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A New Opportunity for States to Take on Corporate Power

Proposed reforms to several states’ antitrust laws would give workers, small businesses and entrepreneurs a fighting chance against abusive monopolistic practices and workplace dominance.

An Amazon delivery van in New York City
An Amazon delivery van in New York City. The company’s entrance and expansion into the warehousing and logistics industry in New York state has driven wages down for warehouse workers and delivery drivers. (Shutterstock)
At the end of last year, Congress passed the first meaningful reform to federal antitrust law since 1976. It was a public recognition of what advocates have been signaling for decades: Rampant consolidation of corporate power is causing unprecedented harm to the economy, with devastating impacts on the daily lives of Americans.

Despite that progress, the general hostility toward antitrust reform from the new House Republican leadership — and, to be fair, from a smattering of Democrats captured by corporate special interests — means a hard road ahead at the federal level.

But that’s not the end of the story. Several state legislatures are considering groundbreaking reforms to their own antitrust laws. If approved, they would constitute the most important changes to antitrust law in generations, ushering in a new era in which workers and small businesses stand a fighting chance against the dominant corporations.

Historically, states have taken the lead on anti-monopoly measures, on everything from railroads to pharmacies to banking and credit. Nearly every state has its own antitrust law, and states also have the power to enforce federal antitrust law.

In recent years, states have joined some of the largest antitrust cases against big tech firms like Facebook and, when the federal government hasn’t stepped up, have gone it alone, such as when California and Washington, D.C., sued Amazon for anti-competitive activities. States have also notched big antitrust wins against pharmaceutical corporations, and have helped blocked mergers across a host of industries.

However, current state-level antitrust laws suffer from many of the same problems that have hampered federal antitrust enforcement: They’ve been warped by corporate lobbyists and unaccountable judiciaries to enable monopolists and middlemen in every industry from tech to pharma to agriculture. They’ve been winnowed down to disregard harms such as wage stagnation, price gouging and competitive barriers to the entry of new small businesses.

Legislation in Minnesota, New York and Pennsylvania proposes a new standard based on the idea that abusive practices by dominant corporations — be they against direct competitors, small businesses or workers — should be reined in by antitrust law. California is hot on those states’ heels.

Under current law, firms must have 70, 80 or even 90 percent of a market before antitrust enforcers can even think about successfully bringing a case against them in court, and those cases are bogged down by definitional fights over what constitutes an appropriate market, rather than focusing on harmful corporate actions. For bad actors with cash to throw at the problem, fighting a case on technicalities is seen as just the cost of doing business.

By implementing a new standard known as “abuse of dominance” or “abuse of market power,” these state-level bills would refocus antitrust law on the actual tactics big corporations use to gain unfair preferences in the marketplace, rather than on silly and costly fights between economists over market definitions. Instead of waiting for corporate power to become entrenched, the updated laws would focus on predatory behaviors that hobble fair competition in the first place.

Perhaps most importantly, these bills would reinvigorate the enforcement of antitrust law to the benefit of workers. In many parts of the country, corporations are able to corner labor markets and then use their “monopsony” — their buying power — to drive down wages. Fewer employers in an area means workers have fewer opportunities to either leave a job for a better-paying one or leverage an offer into higher pay from their current employer.

In New York state, for example, the entrance and expansion of Amazon into the warehousing and logistics industry has driven wages down for warehouse workers and delivery drivers by thousands of dollars per year. A recent study found that Walmart has a similar effect, driving down wages and even the labor-force participation rate when it expands into a labor market. With nowhere else to take their labor, workers suffer. In fact, the Treasury Department found last year that, across the board, wages are 20 percent lower than they would be in a competitive labor market because of monopsony power.

Under an abuse of dominance standard, workers might bring a case against Amazon for using its power to degrade wages and working conditions for delivery drivers. That could be a useful new tool in a place such as Niagara County, N.Y., where officials recently approved $120 million in tax breaks for an Amazon warehouse but where 95 percent of new workers will be paid significantly less than the lowest-wage jobs in the region.

To be clear, none of these measures would make it illegal for a corporation to be big: They merely say that big corporations should have a legal responsibility to refrain from exploiting their size to gain an unfair advantage in the marketplace, to box out would-be competitors or stifle innovation, or to harm workers.

Of course, all of these bills will be met with fierce resistance from corporate special interests, who will scaremonger with fringe hypotheticals and engage in wild speculation about potential harms to local businesses and the economy. But that will only be in service of the status quo, where delivery drivers urinate in bottles for fear of missing their next deadline, restaurants have their margins obliterated by predatory online advertising fees, and working families are paying more than 10 percent more for groceries while giant corporations rake in profits.

We should be far more concerned about an economy in which 75 percent of U.S. industries across the United States have been concentrating market power, where business formation is down and entrepreneurs find it impossible to enter markets due to dominant gatekeepers, and where dominant employers can form the modern equivalent of company towns, using their size and power to undercut wages and prevent working people from supporting their families.

State lawmakers have a golden opportunity to set a new bar for reining in the power of dominant corporations, one the federal government will hopefully someday follow. Voters should expect and demand that their elected representatives pass these measures into law.

Pat Garofalo is director of state and local policy and Lee Hepner is legal counsel at the American Economic Liberties Project.

Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.
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