Locking in supranormal profits

Published: Wed 03 May 2023
Updated: Wed 03 May 2023
By steve

In Markets.

Wednesday 3, May 2023

The US Judiciary and How Anti-Monopoly Cases are Decided

The United States has a big problem: its politics are dominated by corporate interests, and so too is its law. This is evident in the way that anti-monopoly cases are decided.

When a major corporation is accused of anti-competitive behaviour, the mainstream media will often cover the story. But when the case is about something as mundane as “door hardware,” no one cares. This is because the vast majority of people are unaware of the importance of antitrust law, and they don’t understand how it affects their lives.

But there is one person who does understand the importance of antitrust law: Matt Stoller. Stoller is a writer and researcher who has been writing about antitrust for years. In his latest article, Stoller argues that the US judiciary is failing to protect consumers from corporate consolidation. He has written about the Assa Abloy case [here][1].

Stoller points to the case of Assa Abloy, a Swedish company that is the world’s largest producer of door hardware. Assa Abloy has been on a buying spree in recent years, acquiring dozens of smaller companies. In 2021, Assa Abloy announced that it was planning to acquire Spectrum Brands, a US company that is one of Assa Abloy’s biggest rivals.

The US Department of Justice (DOJ) sued to block the merger, arguing that it would create a monopoly in the door hardware market. But the DOJ lost its case in court. The judge ruled that the merger would not harm consumers, because Assa Abloy and Spectrum Brands were already competing with each other.

Stoller argues that the judge’s decision was wrong. He points out that Assa Abloy and Spectrum Brands are not direct competitors, because they sell their products to different customers. Assa Abloy sells its products to businesses, while Spectrum Brands sells its products to consumers. The point is that businesses end up selling to consumers. That is their raison d’être.

The merger of Assa Abloy and Spectrum Brands will create a near monopoly in the business-to-business market for door hardware, the dullest of dull categories, but what is life if not an accumulation of dull categories? More seriously, as production of more and more dull stuff becomes increasingly concentrated, the increased productivity that comes from the need to compete by innovation evaporates. Ultimately, this is visible in poor productivity growth, which is found in almost all developed markets over the last couple of decades. Correlation is not causation, but it is highly suggestive.

How do we genuinely incentivise elected officials and regulators to act in the interests of consumers, and against the interests of corporate power? It genuinely is more difficult than it seems. Winning elections needs money, and money comes from producers and not consumers. All parties are descending into a single party of producer interest, pretending to represent real ideological differences. Somehow, previous generations passed laws that promoted genuine competition. Let’s hope we can do it again.

[1] https://mattstoller.substack.com/p/all-rise-how-judges-rule-america

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