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Friday, April 25, 2014

10 Corporate Behemoths Stifling Competition and Delivering Awful Service to You


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Customers benefit when actual competition occurs. But that's rare these days.

April 24, 2014  

One of the fundamentals of free-market capitalism is that consumers benefit when competition is plentiful. If a business is selling a weak or inferior product, consumers can turn to the competition for a better deal. President Franklin Delano Roosevelt understood that, which is why a key element of his New Deal was the anti-trust, anti-monopoly legislation of the 1930s. Roosevelt firmly believed that large companies should be forced into a competitive environment whether they liked it or not, and that belief served the U.S. well for many years. But in recent decades, a variety of corporate lobbyists, far-right Republicans and neoliberal Democrats have shredded the New Deal and undermined anti-trust laws—thus encouraging corporations to grow larger and larger and engage in monopolistic practices. 
Here are 10 mammoth corporations that detest free-market competition and do everything they can to stamp it out or greatly reduce it.
1. Comcast
When Comcast acquired Greater Media’s cable TV operations in Philadelphia in 1999 and gained over 250,000 new cable television customers in the East Coast’s second largest city (thus expanding its Mid-Atlantic customer base to more than 2 million at that point), consumer rights advocates feared that the company was growing too large. But Comcast is a much larger company than it was 15 years ago: it has since acquired major companies ranging from NBC Universal to AT&T Broadband, and if the proposed Comcast/Time Warner Cable merger goes through, Comcast will have at least 30 million cable customers and an estimated 38% of the U.S.’ broadband customers. Despite being infamous for its poor customer service, Comcast keeps growing bigger and bigger, which is a reflection of its mammoth lobbying budget. Comcast spent $18.8 million on lobbying in 2013, and many politicians (both Republicans and Democrats) are afraid to challenge its monopolistic practices and force the company into genuine free-market competition.  
Harming net neutrality will only add to the already-unfair advantage that telecom giants like Comcast and Verizon enjoy. Tom Wheeler, the new head of the Federal Communications Commission (FCC), is a former lobbyist for the telecom industry—which, arguably, is a conflict of interest—and now, the FCC itself is undermining net neutrality by accepting the idea that ISPs can ask content providers to pay for preferential treatment.
2. Monsanto
Founded in 1901, the Monsanto Corporation has been in business for 113 years. Monsanto’s size has increased considerably along the way, and these days, it is a corporate bully that doesn’t hesitate to throw its weight around. Now the world’s dominant provider of controversial GMO (genetically modified organism) seeds, Monsanto has been quite aggressive about suing farmers for unauthorized use of its seeds—even if the farmer never intended to become a Monsanto customer. Percy Schmeiser (a canola farmer in Saskatchewan, Canada) was sued by Monsanto for a patent violation after GMO seeds from a neighbor’s canola plants drifted onto his land. Schmeiser has complained that Monsanto made it impossible for him to continue with his canola strain because he can’t prove his canola plants are Monsanto-free. Meanwhile, organic farmers have complained that because Monsanto’s GMO seeds are so ubiquitous in the U.S., it has become much harder for them to maintain organic standards. Monsanto hates competition, and its strong-arm tactics with Schmeiser and other farmers bear that out.
3. Blue Cross
During the healthcare reform debate of 2009 and 2010, Blue Cross and other health insurance giants used their lobbying muscle to make certain that the outcome—whether it was one favored by Democrats, Republicans or the Tea Party—would be more favorable to corporate profits than to consumers. Republicans and the Tea Party wanted to maintain the status quo, while some of the more liberal/progressive Democrats favored a public option that health insurance companies would have to compete with (a single-payer system was never on the table). Terrified at the thought of real competition, the health insurance industry spent a fortune lobbying against the establishment of a public option—and the law Democrats in Congress ended up passing in 2010, the Affordable Care Act, was greatly influenced by Republican ideas of the past (including those of the Heritage Foundation and 2006 GOP presidential candidate Bob Dole). The ACA does contain some positive reforms and has brought health insurance to millions of Americans who were unable to obtain it before, but it would have a lot more teeth had the health insurance industry not been unwilling to face real competition in the form of a public option.
4. Bank of America
The “too big to fail” status that Bank of America now enjoys is ironic in light of its humble beginnings. Founded as Bank of Italy by Amadeo Gianni in San Francisco in 1904, BofA originally found its niche by catering to Italian immigrants who faced discrimination from other banks. But today’s BofA has very little in common with the operation Gianni started 110 years ago. In recent decades, the megabank (which received $45 million in bailout money after the crash of September 2008 and now controls almost one in five home mortgages in the U.S.) has demonstrated its anti-competition philosophy by gobbling up one bank after another—and the more competition BofA eliminates, the worse it becomes for consumers. BofA apologists argue that if customers don’t like its abundance of fees and poor customer service, they can simply take their money elsewhere. But that’s a flawed argument because thanks to BofA’s aggressive lobbying and anti-competition practices, there are fewer and fewer alternatives to BofA in many parts of the United States.
5. Verizon
