#steering

This shouldn't surprise anyone. Hundreds of thousands – millions? – of merchants are unable to coordinate strategies in the way that just two credit-card companies can. Indeed, when you have hundreds of thousands of companies, that represents many, many different kinds of businesses, each of which has different kinds of customers and different labor, inventory, cash-flow and profitability specifics.

But as an industry grows more concentrated, all the firms within that industry converge on a single, homogeneous style of operations. Walmart operates very differently from the mom-and-pop shops it forced out with predatory pricing and sweetheart deals with wholesalers – but Costco, Walmart and Sam's Club are all remarkably similar to one another. As a shopper, that means that if have needs that aren't well-served by a big box store, you're out of luck – and it means that a credit-card settlement that works for Walmart will probably work equally well for Costco and Sam's Club.

Think of the mobile phone duopoly of Apple/Google. These two "competitors" have nearly identical ways of dealing with their suppliers – both charging 30% fees for processing payments (and yes, that's a racket that makes Visa/Mastercard look like pikers). These two "competitors" are also one another's most important business-partners: the single largest transaction either company makes every year is with the other – the $26B that Google pays Apple every year to be the Ios and Safari default search engine, through which Apple exposes every one of its customers to Google's incredibly invasive, continuous surveillance.

Speaking of surveillance: consider the surveillance advertising duopoly of Google/Facebook. Not only do these companies extract the nearly identical (sky-high) fees from advertisers and dribble out the nearly identical (miserly) payouts to publishers – they also illegally collude to rig the advertising market, dividing it between themselves:

https://en.wikipedia.org/wiki/Jedi_Blue

The economists' term for this is the "collective action problem." It's a problem we want corporations to have. The problem with monopolies and cartels isn't merely that they're "too big to fail" and "too big to jail" – it's that a handful of companies can form a cartel to capture their regulators:

https://pluralistic.net/2022/06/05/regulatory-capture/

The surveillance industry is unified; the surveilled are not. The rewards from surveillance are concentrated. The costs of surveillance are diffused. This is as good a working definition of corruption as you could ask for: conduct that produces concentrated gains and diffuse losses.

Our generations-long failure to enforce antitrust law created monopolies that rippled out through whole supply chains. As David Dayen described in his brilliant 2021 book Monopolized, it's the story of US health industry:

https://pluralistic.net/2021/01/29/fractal-bullshit/#dayenu

First, pharma companies merged to monopoly and started to gouge hospitals on drug prices. So hospitals formed regional monopolies that could resist these pricing demands – and then turned around and started gouging insurance companies. So insurance companies merged, too. Every corner of health-care is now a monopoly or a cartel – from pharmacy benefit managers to hospital beds:

https://pluralistic.net/2022/01/05/hillrom/#baxter-international

The only parts of the industry that aren't concentrated are the parts that can't concentrate: patients and health-care workers. The monopolized health care sector reaps the concentrated gains, and the patients and workers pay the diffused costs. Those costs are diffused, but they're still substantial – a literal matter of life or death:

https://kffhealthnews.org/news/article/investors-private-equity-nonprofit-nursing-homes-quality-of-care/

Monopolization lets businesses solve their collective action problem, so they can run circles around less concentrated, less organized sectors. But concentration also lets companies solve the collective action problem of lobbying governments and capturing their regulators. A concentrated industry can maintain message discipline in front of regulators and legislators. A diffuse sector will always have credible defectors who'll say, "No, we can absolutely function with tighter controls – my competition is bullshitting you and I have receipts to prove it."

The surveillance industry's massive concentration is why America can't seem to pass a federal consumer privacy law. The last consumer privacy law Congress passed was 1988's Video Privacy Protection Act, a law that bans video-store clerks from telling anyone which VHS cassettes you're renting. But federal law is effectively silent on every other kind of invasion – your ISP, your TV, your car, your phone, your medical implant, your dishwasher and your smart speaker can all harvest your data, charge you for the privilege and sell it to anyone, for any purpose.

That silence didn't come cheap: whenever Congress moots a privacy law, the concentrated surveillance industry is all on the same page for the ensuing lobbying blitz, which it can afford thanks to the massive profits that an industry reaps when it eliminates "wasteful competition."

This is a point that leftists sometimes miss about competition law. The point of competition isn't merely to discipline companies into finding more efficient ways to run their businesses so that their prices go down. Sure, that's sometimes a good thing for the public.

But there's plenty of commercial conduct that we don't want to improve – rather, we want to extinguish that conduct. We don't want more efficient commercial surveillance – we want no commercial surveillance.

Without competition, an industry can outmaneuver the government. Think of IBM: the DOJ sued IBM for antitrust violations from 1970 to 1982. For 12 consecutive years, IBM spent more on lawyers to fight the DOJ's Antitrust Division than the DOJ spent on all the lawyers it employed to fight every antitrust violation in the country. IBM literally outspent the US government, year after year, for 12 years! That let them delay the DOJ's breakup long enough for Ronald Reagan to be elected, and then Reagan dropped the suit.

This doesn't just effect customers for a monopoly's products – it also (and especially) effects the workers for that monopoly. When employers don't have to compete for labor, they can pay workers less and save money they might otherwise have to pay for benefits and workplace safety. Those additional profits can be plowed into lobbying against pro-union laws, and to pay the eye-watering sums charged by scumbag union-busting law firms.

Look at the companies who've gone to the Supreme Court to get the National Labor Review Board abolished: these are giant corporations from heavily concentrated sectors with little competition to erode their profits. And while Tesla, Trader Joe's and Amazon all have very different businesses, they're all similar enough that none of them sees an advantage to courting workers by offering a unionized shop:

https://newrepublic.com/article/179165/musk-supreme-court-nlrb-labor

It's not just leftists who fail to grasp the relationship between competition and the ability of regulators to do their job. Libertarians miss this, too. Even if you're a fully Fountainhead-poisoned freedom-to-contract hobgoblin, you still want a government that can enforce those contracts and defend the property rights they invoke. For a government to force a corporation to abide by its contractual obligations, that government has to be more powerful than the corporation it is charged with policing. Which means that however large you're willing to let a monopoly or cartel grow, you're going to have to tolerate a government that's even larger:

https://pluralistic.net/2023/02/05/small-government/

The "$30b win" for America's merchants is, in fact, a loss. 20 years of litigation over high fees, and the fees are now much higher. But that loss is surely unevenly distributed. Walmart and Amazon and other retail giants are going to be able to bargain for all kinds of off-the-books rebates, promotions, and other sweetheart deals, meaning that they'll have even more unfair advantages over smaller, more disorganized retailers. That means more of those mom-and-pops will vanish, leaving shoppers with less choice and higher prices – and workers with less choice and lower wages.

The lesson of 40 years of pro-monopoly policy couldn't be clearer: you can either have an economy that is regulated by lawmakers who are at least nominally transparent and democratically accountable, or you can have an economy regulated by totally unaccountable and opaque monopolists. Fail to do the former, and you will always end up with the latter.

If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog: