Do you remember learning in grammar school about monopolies and how they were bad for America?  .

We learned how the government broke up Big Oil and Big Steel.  How legislation was passed to stop monopolies from forming. I certainly do recall learning about the Sherman Act (1890), Louis Brandeis, plus Teddy Roosevelt (both from school and my grandpa).  Not to mention Senator Estes Kefauver and his Anti-merger Act.

Except..

Monopolies and oligopolies prevail in American commerce. There’s a new book on the subject, written by Dr. Tim Wu (Columbia University School of Law), The Curse of Bigness.  It’s short- about 150 pages.

American commerce is dominated by the big players- some ¾ of all industries have become so since 1997.  Three chemical firms dominate the seed/pesticide business. (I discussed the merger of Dow and Dupont here and Monsanto-Bayer’s dominance here.) 10 firms control the world’s medicine. And, we let a foreign firm take over American beer giants- and it controls almost all the sales of beer that are not “craft” beers worldwide. Not to mention the tech giants- Facebook, Google, and Apple.

It seems that America lost its interest in controlling monopolies when it forced the breakup of AT&T back in the early 1980s. (A process that took eight long years of litigation, I might add.)  Or, maybe it was the infamous Robert Bork with his crazy conservative views, claiming that the Sherman Act was only addressing issues that brought higher prices to consumers.  (Yeah, another BS legal argument from the WrongWing. Unfortunately, one that prevails today.  Consider that Scalia actually intoned in a Supreme Court case in 2004 that monopoly power was both legal and provided a public good.  Really????)

I know you don’t really believe me, so let’s look at a few cases- first in general businesses.  The wireless business sector has been in the news lately- because TMobile and Sprint want to merge.  That would mean that three carriers would control 98% of the business.  Apple and Samsung control more than 75% of smartphones, Facebook and Google (it owns YouTube) control more than 2/3 of the entire social media platforms.

But, here’s a business I really know.  Providers of dialysis generate some $24.4 billion in revenue each year.  Oh, wait- two providers  (Fresenius  with a 50% market share and DaVita with about 42%) generate more than $ 22 billion of that total- some 92%.  And, the providers of equipment, the dialysis manufacturers and suppliers are governed by two firms (Fresenius controls more than 33% of the total) controlling 76% of the $ 2.3 billion in annual turnover.

What about the IV (intravenous solution) business that I reported about 18 months ago?  Two firms control 75% of that $ 1.5 billion market. (Add a third firm and the concentration of control reaches 86%.)  Or, the syringe business?  Becton Dickinson controls more than 60% of  the total market of $ 3.8 billion.  (With the second firm, the control reaches 69%.)

Except for the tightly regulated dialysis market, this concentration of control is one of the primary reasons that US health care costs are so high. (Hmm. Now you understand why there’s been so much political talk about increasing the regulation of the healthcare segment- to do to it what’s been done to dialysis.  Of course, there may be fewer new developments, just like what’s happened to dialysis innovation.)

How did this concentration of power happen?  We can start with a subtle (yeah, that’s the right adjective) change to anti-monopoly regulations.  Under George Bush (2001), the requirement to report acquisitions by larger firms changed from a $ 15 million threshold to $ 90 million.  Unless the firm operates in the pharmaceutical or IT (information technology) segments, when the threshold is $ 360 million. (That lets an awful lot of consolidations fall through the cracks!) That’s how folks like Google, Microsoft, Apple, plus big pharma have consolidated their powers with not one drop of interest from the regulators.  (The number of mergers requiring notification dropped by more than 1/2, as a result of these changes!)

Let’s consider the concentration of power in those two dialysis companies.  Between 1997 and 2017, there were some 4000 center acquisitions- with only 1/2 over the reporting threshold, with about 10% of them required some sort of divestiture- but only 3 divestitures for those below the threshold.  That’s how DaVita and Fresenius managed to increase their control from 31% to more than 77% of the centers (but more than 92% of the revenue).

We do need to get more active breaking up these monopolies and  oligopolies.  Now.