Morgan’s Monopoly Digest – February 2024
By Morgan Harper & Lilly Solomon
- JETBLUE/SPIRIT BLOCKED. The DOJ and seven state AGs won their lawsuit to block the merger of JetBlue and Spirit, with a federal judge finding the merger would increase ticket prices and reduce consumer choice. This was the first time in 40 years the DOJ has successfully blocked an airline merger. JetBlue/Spirit have already appealed with arguments set to begin in June, and Spirit is exploring options to grapple with its $1.1 billion in debt. Shortly before the ruling, JetBlue’s CEO stepped down and Joanna Geraghty took over.
- BOEING UNDER FIRE. The Boeing 737 Max window disaster on a recent Alaska Airlines flight was just the latest example of how the airline manufacturer duopoly leads to dangerous consequences. In response, the FAA announced an indefinite restriction on Boeing’s production. House Infrastructure & Transportation Committee chairs Rep. Sam Graves (R-MO-06) and Rep. Rick Larsen (D-WA-02) sent a letter to the FAA asking what the oversight of Boeing has uncovered. The NYTimes also asked experts, including Economic Liberties’ Matt Stoller, for ideas on fixing the troubled company, ranging from nationalization to moving the HQ back to Seattle from Virginia, so management can be closer to engineers. Boeing’s workers are also demanding a 40% pay raise as they negotiate a new labor agreement.
- KOCH’S TAXPAYER-FUNDED FERTILIZER TAKEOVER. Four firms, including Koch Industries, control 75% of the nitrogen-based fertilizer market, leaving farmers vulnerable to price hikes for this critical input. In December, Koch announced its purchase of OCI Global’ s stake in the Iowa Fertilizer Company, a nitrogen enrichment facility that received tax breaks in the “worst economic development deal in state history” with a promise to bring more competition to the industry. Given these concerns, Economic Liberties, Farm Action, and 16 other advocacy organizations sent a letter to the FTC and DOJ urging them to investigate the transaction.
- PESTICIDE SCHEME HEADS TO TRIAL. Seven pesticide companies control 90% of sales, including China-based Syngenta and U.S.- based Corteva. These companies would pay distributors not to carry competitors under the guise of a loyalty program. The FTC and 10 states sued claiming that the loyalty programs violate antitrust law. Beyond harm to competitors, the suit claims farmers had to pay “millions” extra without access to rival products. Syngenta sought to dismiss the case, but a Judge denied the motion.
Building Worker Power
- DOL TACKLES EMPLOYEE MISCLASSIFICATION. Estimates suggest 10-30% of employees are misclassified as independent contractors, who often lac k labor protections and benefits such as overtime pay, workers’ compensation, and insurance. The Department of Labor recently finalized a rule that updates its classification analysis under the Fair Labor Standards Act (FLSA) to include factors such as flexibility over hours worked. The rule takes effect March 11, 2024. Sen. Murphy (D-CT) has also sent a bipartisan letter calling out Amazon for misclassifying their drivers, and FTC Commission Alvaro Bedoya in a speech noted that misclassification may be an unfair method of competition under Section 5 of the FTC Act.
Reining in Big Tech
- FTC TARGETS BIG TECH & AI. Big Tech has spent $19 billion investing in AI firms without much transparency about the terms of these agreements. In response, the FTC has launched a 6(b) study to examine these investments, including Microsoft’s partnership with OpenAI. FTC Chair Khan previously wrote in the NYTimes about the need to move swiftly to regulate AI. Check her out on CNBC discussing the scope of the FTC’s investigation.
- APPLE: DOJ’s NEXT TARGET? In 2020, the House Judiciary Subcommittee on Antitrust released a report detailing how Apple leveraged its dominance over the smartphone and mobile operating system markets to block competition. The NYTimes reports the DOJ is wrapping up an inve stigation and could file a “sweeping antitrust case” against the company, for this type of conduct. In response to EU regulatory pressure on its exclusivity practices, Apple just offered to make its tap-to-pay mobile wallet technology available to competitors.
- AMAZON DROPS iROBOT. Amazon’s proposed acquisition of iRobot, maker of Roomba, posed a series of concerns, from limiting competition to threatening consumer privacy. The EU expressed formal concerns with the deal in November and was widely expected to block the deal in short order. While the FTC have not public ly signaled their intentions, Amazon and iRobot decided to abandon the deal. Sen. Warren (D-MA) and several advocacy organizations had urged the FTC to block the deal.
