Anti-Monopoly Candidates Are Testing a New Politics In The Midterms
Austin Frerick couldn’t believe the numbers. Last year, while working as an economist at the Office of Tax Analysis in the Obama Treasury Department, Frerick co-wrote a paper on “excess returns,” which he describes as “a fancy way of saying monopoly profits.” And the data was leaping off the charts. “We were seeing returns in places we shouldn’t,” said Frerick, 27. “It’s baby formula, strawberries, crackers. The barriers to entry of making crackers should be next to nothing.”
The paper is focused on tax policy and therefore, somewhat unintelligible. But its conclusion, that outsized profits have been rising across virtually all sectors of the economy, has formed the basis of a newly prominent concern: that too much wealth and power has been concentrated in the hands of a few giant corporations. “It’s the issue of our time,” said Frerick. “It’s everywhere.”
It’s difficult to translate a wonkish concept like excess returns into something bite-sized for voters. And it’s difficult to revive a long-dormant anti-monopoly movement to explain why corporate concentration is not only bad because of potential consumer price increases, but because of reduced entrepreneurship, abandoned communities, poor quality of service, and a diminished democracy.
But Frerick is willing to try. He left the Treasury for his native Iowa, where he’s running for the House of Representatives in the 3rd Congressional District, a swing seat occupied by two-term Republican David Young. And Frerick has made the fight against corporate monopolies the centerpiece of his campaign. He’s probably the only congressional candidate in history who lists among his heroes RuPaul and Thurman Arnold, the head of the Justice Department’s antitrust division during Franklin Roosevelt’s presidency.
Frerick and another anti-monopoly candidate in Texas, Lillian Salerno, represent a new school of thought in the Democratic Party, criticized in the past for too much coziness with corporate donors. A populist challenge to corporate power and growing monopolization is part of the party’s “Better Deal” midterm campaign platform. Newer members of Congress, like Ro Khanna, D-Calif., have foregrounded market concentration as a threat; with some colleagues, he is building a Congressional Monopoly Caucus to develop policies to counter the trend.
In 2018, we’ll see if this interest in monopoly politics can play on the campaign trail.
Frerick talks about running a Teddy Roosevelt-style campaign. In rural towns in southwest Iowa, he has challenged the merger between Monsanto and Bayer, which would give two companies (the other is Dow/DuPont) control of 75 percent of the U.S. corn seed supply. Add the company created by the merger of ChemChina and Syngenta, and three companies would sell 80 percent of all seeds. Farmers have no ability to bargain for corn seed, which has doubled in price over the last decade, even while crop prices have dropped.
Free market theory says that in a mature market, profits should be low as a result of competition. It’s hard to think of a mature market than that for seeds, a business that is roughly 14,000 years old, give or take a millennium.
Monsanto also has a foothold in fertilizers and pesticides, a dominance that will grow as they get bundled with seed purchases, Frerick believes. This makes it difficult for rural America to survive. In Red Oak, where Frerick called me from last week, over 60 percent of children qualify for free or reduced lunch, according to the state Department of Education.
“Debt levels in these communities are as high as the farm crisis” of the 1980s, Frerick said. “The land’s the most productive it’s ever been, and none of the money ever stays here. These little towns are hollowed out, and you get lack of hope.”
Beyond advocating to block the Monsanto-Bayer merger, Frerick wants to break up Monsanto and other Big Ag corporations. As a young, gay Democrat — three marks against him for some voters — Frerick believes this straight talk gives him a chance with rural voters. “Democrats are an urban party, especially in Iowa,” he said. “The fact that I’m young and can talk corn prices and crop insurance, that makes people happy.”
From left, Tim Hassinger, president and CEO of Dow AgroSciences; Erik Fyrwald, CEO of Syngenta International AG; Bayer CropScience North America President and CSO Jim Blome; and Monsanto Company Executive Vice President and CTO Dr. Robb Fraley raise their right hands to be sworn in, on Capitol Hill in Washington on Tuesday, Sept. 20, 2016, prior to testifying before the Senate Judiciary Committee hearing on a proposed $66 billion merger of American seed and weed-killer company Monsanto and German medicine and farm chemical maker Bayer.
But Frerick has a broader case to make on monopolies. In urban areas of Des Moines with less connection to farm life, he’s talked about cable companies who take hours to answer customer service calls, or shrinking local newspapers due to Facebook and Google capturing prized eyeballs for advertisers. In older communities, he’s condemned pharmaceutical companies that funnel patients to expensive drugs with little or no competition. A separate 2016 paper Frerick wrote while at the Treasury explained how drug companies use corporate charity as a profit center, by paying discounts for individuals so insurers and government plans have to pay exorbitant rates for medications.
Frerick believes focusing on corporate power can reach voters who have backed away from Democrats in recent years. “When we were putting together the campaign, every consultant said nobody understands antitrust,” Frerick said. “They take people for dummies. You just have to build the bridge for people.”
Lillian Salerno has the same idea. She recently announced her candidacy for Texas’s 32nd Congressional District, which Pete Sessions has represented for 11 terms. Hillary Clinton beat Donald Trump in this suburban Dallas district in 2016, but Democrats inexplicably didn’t run a candidate. This year several Democrats are vying to challenge Sessions, including Clinton-world favorite Ed Meier, and former NFL linebacker–turned–civil rights attorney Colin Allred.
But Salerno believes her story will resonate. “I had a front-row seat on the game being rigged,” she said.
