, as well as offer some predictions for next year.

What’s the basic story of 2022? This Reuters headline says it all. For the first time in our lifetimes, it became harder for Wall Street to construct monopolies.

We’re part of this story, so first, let’s talk a bit about this newsletter, and what we accomplished together.

Newsletter Stats

In 2022, BIG got big. At the end of 2022, 76,647 people were subscribed to this newsletter. That’s up from 50,080 at the end of 2021, 35,513 at the end of 2020 and 17,690 at the end of 2019. Our nerdy but useful articles were read millions of times, and BIG is now cited in antitrust cases and major publications, as well as read widely within the competition policy community around the world. State and city officials, members of Congress, entrepreneurs, journalists, students, workers, and engineers read and circulate what we do.

This size and reach has translated into influence. Last month, Politico’s Nancy Scola noted that our “ideas are dominant in Washington under President Joe Biden,” though we also have many allies on the right as well. One lobbying firm ranked us as #5 in the country in terms of being a super-influencer on antitrust (as well as political economy in general). I don’t know what a super-influencer is, but it sounds impressive.

While there are many people who have praised this work, I tend to see hostility from opponents as equally significant. So my favorite mention this year is from former Senator Phil Gramm, who attacked us in the Wall Street Journal for criticizing the use of economics in antitrust law. Gramm is responsible for the repeal of Glass-Steagall as well Ticketmaster’s market power, and once said, “When I am on Wall Street and I realize that that’s the very nerve center of American capitalism and I realize what capitalism has done for the working people of America, to me that’s a holy place.” If Gramm is unhappy with what we’re doing, then we’re on the right track.

In terms of paid subscribers, over 3000 of you signed up as paying supporters. With this revenue stream, we have a copy-editor and as well as a few guest-writers. I’ve been testing a podcast to see if it’s doable, and I am doing videos with Breaking Points on monopoly power. There’s also a Discord server for paying subscribers, where you can learn about everything from the nitty gritty of pharmaceutical pricing to finding old-timey anti-monopoly cartoons. Most importantly, you invested in making sure that I have the independence to offer the unvarnished truth. If you want to subscribe, you can do so here. If you are a student or otherwise can’t afford this newsletter but want to be a paid subscriber, get in touch.

What Happened on the Monopoly Front in 2022?

So the big trend this year, according to both the Financial Times and the New York Times’ Dealbook, is the fall in merger activity. Wall Street bonuses are down, and private equity firms are pulling back from acquisitions.

There were two main reasons for this downturn. First, the crazy merger wave of 2021 finally crested, because the Federal Reserve stopped printing trillions of dollars, which had made it easy to borrow money to make acquisitions. In 2021, the total global value of mergers was a record $5.7 trillion. In the last six months of 2022, the rate dropped to $2.8 trillion a year, an eight-year low. Private equity lost its cheap financing, and the most obvious Ponzi schemes - such as crypto - collapsed.

Second, antitrust enforcement became real. The Federal Trade Commission and Antitrust Division started to bring merger cases more aggressively and more assertively than they had since the 1970s. Numbers tell the story.

The U.S. Justice Department and Federal Trade Commission (FTC) have attempted to thwart 22 mergers since Biden came into office in January 2021… That outnumbers the antitrust challenges during the first two years of former President Barack Obama's first term in office and is twice as many as in Donald Trump's first two years, the Reuters analysis shows.
While comprehensive data going back decades is unavailable, Joel Grosberg, an antitrust lawyer at McDermott, Will & Emery LLP, said more mergers are entangled in U.S. antitrust litigation now than at any point in his 25-year career.

It’s not just mergers. Enforcers resurrected dormant areas of law, such as the Robinson-Patman Act against price discrimination and corporate bribery, a section of the Clayton Act that bars exclusive dealing, and a provision of antitrust law which bars having directors sit on the board of rival firms. In addition, Congress passed the first meaningful antitrust reforms since 1976, as well as gave significant funding boosts for the agencies. State attorneys general also ramped up their role. For instance, Washington state’s Bob Ferguson actually delaying the payout of a $4 billion special dividend by Albertsons to private equity owners.

Our Contribution

Believe it or not, this newsletter played a role in this shift. We write consistently about monopolies. On a broad level, having a clear and persistent argument helps ensure policymakers act. It’s human nature that when people know they are being watched, they operate differently. Corporate lobbyists are watching policymakers all the time, which leads government officials to take their perspective into account. Now that policymakers know we are watching them, they are taking our perspective into account. The result is aggressive enforcers get more aggressive, and those who are unwilling to act feel more pressure to do so.

I want to highlight two particular accomplishments. The first is helping to revamp how merger policy works. In early 2022, the Federal Trade Commission and Antitrust Division announced they were soliciting public comments on new merger guidelines, which is a very nerdy policy area that organizes all the money and power in the world. Despite its importance, very few people know about merger guidance. In 2010, the last time enforcers changed merger guidelines, just 32 people offered comments, and nearly all of them were corporate lobbyists. This time, there were over five thousand, including thousands from readers of this newsletter alone. Antitrust enforcers have taken these comments seriously. The merger guidelines will be out fairly soon, and I’m guessing the outcry from the antitrust bar will be something to behold.

The second accomplishment is delaying a private equity attempt to loot the Albertsons supermarket chain. In October, when Kroger announced it was buying Albertsons, I wrote up a part of the deal that no one else had - the $4 billion special dividend that Albertsons was going to borrow and then pay to its billionaire private equity owners before the deal closed. These ‘dividend recapitalizations’ as they are known are highly destructive, but no one has ever challenged one in court under antitrust law. The result of my piece was a series of lawsuits in Washington state and D.C. that have tied up the dividend until at least February. The fight has highlighted the destructiveness of this financial tactic, as well as the merger itself. I don’t know the ultimate outcome, but it’s always good to annoy private equity billionaires trying to commit arson for profit.

Predictions for 2023

Last year’s predictions were good. I thought we’d re-regulate shipping, pass antitrust laws, lose antitrust cases in the courts, address meatpackers and start one antitrust trial against big tech, all of which happened. I also believed enforcers would go after pharmacy benefit managers, which is in process but hasn’t begun yet. I suspected the right would go into a civil war between populists and the establishment, and that happened, but it’s not organized around corporate power as I thought it would be. By and large, the corporate Republicans have gained more power than I expected within their party, and Democrats have become more populist than I expected.

Ok, so what’s going to happen this year? Here are my thoughts.

Antitrust enforcement will ramp up significantly, leading to the emergence of a new legal regime. With new funding and momentum, the Federal Trade Commission and Antitrust Division will double the number of merger cases and bring more cases on monopolization in the agricultural, health care, and technology sectors. State attorneys general will use their new authority to bring cases in friendlier courts as well. Since the overall number of mergers is declining, this ramp-up will lead to a much larger percentage of deals being challenged, and feel that much more intense to deal-makers.
This new legal regime, signified by new merger guidelines, will terrify Wall Street, and the Republican establishment will start a war on antitrust enforcement. Parts of the Democratic Party will be persuaded by Wall Street that this aggressive posture on mergers is a problem.
The FTC will win its challenge to Meta’s acquisition of Within, which will be the first time an American enforcement agency has blocked a big tech acquisition. The UK’s Competition and Markets Authority will move to block the Microsoft-Activision merger before the FTC gets a chance to bring it to trial.
The Biden administration’s industrial policy framework will run into significant problems. While there will be some useful results, new spending on infrastructure, carbon reducing technologies, and semiconductors will be dwarfed by stock buybacks and extraction by financial middlemen.
The Securities and Exchange Commission will begin suing nearly every major player in the crypto space, and powerful venture capitalists will be in the crosshairs for unlawful sales of securities. Crypto will mostly go away.
The Consumer Financial Protection Bureau will get into a fight with big tech.
The Ponzi economy will continue collapsing, as the same dynamics evidenced in crypto will be revealed in many other sectors, such as large private equity firms who overpaid for many of their acquisitions over the last few years. PE investors, such as pension funds, will suffer. Private equity firms will try to pretend their returns are still good, using internal fake accounting models that overvalue their portfolio firms. In the meantime, they will lobby the Federal Reserve and Congress to rescue them.
Corporations will see slightly lower profit margins, and will try to reduce labor compensation. Workers will be angry instead of complacent.
Last year, Congress re-regulated the shipping sector with the Ocean Shipping Reform Act. This year, policymakers will begin the early stages of thinking about public utility rules on other industries, the most obvious ones being airlines and social media. This rethink will begin with Congress considering basic consumer protections in old-line industries, and court decisions narrowing Section 230 for social media. Congress will also pass a law regulating app stores.
The FTC will begin writing rules regulating unfair practices in the economy, but will have parts of its authority curtailed by conservative courts.
The U.S. will get more aggressive on moving production from China to friendlier countries. De-coupling supply chains from China will be one of the few bipartisan areas of cooperation, and Congressmen Mike Gallagher and Ro Khanna will lead the charge. The movement to ban TikTok, spearheaded by Republican Federal Communications Commissioner Brendan Carr, will succeed
Antitrust will be in the GOP Presidential primary discourse. It will not be a high priority issue, but it will be mentioned.

Any predictions on your end? I’m particularly interested in what will happen in specific concentrated industries. Add your thoughts below.

Leave a comment

Top Five Articles

Here are the top five articles from BIG in 2022, and then below are a selection of articles by topic.

(1) Why Is Booz Allen Renting Us Back Our Own National Parks? (11/29/22)

(2) The Smash and Grab of Kroger-Albertsons (10/18/22)

(3) Closing Down the Billionaire Factory (8/17/22)

(4) Why Didn't the Government Stop the Crypto Craze (11/11/22)

(5) Big Bottle: The Baby Formula Nightmare (5/13/22)

Finance

The Cantillon Effect and Credit Cards: The $257 Billion Payments Mess

Why Didn't the Government Stop the Crypto Craze

The Cantillon Effect and Stock Market Crashes

Who Loves Woke Wall Street

Health Care

Big Bottle: The Baby Formula Nightmare

The Red Wedding for Rural Pharmacies

Buckraking: Did A Medical Monopolist Buy Off CNN?

Looking Forward to 2023

In 2019, I started this newsletter, with the hopes of growing the anti-monopoly movement, which stretched back in its modern form to anger at Too Big To Fail banks during the financial crisis. The weirdest thing about this venture is that… we’ve been successful.

Ten years ago, if someone had said ‘you’ll be able to take on billionaires and monopolists by writing and talking about antitrust law with a bunch of people’ I would have scoffed. And yet, working to address monopolies through government and legal reform has impacted policy in a serious way. It’s the most successful political venture I’ve ever been a part of. I’m honored to be working with all of you to make our world better. Onward!

Thanks for reading and happy soon-to-be New Year. And keep those tips on monopolies flowing, they are essential to this work.

If you liked this issue of BIG, you can sign up here for more issues, a newsletter on how to restore fair commerce, innovation and democracy. Consider becoming a paying subscriber to support this work, or if you are a paying subscriber, giving a gift subscription to a friend, colleague, or family member.

cheers,

Matt Stoller

BIG by Matt Stoller

What's Coming in 2023 on the Monopoly Front?