Do you guys remember the Occupy Wall Street movement? Do you remember how annoying they were? I’m glad that’s over!
They made (some) salient points, though. Chief among their complaints was the fact that, according to various financial reports, more than one-third of the nation’s wealth was controlled by one percent of the population. “Impossible!” we all screamed, “America is built on the potential of financial success through hard work!”. The OWS movement came and went, but many of the problems remain unresolved. The one percent remains the one percent, and those of us in the 99 percent maintain hope that we’ll invent the next Instagram, Microsoft, or Kardashian-esque empire to join their ranks. We all aspire to one day work for ourselves, join the upper echelon of American wealth, and vacation with Jay-Z and Beyoncè.
The distribution of wealth and prosperity is not just uneven for individuals- the same rules apply for corporations. A recent Policymic post has exposed a fact about which I was previously unaware: many of the most popular brands in America are actually owned, in some capacity, by ten companies. These ownerships are not outright; many of the business arrangements arise as part of majority stock ownership, distribution deals, and mergers. The same article shows that there are six companies responsible for the majority of media output in this country, and that four financial institutions control our banks.
That sh-t cray.
It’s an interesting, and even insane, premise to consider: so few people actually control so much. In theory, there are twenty-ish CEOs that have the American economy under marionette strings. They’re the business illuminati, if you will. This statement is even scarier when you consider how much corporate money controls politics. Many of the people that we elect to represent our interests are eventually bought and sold by private interests that do not always directly align with the desires of their constituents. It’s hard to stick to your political promises and not become a Washington insider when your reelection campaign coffers are empty. Money wins elections, after all. NRA, anyone?
The power struggles in this country are real. There is no problem with capitalism, and for many the drive for financial and professional success is the fuel they need to continue to work hard. That drive is premised on the possibility of one day being the boss. It’s tougher to become the boss when there are only twenty open positions. So much money and power in so little hands is scary.
An Antitrust Primer
Antitrust is an area of law that seeks to guarantee competition between businesses for the benefit of the public. Antitrust law also endeavors to regulate mergers and acquisitions of businesses so that mega-corporations are not formed to unfairly dominate their respective industries. The premise of antitrust is basically that competition is a good and necessary component of running a business, and attempts to lessen competition in an unapproved manner are illegal.
There are various reasons why a lack of competition is problematic in modern business.
The first goes back to the old phrase of “absolute power corrupts absolutely.” Let’s take a moment to remember the history of our dear nation, shall we? This country was founded by people who were escaping monarchies and a government where the power was vested in one person; they understood what too much power can potentially do to a country. If we subject those who govern our country to these standards, why would our businesses be treated differently?
They’re not.
When it comes to these businesses, the same premise applies. If one company controls everything, we all lose. How else would their business practices be regulated? Concerns from consumer prices to employee wages wouldn’t be countered by an industry standard, because the one company is the industry.
Second, competition spurs economic growth. If Samsung didn’t exist, Apple wouldn’t be a powerhouse. There wouldn’t be a Magic Johnson without a Larry Bird, a Britney without a Christina, and a Starbucks without a Dunkin’ Donuts. You get where I’m going with this, right? Additionally, this country is still experiencing the effects of an economic downturn, and the last thing on the agenda of any political party is the slowing down of financial recovery.
This is especially true because America has been down the mega-corporation road before, and it didn’t end well.
The Lessons of Bell Atlantic
In 1974, the U.S. Department of Justice filed an antitrust lawsuit against AT&T. In U.S. v. AT&T, 552. F.Supp.131 (D.D.C. 1983), the government sued AT&T to stop what they believed were monopoly-like business practices. The allegations were that the corporate structure created unnecessary barriers to competition, which is in direct contravention of the Sherman Act. The main goal of the Sherman Act is to establish and protect unobstructed competition between businesses as a national standard. Specifically, the complaint stated that 6conspiracies sought to “restrain trade in the manufacture, distribution, sale, and installation of telephones, telephone apparatus, equipment, materials, and supplies…”. The D.C. Circuit found that, at the time, AT&T was the largest corporation in the world. The resolution of the case created twenty-two smaller “operating” companies, mostly allocated by region. The forming of these operating companies divests and divides the power from one major body, thus creating competition and reinforcing the tenets of the Sherman Act.
Why It Matters
Obviously this situation is significantly different, but it is sure to raise some red flags. It’s a slippery slope, no? With U.S. v. AT&T, there was one company dominating an industry. The same result would not occur in the current scenario. Here, there are ten companies controlling hundreds of consumer goods, six companies running the entertainment industry, and four banks commanding our financial institutions. We are a merger away from a mega company stomping away at the competition. In other words, we’re monopoly-adjacent. These companies need to be closely scrutinized. It’s the same reason that the proposed merger between US Airways and American Airlines has been scrutinized so closely as of late. A superpower is not beneficial for the expansion of business, and it’s not in the best interests of the country.
[Policy Mic] [Case Text] [New York Times] [Deal Book]
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Featured image courtesy of [FamZoo Staff via Flickr]