In the late 1980s, Salerno and an engineer friend, Thomas Shaw, became disturbed by news reports about surging HIV and hepatitis C contractions among health care workers. When treating patients, hospital personnel would accidentally stick themselves with used needles, with hundreds of thousands of accidents annually.
Shaw spent years tinkering with syringes until perfecting a design that worked like a ballpoint pen: Once you fully depressed the needle into the patient, a ring would snap and retract the needle, allowing workers to safely pull out the implement. Shaw and Salerno formed a company, Retractable Technologies, to sell this lifesaving syringe to hospitals. They even received a $650,000 grant from the National Institutes of Health to bring it to market. But that’s when they found out about Becton, Dickinson & Co., which sells 80 percent of all syringes in America.
Most hospitals buy supplies in bulk through group purchasing organizations, or GPOs, which carry a “90/10” requirement. Hospitals must continue to purchase at least 90 percent of their supplies from inside the GPO to qualify for discounts and avoid millions of dollars in penalties. This contractual obligation fortified BD’s monopoly, despite selling a more dangerous, more expensive product.
Even after a federal law, the 2000 Needlestick Safety and Prevention Act, mandating that hospitals work to prevent needle-stick injuries, and after two successful lawsuits forcing BD to pay over $400 million for violating anti-monopoly statutes, Retractable has been unable to penetrate the U.S. market, doing most of its business overseas. In 2000, the Centers for Disease Control estimated 380,000 needle-sticks at hospitals every year. Today, they estimate 385,000.
“When you have something as a small business and try to sell it, and the big guys don’t want that done, there’s no opportunity,” said Salerno, who served as Retractable’s COO for over a decade. She added that BD’s control of the halls of Congress and hospital wards mattered more than the safety their product provided. “I don’t advise [entrepreneurs] to do this anymore, and that makes me really sad.”
Salerno worked with the World Health Organization on global HIV prevention, and joined the Obama administration as deputy undersecretary for rural development in the Department of Agriculture. But she never forgot the plight of startups that run into buzzsaws of market concentration. “When they were talking about TPP, I would say, what about the markets in this country, why not open them up?” Salerno said. “They thought I was kidding, I said no. Why are we worrying about the Pacific Rim when companies can’t sell into Dallas?”
Salerno, who just joined her race in mid-September, believes antitrust policy can make the economy more dynamic. New business creation has fallen dramatically in recent years, stifled by incumbent behemoths who either buy out or cripple the competition. “I have eight siblings, four are entrepreneurs,” Salerno said. “I have 26 nieces and nephews, and one is an entrepreneur. And he was unsuccessful, though he tried like hell. Innovation, people should be really worried about that one. That is our competitive edge.”
As a small businessperson in the health care sector, Salerno brings a fresh perspective about how the system really works. She supports a single-payer system but believes that it must be paired with changing how market structures raise costs. And the way medical supply giants bundle their products and force providers into all-or-nothing deals make those costs hard to see. “I’ve talked to politicians. If you just put engineers around a table, with devices used in a hospital, and figure out what it costs to make and what it would cost to buy, it would change everything,” she said.
Though voters may be unfamiliar with the terminology of antitrust enforcement, Salerno thinks she can sell its importance to exurban Dallas voters. “There’s not a Texan that doesn’t have a rural connection. They remember when Walmart came to town, when the storefronts shut on Main Street,” Salerno said. “They get that there’s something wrong with the fact that they’re walking in to buy something for a phone, and they have only two companies to choose from. They get it.”
Both Salerno and Frerick believe that concrete examples of how workers, businesses, and consumers have been damaged by corporate monopolies can resonate. And they believe that America cannot respond to income inequality or a captured political system without taking on the economic royalists who have consolidated wealth and power.
After seeing Frerick at a Progressive Change Campaign Committee conference, Khanna endorsed him. “He’s a candidate expressing the themes of antitrust enforcement and economic concentration, and connecting that to real people’s lives in the heart of the country,” Khanna said. He’s been assembling the Monopoly Caucus with other Democrats, such as Keith Ellison and Rick Nolan of Minnesota and Mark Pocan of Wisconsin. While Khanna has also put forward progressive welfare policies, like expanding the earned-income tax credit and Social Security, he believes a comprehensive economic vision must include a focus on how monopolies rob people of economic liberty.
As for how to fix that, the Better Deal outline urges antitrust authorities to look more skeptically at mergers, expand the scope of enforcement beyond consumer prices to look at how monopolies hurt suppliers and business rivals, and conduct retrospective studies to identify anti-competitive behavior. But most of these policies are the province of the executive branch, which, under Trump, doesn’t even have leadership in place in the agencies with jurisdiction yet. Both parties have shown willingness to crack down on tech giants, like Facebook and Google, but action has yet to emerge.
Anti-monopoly politicians think change starts with building a grassroots movement. Notably, there’s no clear example of electoral success yet. Tom Perriello drove these themes in his race for Virginia governor and did well in blue-collar communities, but still lost the primary to Ralph Northam. Zephyr Teachout beat expectations but didn’t oust Andrew Cuomo when she challenged him in the Democratic primary for governor of New York, and subsequently lost a congressional race after beating on the same themes. Khanna didn’t exactly run on monopoly politics when winning his congressional seat over longtime progressive Mike Honda.
But monopoly politics have changed in recent months. Even Democratic leaders like Chuck Schumer have embraced the issue, and you can see discussion of it on Fox News. The midterms could be where anti-monopoly candidates finally break through.
“People are starting to recognize this,” said Salerno. “If we get enough people in, it can be interesting.”