Improving Health Care
- HEALTHCARE DATA GIANTS FOLD. In July, the FTC sued to block the world’s largest healthcare data provider, IQVIA, from acquiring Propel Media, a health advertising firm. The firms are two of the largest healthcare advertising agencies. After an evidentiary hearing, a federal judge ruled in favor of the FTC, finding the merger likely would harm competition. Just days after the decision, IQVIA dropped the deal.
- ILLUMINA/GRAIL NO MORE. Illumina, a gene sequencing company, vertically acquired Grail, the producer of a cancer screening test, without FTC or EU approval. EU authorities imposed record fines for the rushed closing, and the FTC also ordered the companies to divest. In response to Illumi na’s appeal, the Fifth Circuit unanimously found the FTC could likely prove the merger would harm competition. Just days after the court’s ruling, Illumina announced it would divest Grail.
- BREAKING UP TICKETMASTER. It’s been a year since the Break Up Ticketmaster coalition launched and Swifties rebelled. Their outrage matched frustration from artists and other fans with the live events monopoly, covered in a fiery Senate hearing. DOJ is reportedly investigating Live Nation, but whether they will file a lawsuit is unclear. Economic Liberties has outlined how the DOJ could go about structurally separating Live Nation/Ticketmaster’s business lines. Senator Klobuchar (D-MN) recently joined an Economic Liberties’ virtual discussion on the need to rein in Live Nation/Ticketmaster.
- ENFORCERS CONFRONT UPMC. A consolidated hospital market raises prices, lowers wages, and decreases quality of care. Western Pennsylvania is experiencing such consolidation firsthand as its health care goliath, UPMC, which owns 40 hospitals and controls 44% of regional inpatient surgical services markets, looks to expand its footprint. The FTC reportedly is investigating and has reached out to other hospital networks in the region. UPMC is also facing private antitrust litigation from SEIU workers, and the DOJ is reportedly investigating UPMC for their dominance over regional labor markets.
- OVERDRAFT SHOWDOWN. Banks charge as much as $39 for overdrawing a transaction, raking in $9 billion in overdraft fee revenue annually. A new CFPB proposed rule would rein in predatory overdraft fees by subjecting them to the protections of the Truth in Lending Act or limiting them via a proportional-co st mandate that could cap them as low as $3 per transaction. The CFPB is accepting comments on the proposed rule until April 1, 2024. Together with a similar proposed rule banning non-sufficient funds fees, these CFPB rulemakings are estimated to save Americans $5.5 billion annually.
- FTC AUTO DEALER RULE ON PAUSE. By the age of 24, 20% of service members have $20,000 in auto debt. Predatory dealers, often located near military bases, li e about the cost of a vehicle and tack on junk fees, contributing to this debt. The FTC finalized the Combating Auto Retail Scams (CARS) rule to stop these tactics for all borrowers, which the agency estimates could save consumers $3.4 billion annually. The Auto Dealers Association is appealing.
- The CFPB’s small business lending reporting rule is here to stay as Biden’s veto of the CRA to ban the rule failed a senate override.
- Joseph E. Stiglitz wrote an op-ed on why the Biden Administration’s antitrust victories are necessary wins for consumers.
- Meta lost its preliminary injunction motion to stop the FTC’s case against the platform for violating the consent decree pertaining to child data while Meta challenges the agency’s constitutionality.
- WBUR’s On Point covered the Credit Card Competition Act debate.
- Economic Liberties and legal academics submitted an amicus brief in the SCOTUS case NetChoice v. Paxton, arguing that social media platforms should not be permitted to use the First Amendment as a shield from non-discrimination laws.
- NYTimes is asking for consumer stories on prescription drug costs.
- HHS named Stacy Sanders as inaugural Chief Competition Officer.
- Washington state AG has filed a lawsuit to block the Kroger & Albertsons merger.
- Economic Liberties along with more than a dozen other advocacy groups sent a letter urging Appropriations Committees to increase funding for the DOJ’s Antitrust Division.
- The Second Court of Appeals upheld the FTC’s lifetime ban to keep “Pharma Bro” Martin Shkreli out of the industry.
- Two prominent real estate agents have started a new trade association, American Real Estate Association, in response to the National Association of Realtors’ dominance of the real estate listing market.
BRIEFINGS & EVENTS
- During a happy hour conversation at the National Press Club, Economic Liberties and the Vanderbilt Policy Accelerator discussed their new white paper, “How to Fix Flying: A New Approach to Regulating the Airline Industry.” The paper details policies Congress and the Administration could implement to improve the U.S. airline industry, including bringing transparency to points programs and more fairly allocating airline slots at airports.