A central plan to impose competition

President Biden issued a long-awaited executive order on Friday Promote competition in the US economy. the fact sheet accompanying the order said it would “lower prices for families, raise workers’ wages and promote innovation and even faster economic growth.” Competition benefits consumers and workers, and is essential for a vibrant and thriving economy. But some law enforcement initiatives seem more likely to inhibit competition and innovation than to encourage them.

Order assigns more than a dozen federal agencies to take 72 different initiatives. These actions would go beyond standard antitrust tools, such as merger and acquisition reviews conducted by the Federal Trade Commission and the Department of Justice, and address the prices and business practices of companies in a range of industries, including including health care, transportation, agriculture and technology.

Presidents can use executive orders to manage executive agencies, but not to directly regulate private activities. So this order tells agencies toadopt[] pro-competitive procurement and expenditure regulations and approaches, and… cancel[] regulations that create unnecessary barriers to entry that stifle competition. Such a broad policy statement is not in itself embarrassing; but the ordinance then goes on to urge agencies to take specific actions that will effectively regulate private parties and replace market competition with government mandates.

Some of the actions ordered would have positive effects.

Some of the decree’s guidelines target existing regulations or practices that hinder competition and likely harm consumers and workers. For example, it directs agencies to pay “particular attention to the influence of any of their respective regulations, in particular any licensing regulations, on concentration and competition in industries under their jurisdiction.” .

Economists have long criticized unreasonable professional licensing requirements that “raise the price of goods and services, restrict employment opportunities and make it more difficult for workers to acquire their skills beyond state borders. State governments impose many of the unnecessarily onerous professional licensing requirements, and they are beyond President Biden’s control. Still, asking federal agencies to identify and review their existing regulations, such as restrictions on the types of care nurse practitioners are allowed to provide versus physicians, could bring significant benefits to workers and consumers.

The order also directs the Department of Health and Human Services to issue a rule allowing over-the-counter hearing aids. HHS already has the legal authority to do so, and the ordinance provides time limits to begin rule making. The accompanying fact sheet acknowledges that hearing aids are unnecessarily expensive because “consumers have to get them from a doctor or specialist …[which] only serves as a red tape and barrier for more companies selling hearing aids.

In another potentially important step, the ordinance orders the Office of Information and Regulatory Affairs examine “whether the effects on competition and the potential for creating barriers to entry should be included in regulatory impact assessments”. Competition itself is a powerful regulator – much better able to adapt and respond to changing conditions than government regulation – and consideration of the effects of proposed rules on competition and market structure is one aspect. important to regulatory analysis. Historically, competition analysis has been carried out by experts from the Department of Justice and the FTC, as well as some specialist offices such as the Competition Bureau of the Department of Energy (now defunct). It makes perfect sense to formalize this dynamic perspective as a routine part of OIRA’s regulatory impact assessment and interagency review process.

Most orderly actions would reduce competition and harm public welfare.

Despite these positive aspects, order on the net can hamper competition and harm public welfare. He seems more concerned with company size and perceptions of fairness than actual competition or consumer welfare. Indeed, well-being is mentioned only once in the order, while “just” or “unfair” occurs 40 times.

In dozens of areas, the ordinance orders agencies to dictate or prohibit certain practices. Rather than encouraging competition, such regulations reduce the dimensions on which companies can compete for consumers and workers.

For example, he tells the Department of Transportation to consider many new restrictions on the prices that airlines can charge for various services. If pursued, it could reverse the dramatic consumer benefits and innovation triggered by the bipartite deregulation actions 1970s and 1980s. The government would determine which practices are “fair” rather than allowing airlines to compete to offer combinations of services and prices that meet the diverse needs of their passengers. As airlines currently have no incentive to satisfy consumers, the decree’s guidelines to ensure clearer disclosure of charges should be sufficient.

Likewise, concerned about unfairness in the provision of healthcare, he orders the HHS to pursue numerous regulations that would limit the margins on which providers can compete. For example, it recommends standardized insurance packages, which will limit the ability of insurers to offer coverage options that meet diverse situations and needs.

It orders the Federal Communications Commission to revert to its 2015 “net neutrality” rule, which had classified broadband as a “public operator” subject to old utility regulations. The 2017 FCC “Restoring Internet Freedom” Rule offered in-depth economic analysis showing that light regulation is more conducive to competition, innovation and consumer welfare than regulation as a public service. Returning to the 2015 rule, that was not supported by an economic theory or analysis, would compromise competition.

The order also directs the FTC to restrict the use of non-compete clauses and other labor agreements, without recognizing the potential value such contracts freely concluded between employers and potential employees, such as protection against the theft of intellectual property or the encouragement of companies to invest in employee training.

More government means less competition.

The new competition decree provides important information about how the Biden administration plans to govern. Some of the ordered actions might improve competition and public welfare, while others might have the opposite effect. Overall, the administration appears much more concerned with the size of companies and a concept of fairness that is not explained than to foster a competitive environment in which companies succeed by competing to attract and satisfy customers. , workers, suppliers, etc.

Rather than encouraging competition for the opportunity to cooperate with others, much of the order would strengthen cronyism, where companies compete for favorable regulatory treatment. Competing for government favors is a zero sum game at best, where the biggest winners are often the big incumbents that have the resources to ensure that policies serve their interests.

Perhaps most alarmingly, the order shows no hesitation in imbuing the government itself with monopoly power over vast sectors of the economy that until now have been shaped primarily by consumer sovereignty, something that consumers will surely miss when it is gone.

About Sharon Joseph

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