When the Federal Communications Commission approved the merger of Bell Atlantic and GTE in 2000, Verizon Communications became the largest provider of phone service in the United States. Since then, its practices have often been both anti-competition and anti-regulation. One of the biggest complaints consumers have about mobile/wireless providers is being forced to signlong-term contracts. Verizon Wireless has often demonstrated its aversion to competition by chaining customers to such contracts and hitting them with stiff termination fees should they become dissatisfied and cancel. On the landline side, Verizon has been aggressively pushing many of its customers to give up copper wiring and go with its fiber-optics program FiOS—that is, if Verizon even offers landlines in a particular area. After Hurricane Sandy damaged copper lines on Fire Island, NY (where Verizon had a monopoly) in 2012, Verizon wanted to discontinue copper line support, but wasn’t offering FiOS there and tried to force the area’s landline customers onto the wireless program Voice Link. Problem: Voice Link didn’t support broadband, and many Fire Island residents liked having both a cell phone and a landline. Verizon later reconsidered and announced it would be installing FiOS on Fire Island, but the debacle underscored the problems that can occur when a behemoth like Verizon becomes a monopoly in a particular area.
6. American Airlines
Like banking and telecommunications, air travel is an industry that has been plagued by more and more consolidation. In 2013, American Airlines became the world’s largest airline when it merged with U.S. Airways (which had merged with America West in 2005). Other big airline mergers of the last five years have included the Delta/Northwest and United/Continental mergers—and now, 85% of the U.S. air travel market is dominated by only four airlines: American, United, Delta and Southwest (widely regarded as the most consumer-friendly of the four). To understand how bad all these mergers are for consumers, one need only look at a study conducted by the Massachusetts Institute of Technology, which found that from 2007-2012, airlines in the United States cut the number of domestic flights by 14%. The more companies like American are allowed to reduce competition, the worse it will be for consumers in terms of price, convenience and customer service.
7. Wells Fargo
Like BofA, Wells Fargo had a reputation for being a West Coast bank throughout much of its history. But when the New Deal was greatly undermined in the 1980s and 1990s and the Glass-Steagall Act was overturned in 1999, Wells Fargo expanded considerably. Wells Fargo now has a strong presence all over the U.S. and has been allowed to acquire one bank after another (including Wachovia in 2009). Wells Fargo, whose assets increased from $609 billion before 2008 to $1.4 trillion in 2013, needn’t worry about having a lot of competition because it has devoured so many of the local and regional banks it once competed with.
8. Koch Industries
Billionaires brothers Charles and David Koch like to paint themselves as masters of free-market competition. But in reality, Koch Industries is the essence of crony capitalism—and the tens of millions of dollars the Koch brothers have donated to politicians (especially Republicans and Tea Party candidates, but some Democrats as well) are designed to ensure that politicians never challenge Koch Industries in a meaningful way. The Citizens United and McCutcheon decisions encourage the Koch brothers to make sure that any politicians they help elect are as submissive to Koch Industries as possible. And the Koch brothers’ desire to build a pro-Koch media empire that doesn’t challenge them in any meaningful way will only further their corporatist agenda.
9. Goldman Sachs
Matt Taibbi, who wrote about problems in the banking industry extensively during his years with Rolling Stone, has often said that in a true free-market environment, a behemoth like Goldman Sachs would not exist—especially in light of all the damage banking giants have done to the economies of the U.S. and other countries. But thanks to the too-big-to-fail doctrine, Goldman Sachs has not only been propped up by the U.S. government and the Federal Reserve, but has been allowed to continue growing in size: according to Bloomberg Businessweek, the U.S. five largest banks (JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs) went from comprising 43% of American GDP in 2006 to 56% in 2011. Ideally, Goldman Sachs should have been broken up and divided into an abundance of smaller banks after the crash of September 2008—a move that would have mandated competition—but instead, commercial and investment banking were allowed to become even more concentrated. Beholden to banking lobbyists, U.S. politicians have sheltered Goldman Sachs execs from the thing they need the most: competition.
10. JPMorgan Chase
Far-right critics of FDR's New Deal like to characterize Roosevelt as a Marxist, which is downright absurd to actual Marxists. But FDR understood how vital competition was to free-market capitalism when he signed the Glass-Steagall Act into law in 1933. Mandating a strict separation of commercial and investment banking, Glass-Steagall was meant to discourage monopolies—and its repeal in 1999 encouraged JPMorgan Chase to become the unwieldy giant it is today. Formed when J.P. Morgan & Co. merged with Chase Manhattan Bank in 2000, JPMorgan Chase is now the U.S.’ largest financial institution. A company that has $2.4 trillion in assets has enormous lobbying power, and according to the Center for Responsive Politics, it spent $8 million on lobbying in 2012. CEO Jamie Dimon claims that JPMorgan Chase (which faced hundreds of millions of dollars of fines last year) is overregulated when, in reality, it is woefully underregulated and would not have become so bloated if it operated in a true free-market economy and hadn’t received so much corporate welfare (including $25 billion in bailout money in October 2008).
Alex Henderson's work has appeared in the L.A. Weekly, Billboard, Spin, Creem, the Pasadena Weekly and many other publications. Follow him on Twitter @alexvhenderson.

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