Consumers and the dollars they spend are the backbone of the U.S. economy. For the last several years, consumers have grown frustrated by high prices for basic necessities like housing, food, and health care. Anger around rising prices and a high cost of living played a major role in the 2024 U.S. presidential election. Disillusionment with the “Bidenomics” agenda fueled a sense of disenfranchisement. Namely, consumers’ struggle to afford necessities was put on the back burner in favor of proposals that would benefit elite demographics, not working-class voters.
High prices in consumer-facing sectors that account for the vast bulk of spending are driven by a number of factors: inflation, economic scarcity, opportunistic price gouging, and market power wielded by powerful firms. This report by the Progressive Policy Institute (PPI) takes up the problem of market power, or the ability of powerful firms — rather than competition — to control prices.
To head off the skeptics, disentangling the role of market power from other drivers of high prices is unnecessary. There is substantial evidence that sectors that have an outsized impact on consumers’ pocketbooks lack robust competition. This results, in part, from decades of consolidation, sluggish growth in productivity, and some bottlenecked supply chains that contribute to high consumer prices.
This report asks if antitrust could be doing a better job of protecting consumers. Analysis of a number of key trends over the last 15 years indicates that the answer is “yes.” Indeed, by many measures, antitrust has lost touch with consumers. This finding is especially relevant with the changing of the antitrust guard from the Biden to Trump administrations. With little common bipartisan ground on a “populist” antitrust agenda, a scaling back or scrapping of the Neo-Brandeisian movement’s influence at the U.S. antitrust agencies is likely. This does not necessarily mean, however, that antitrust enforcement will decline in vigor.
The Biden antitrust enforcers focused on extending the reach of antitrust from traditional law enforcement to solve broader economic, political, and social problems; introducing new standards; and taming market power in the digital sector. This retooling of antitrust appeared in many ways to be tone deaf to the pleas of Americans besieged by high prices and living costs resulting from harmful consolidation and business practices. Moreover, it likely came at the expense of enforcement that more directly protects consumers’ pocketbooks.
PPI’s analysis breaks down major factors that highlight the importance of antitrust priorities focused on directly protecting consumers from the effect of market power on raising prices and their cost of living. It looks at flagging productivity in the top five sectors in which consumers spend 75% of their budgets. The analysis exposes high concentration and market power “bottlenecks” that supercharge high prices to consumers and destabilize critical supply chains, such as in health care and food. The analysis also finds lackluster merger enforcement — the most important tool for controlling consolidation that can drive up prices — in the top five consumer-facing sectors over the last 15 years.
The report concludes with policy recommendations. These range from reshuffling merger review responsibilities at the DOJ and FTC, to junking policies for approving harmful mergers subject to ineffective remedies. Other recommendations focus on how the agencies should consider the impact of market power on the stability and resiliency of critical supply chains, and call for the agencies to get up the learning curve on strengthening enforcement in consumer-facing sectors.
