"Today, President Joe Biden blocked Nippon Steel’s proposed acquisition of US Steel on the grounds that “there is credible evidence” the Japanese steelmaker “might take action that threatens to impair the national security of the United States.” What “credible evidence” might push the president of the United States to block a multi-billion dollar investment in an ailing American steel company by a publicly traded corporation headquartered in one of the United States’ closest allies? Well, Biden never says, perhaps because—as I wrote right before the holiday—there is none:
- Nippon Steel wasn’t just paying a big premium for US Steel, but had also pledged to invest at least $2.7 billion in US Steel’s union-represented facilities;
- Steel buyers and industry experts in the United States supported the deal because they believed it would improve both US Steel and the domestic steel market. The transaction was backed by thousands of US Steel employees, more than 98 percent of its shareholders, and an independent arbitration panel chosen by the company and the United Steelworkers (USW) union.
- Independent national security and foreign policy experts across the political spectrum agree that the arrangement should proceed because it raises no national security concerns. Instead, many of these same people, and many others, believe that the deal would, if anything, bolster US national security and relations with one of our closest allies.
- Many US government officials, including the three federal government departments with the most responsibility for and expertise in national security and foreign investment—Treasury, State, and the Pentagon—have concluded that the proposal poses no security risks.
The transaction was and remains a no-brainer, and right after I wrote my column, the Hudson Institute’s William Chou and Paul Sracic published a comprehensive national security analysis of the deal, coming to the same conclusion:
We examine Nippon Steel’s acquisition of US Steel from industrial, antitrust, labor, technology, trade, national security, and community perspectives. Our research findings determine that this proposed transaction would advance American economic, national security, and political interests at a time when the needs for secure domestic steel production and supply chains are paramount.
Nippon Steel even went so far as to offer the US government unprecedented veto power over the merged entity’s future US plant closure decisions (to alleviate possible concerns that the company would reduce US steelmaking capacity). In the end, however, none of this mattered because, as I documented last month, Biden’s decision wasn’t about “national security” at all. It was about politics—in particular, USW pressure on Biden and other administration officials to block the deal and, as the Pittsburgh Post-Gazette reported last month, US steelmaker Cleveland Cliffs’s herculean lobbying efforts to stymie a possible new competitor in the captive (thanks to tariffs and other protectionism) US steel market.
Given these obvious and widely reported motives, it’s all but certain that Nippon Steel and US Steel will challenge Biden’s decision in federal court. Maybe they’ll win in the end, and maybe the plan—and all those new investments—will be saved. As I wrote last month, however, “the politicization of the Nippon Steel deal and ‘national security’ has potential harms that go way beyond the two companies or even the industry at issue.” In particular, it risks damaging the US investment review process; US-Japan relations; the United States’ position as a welcoming place for foreign investment; nations’ general rule against using “national security” as a guise for political favoritism and economic protectionism; and the US economy itself.
The courts, unfortunately, won’t be able to reverse any of that."
Friday, January 3, 2025
Nippon Steel and the “National Security” Hoax
WSJ’s Prof. Blinder Misses Again on Inflation Analysis
"Writing in the Wall Street Journal, Alan Blinder argues that President-Elect Donald Trump’s economic agenda will spark inflation. “Almost every economist will tell you — as many did before Nov. 5 — that Mr. Trump’s proposed policies are inflationary,” he warns.
Blinder singles out tariffs, tax cuts, and deportations as causes. He also thinks politicizing the Fed is a concern.
But Blinder has been consistently wrong about inflation for the past four years. He failed to predict massive price hikes and misdiagnosed their cause. We have every reason to suspect he’s misleading us again. Based on his column, it seems he’s learned nothing and forgotten nothing since the COVID-19 pandemic.
Blinder correctly notes that tariffs will raise prices for American households. Tariffs cause a “one-shot price increase,” he acknowledges. However, this acknowledgement sinks his broader argument. A one-time increase in certain relative prices is fundamentally different from a sustained increase in the general price level. The latter is what economists call inflation.
Next, he says tax cuts cause inflation. This reeks of zombie Keynesianism. The argument is that increasing the government budget deficit, whether by increasing spending or cutting taxes, puts upward pressure on prices. Except it doesn’t: deficits alone can’t cause inflation.
An increase in the deficit changes the composition of total spending, but it only increases total spending if it is accommodated by monetary policy. As the residual determiner of aggregate demand, it’s the Fed — not Congress and the President — that’s responsible for inflation. Blinder qualifies himself by predicting “only a little inflation,” but what matters is that his framework for evaluating the relationship between deficits and prices is outdated.
What about deportations? Blinder asserts they “will be inflationary by restricting the supply of US labor.” Again, far too simplistic. Deportations will reduce the labor supply, driving up wages. But illegal immigrants are not just suppliers of labor. They are also demanders of labor, through the various goods and services they consume. Immigration crackdowns will lower both the supply of and the demand for labor. The net effect on wages is ambiguous.
Higher wages do not necessarily imply higher inflation. More likely, the wage increase Blinder predicts would result in a one-time increase in the price of some goods and services, not an increase in the general price level.
This brings us to Blinder’s least-bad argument: eroding Fed independence could result in perpetually higher inflation. Keeping the central bank independent from politics is supposedly necessary to promote responsible monetary policy. True, politicians on short-term election cycles have predictably bad incentives when it comes to interest rates and money creation. But it’s not clear that total Fed immunity, which is more or less what we have now, is any better.
Furthermore, we can question Blinder’s commitment to safeguarding monetary policy from electoral politics. When former New York Fed President William Dudley not-so-subtly suggested the Fed tank the economy so Trump would lose in 2020, Blinder was awfully quiet. Perhaps he thinks “independence” is only necessary to protect us from Republicans.
Suppose Trump succeeds in making the Fed more beholden to elected officials. That would at least be some kind of a responsibility mechanism. Right now, there’s none. No member of the FOMC, and certainly not Chair Powell, will face any professional consequences for unleashing the worst inflation in 40 years. If the politicians have more of a say in selecting and overseeing monetary policy makers, we can meaningfully change monetary policy by throwing out the politicians every two to six years.
Most monetary economists today believe that central bank independence results in better monetary policy. But many earlier monetary economists, including Milton Friedman, were skeptical of central bank independence.
“Is it really tolerable in a democracy to have so much power concentrated in a body free from any kind of direct, effective political control?” he asked. There are both political and economic problems associated with central bank independence, not least of which is that “it almost inevitably involves dispersal of responsibility.” Friedman was more optimistic about “legislating rules for the conduct of monetary policy.” This would “enable the public to exercise control over monetary policy through its political authorities, while at the same time preventing monetary policy from being subject to the day-to-day whim of political authorities.” I concur.
In short, Friedman knew what central bank independence really meant: central bank unaccountability. Friedman was far from a crank. And today’s monetary economists would do well to consider his view.
Blinder’s column offers more heat than light. This isn’t surprising. Ever since Covid, Blinder’s writings have studiously ignored anything written about monetary economics and macroeconomics since 1960. The result has been consistently bad predictions. So long as Blinder doubles down on Eisenhower-Kennedy era Keynesianism, he won’t have much to offer public discourse."
Thursday, January 2, 2025
Globalization Is No Unique Source of Economic Change
"Here’s a letter to The Free Press:
Editor:
Rupa Subramanya diminishes the excellence of her defense of high-skilled immigrants by writing, without evidence, of “the American working class left behind by globalization” (“A MAGA Attack on a Trump Nominee—and the Problem with the Woke Right,” December 29). Although incessantly repeated as if it’s a reality as indisputable as gravity, in reality it’s a myth that crumbles beneath logic and facts.
Some particular jobs are, of course, ‘destroyed’ by imports. But so, too, are some particular jobs destroyed by labor-saving technology and changes in consumer tastes. How many jobs for workers making crutches and wheelchairs were destroyed by the polio vaccine? How many clerical jobs were destroyed by the personal computer? How many jobs for auto mechanics were destroyed by improvements in automotive technology? (When did you last have your car tuned-up?) How many jobs in local hardware, book, and clothing stores were destroyed by innovations in retailing brought by the likes of Home Depot, Amazon, Walmart, and FedEx? How many cashiers were put out of work by technologies that enable customer self-checkout? How many workers in baby-food and diaper plants are losing jobs because of the decline since 2007 in the U.S. birthrate? How many jobs for railroad workers were destroyed by the automobile and the Interstate highway system? How many jobs for bus drivers and motel maids were destroyed by commercial aviation – and, starting in the late 1970s, by the successful deregulation of the latter? How many lumberjacks lost jobs as a result of the rising popularity of e-books and electronic documents? How many jobs at tobacco companies were eliminated by the reduced popularity of smoking?
Globalization is merely one of many sources of economic change. And in a country as large and as diverse – in both population and geography – as the United States, globalization is a relatively small source of such change. From 1976 (when America’s unbroken string of annual trade deficits began) through today, imports as a percentage of annual U.S. GDP averaged 12.7%. During these years they were never higher than 17.4% of GDP and are today (2023) 13.9% – numbers too small to support the insinuation that an entire, large class of Americans have been “left behind” by globalization.
If ordinary Americans for centuries – starting with the improvements in agricultural technologies in the 19th century – have not been “left behind” by the stupendous technological progress, demographic transformations, and changes in consumer preferences that have incessantly marked our national existence, what reason is there to think that the relatively small amounts of imports that Americans choose to buy pose a categorically different and uniquely insurmountable economic challenge?
The answer is none. Globalization requires no more in the way of economic adjustment than do any other market-driven sources of change. And globalization, no less than other sources, fuels economic growth. Unsurprisingly, therefore – at least to those persons who attend to the facts – the material standard of living of ordinary Americans is today higher than it’s ever been."
The Case for More H1B Visas
"Apparently, there is an ongoing debate in Trumpworld about whether more H1B visas are a good thing. From an economic perspective, the answer is a clear yes.
From the standpoint of economic efficiency, allowing a highly skilled immigrant to work at a U.S. firm is, for standard reasons, beneficial. The transaction is voluntary, so both the employee and employer are better off. And there are no obvious negative externalities (not counting, of course, pecuniary externalities). In addition, the U.S. government collects more revenue in the form of payroll and income taxes.
From the standpoint of economic equality, allowing a highly skilled immigrant is again beneficial. The relative wage of skilled versus unskilled workers depends on, among other things, the relative supply of the two types of worker. When highly skilled workers immigrate into the United States, the demand for less skilled workers rises.
Think of technology firms that need both engineers and janitors. When the supply of engineers rises, the demand for janitors increases, leading to higher janitor wages.
So an increase in H1Bs visas not only expands economic liberty (arguably a good thing in itself) but also increases both efficiency and equality.
Score one for Vivek and Elon.
Update: A friend points out there may be significant positive externalities in form of new knowledge that highly skilled immigrants would produce. I agree. That strengthens the case."
A Policy for All Seasons
"George Selgin is the most frequent guest on David Beckworth’s Macro Musings podcast, and listening to the recent interview it’s easy to see why. I would have trouble finding a single point on which I disagree. I see Selgin as a more eloquent and better-informed version of myself.
While much of the podcast discusses issues such as Bitcoin and debanking, I’ll provide a few comments on the final portion, which covers the Fed’s upcoming monetary policy review. Here’s Selgin:[A]ll this stuff, from just having a plain old 2% inflation target, to having a flexible average inflation target, to having God knows what they’re going to come up with next, some acronym with inflation in it— All of this is just a way of getting to what really works, which would be targeting nominal GDP.
But they can’t say that. They don’t even want to talk about it because it doesn’t sound like the dual mandate. And this is really unfortunate, because NGDP targeting is a good way to come up with good behavior of both the inflation rate and employment. It’s a way to avoid severe unemployment. It’s a way to avoid overheating the labor market. It’s a way to gain a long run inflation rate of around 2%, but while also allowing prices to behave differently during supply shocks in a way that, again, best preserves stability in the labor market, which is the other thing you want.
It accomplishes all of those things. The one thing NGDP has going against it is it is not obviously the same thing as stable prices or high employment. It doesn’t sound like the dual mandate. So, we have to figure out, I think, what the Fed has been doing has been stumbling its way towards strategy language that sounds like the dual mandate but is actually stable NGDP. They would save a lot of time doing this, and, maybe, who knows how many more strategic reviews if they would just acknowledge what they’ve been up to and at least, secretly, talk about stabilizing spending.
Unfortunately, David Beckworth indicates that the Fed is not likely to move in the direction of NGDP level targeting.
This is a good illustration of what concerns me about where I think the framework review is going, and that is, Jay Powell sat down with Catherine Rampell from The Washington Post. They did a little interview. She asked him about the framework review, and he said, “I see as a base case,” these are his words, “A reaction function where you don’t overcompensate or you don’t overshoot for past misses.” So, effectively, he’s saying, “I see as a base case, we don’t have makeup policy.”
After 2008, the Fed screwed up by not trying to do any make-up policy. In 2021 they screwed up in exactly the opposite direction, by doing far too much make-up, overshooting the previous NGDP trend line by 11%.
So when you’ve made one serious error going too much in one direction, and another serious error going too much in the opposite direction, isn’t the conclusion that you should aim for somewhere in the middle—do just the right amount of make-up? Instead, it seems as though the Fed is planning to return to the policy regime that led to the Great Recession. How can we explain that?
The following is just speculation on my part, but it’s the only explanation that I can think of. The Fed may be assuming that the zero rate problem is gone, and that for various reasons the (nominal) natural rate of interest will remain above zero. Why might that be? Perhaps some combination of slightly higher trend inflation than during the 2010s, slightly stronger real growth due to AI, and much bigger budget deficits for as far as the eye can see. The bond market is certainly not forecasting a return to the zero lower bound.
The second calculation may be that level targeting isn’t really necessary when you are not at the zero lower bound. They may be thinking that Alan Greenspan’s policy approach worked pretty well when rates were positive, and they can safety return to inflation targeting in a positive interest rate environment.
I don’t view that sort of reasoning as crazy, but in the end I do not agree. First of all, NGDP targeting works better than inflation targeting even during “normal times”. More importantly, macro history is full of unforeseen developments and thus you need a policy for all seasons. I have no doubt that during the 1990s my students were bored when I taught them about what happened in the 1930s when there was a severe banking crisis and interest rates fell to zero. That had never happened during their lives, or even in my (much longer) life. “Why do we need to learn this old stuff?” I hope that they saw the value of my teaching when they were working on Wall Street in 2008.
You never know what sort of changes will occur in the macroeconomy. Rather that take policy shortcuts, adopting a policy regime that might work in “fair weather”, isn’t the more responsible course of action to adopt a regime that works under almost all conditions? Indeed, isn’t that approach more responsible even if it is slightly harder to explain NGDP level targeting to Congress than it is to explain inflation targeting?"
Wednesday, January 1, 2025
No, Reviving the Robinson-Patman Act Will Not Lead to More Competition or a Better Economy
By Trelysa Long of Information Technology & Innovation Foundation. Excerpts:
Here is one quote that comes again later "of the 564 companies in violation of the RPA, only 6.4 percent had annual sales of $100 million or more while more than 60 percent had sales below $5 million."
"KEY TAKEAWAYS
Neo-Brandeisians want to bring back enforcement of the Robinson-Patman Act in an attempt to protect small firms from competition.Economics and history make clear that the Robinson-Patman Act’s prohibition of both primary- and secondary-line price discrimination would raise prices for consumers and reduce overall economic welfare.The Robinson-Patman Act does not address any anticompetitive behavior that is not already covered by other antitrust laws.Neo-Brandeisians and critics fail to justify the Robinson-Patman Act on Rawlsian or “fairness” grounds, or under substantive equality or equity. Both rationales are flawed frameworks for competition policy.The act’s prohibition of secondary-line price discrimination also harms the same small businesses it is trying to protect because they cannot receive discounts from buying as part of an association or otherwise compete by undercutting larger rivals.The new Congress should repeal this fundamentally flawed legislation once and for all.""The passing of the RPA led to the Department of Justice (DOJ) filing a suit against A&P, the largest retailer of its time, for violations of the act. In United States v. New York Great Atlantic & Pacific Tea Co., DOJ claimed that A&P had used its buying and market power 1) to restrain interstate commerce in food product markets and 2) to create a partial monopoly in multiple food products."
"while DOJ claimed that A&P sold below costs, in reality, A&P did not suffer from a temporary loss. Indeed, MIT economist Moris Adelman asserted that “if there is no temporary loss suffered—as there is none in the A&P case—the defendants were still considered as selling below cost.”"
"the government did not sufficiently “draw the line between ‘predatory’ and ‘competitive’ price cutting.”45 Furthermore, DOJ did not measure the impact of price discrimination in favor of A&P on individual buyers, but rather simply assumed that price differences automatically led to harm against competitors that did not receive them.46 Finally, DOJ could not provide evidence that A&P had monopsony power or had intimidated competitors to prove that A&P had used its buying power to secure lower prices compared with competitors."
"the RPA resulted in a slew of other cases—almost 1,400 RPA complaints that the FTC filed from 1937 to 1971—that had similar negative results."
"The Morton Salt case is worth special attention as a case study in RPA enforcement gone wrong. As the company argued, the FTC’s theory was flawed because the discounts were available to all buyers as long as they purchased the same large quantity.54 More importantly, the FTC’s argument that the system favored large buyers was also problematic because, as Morton Salt Co. argued, its policy was one where a small buyer purchasing 50 cases of a carload receiving a 10 cents discount could get another 10 cents discount when they purchased 5,000 cases.55 However, the large buyer that originally bought 5,000 cases would only get an additional 5 cents discount despite purchasing 10 times that of the 50-case buyers.56 In other words, the large buyer received a lower discount and could arguably be seen as being discriminated against, rather than favored. Channeling these concerns, a dissenting opinion by justices Jackson and Frankfurter quipped, “The law of this case, in a nutshell, is that no quantity discount is valid if the Commission chooses to say it is not,” even if it benefits consumers."
"the alleged harms from price discrimination do not result in the “supreme evil of antitrust”: collusion.58 Rather, PL (primary-line) price discrimination, or below-cost pricing, encourages firms to lower prices and outcompete their rivals to gain more customers. As a result, firms are constantly changing their prices when they reduce them, resulting in a lower probability that two firms can collaborate to reduce output and fix prices. Similarly, SL (secondary-line) price discrimination, or the ability to offer varying discounts to buyers, can undermine a collusive pricing structure when sellers are allowed to offer discounts to certain downstream customers, leading to price differentiation. Commentators have observed that “the Act facilitated price discussion and price communications among sellers, fostering price stabilization if not collusion. For sellers could seek to legitimize such price discussion as necessary for their compliance with the Robinson-Patman Act.”59"
"the RPA’s prohibition of SL price discrimination is unnecessary to address anticompetitive behavior because this practice does not result in exclusionary conduct."
"exclusionary conduct constitutes behavior that creates, enlarges, or helps maintain monopoly power by excluding rivals.62 However, SL price discrimination clearly fails this criterion. In the upstream market, SL price discrimination is not exclusionary because offering discounts to buyers promotes greater price competition with other sellers. In the downstream buyer market, SL price discrimination also does not result in exclusionary conduct but, at worse, reflects the exploitation of buyer power, which, as noted, can be a result of efficiencies. That is, SL price discrimination involves larger, more efficient buying firms simply using their existing market power to obtain discounts from sellers rather than using anticompetitive methods to obtain market power."
"the possession and exercising of market power is not illegal."
"predatory overbuying . . . is already covered by antitrust laws"
"predatory overbidding could be done to raise the costs of downstream rivals.66 However, as before, this was precisely the sort of behavior the Supreme Court condemned long ago in United States v. Aluminum Co. of America"
" cases where overbuying practices do result in exclusionary conduct that also harms consumers, the Sherman Act already makes it unlawful"
"Congress did not intend to outlaw price differences that result from or further the forces of competition. Thus, ‘the Robinson-Patman Act should be construed consistently with broader policies of the antitrust laws.’”"
"price discrimination is generally beneficial to society because it increases consumer and total welfare. First, a ban on PL price discrimination will raise consumer prices because firms will be prohibited from lowering their prices to below the cost of doing business (even when recoupment is not feasible) and thus be unable to compete vigorously on prices. As a result, consumer prices will rise. Similarly, a ban on SL price discrimination will also raise prices for consumers because buying firms will be prohibited from receiving price concessions from manufacturers despite their efficiency. As a result, these buying firms pass on the higher cost of purchasing goods down to consumers in the form of higher prices."
"This theory is consistent with the empirical evidence. For example, a paper by Blair and DePasquale summarizes previous research by Hovenkamp, which concludes that the RPA results in higher consumer prices, as well as findings by Carlton and Perloff that the RPA inhibits buyers’ benefits of scale economies, thereby raising consumer prices.71 Moreover, according to a paper by O’Brien and Shaffer analyzing SL price discrimination, while firms may benefit from the RPA because their rivals cannot gain a cost advantage due to the RPA provision prohibiting sellers from charging buyers different prices, this is usually at the expense of consumer and total welfare because buying firms are unable to bargain for lower prices that are subsequently passed on to consumers."
"when buying firms have access to more than one supplier—which is the case in many industries—prohibiting price discrimination could reduce consumer surplus and welfare because it is likely to stifle downstream firms’ incentive to enhance efficiency."
"ndard Motor Products Inc. violated the RPA for making rebates to its distributors, many of which were small businesses.76 Indeed, as the court opinion wrote, “Commission’s order is directed against Standard’s practices of making rebates to its distributors based on volume sales … petitioner sells a substantial portion of its output to distributors who have joined together in cooperative buying groups.”77 As a result of cases such as this one, small businesses could not form associations to buy at a discount, thereby increasing their costs and affecting their ability to compete on price."
" in neo-Brandeisians’ eyes, the RPA’s provisions are an excellent tool to promote equity because they prohibit more efficient firms from using scale economies, lower costs, and greater efficiency to gain discounts—a competitive advantage—against less-efficient, small firms."
"the RPA served to hurt small buyers that tried to organize against big business but as a result of the act could not receive discounts based on their combined power. Thus, the RPA did not help small businesses succeed against their larger rivals in the competitive market, but rather hindered their chances and thereby paradoxically contradicted the goal of empowering small businesses and achieving equity"
"of the 564 companies in violation of the RPA, only 6.4 percent had annual sales of $100 million or more while more than 60 percent had sales below $5 million."
The FTC Takes Action to Raise Wine and Spirit Prices
"In a 3-2 party-line vote, a divided Federal Trade Commission (FTC) moved Dec. 18 to seek a federal district court injunction against Southern Glazer’s Wine and Spirits LLC, the largest U.S. distributor of wines and spirits. The FTC complaint alleges that Southern’s discounting practices discriminated against small independent businesses, violating the Robinson-Patman Act (RPA), to the detriment of competition. The FTC requests that the court order Southern to charge the same net prices to all competing purchasers.
Unfortunately, the FTC’s suggested remedy would likely raise prices and harm consumers instead. A new FTC Republican majority may wish to rethink this case and RPA enforcement in general.
The Robinson-Patman Act in a Nutshell
Congress passed the RPA in 1936 in response to the concern of small businesses—such as “mom and pop” grocery stores—that they were losing share to larger supermarkets and chain stores and, in some cases, being forced to leave the market. Small businesses complained that they could not obtain from suppliers the same price discounts that larger businesses demanded and received.
To address this concern, the RPA prohibits sellers from offering different prices to different purchasers of “commodities of like grade and quality” where the difference injures competition. Selective discounts that are “cost-justified” or are made to meet the price of a competitor are okay. Apart from those exceptions, however, the general rule is that discounts must be made available to all competing purchasers.
Recent judicial decisions have essentially held that, when the discounting firm’s practice harms its direct competitors – “primary line discrimination” – the RPA is only violated if the discounts would also harm competition and consumer welfare – in line with modern U.S. antitrust philosophy.
Under current case law, however, when the discounter’s actions affect competition between its customers – “secondary line discrimination” – mere harm to actual disfavored rivals of the firm (or firms) receiving discounts may amount to a violation of the act. This conclusion, some argue, follows from the RPA’s reference to discounts that “injure, destroy, or prevent competition with any person”. This interpretation is in tension with the U.S. Supreme Court’s teaching that antitrust is concerned with benefiting the competitive process and consumers, not with protecting individual competitors.
For several decades, a bipartisan scholarly consensus has held that the RPA discourages economically efficient discounting, which benefits consumers and is a normal part of the competitive process. Actions by “big box” retailers and other large firms who negotiate for and receive discounts benefit countless American buyers. For instance, Total Beverage, a major client of Southern Glazer’s, provides lower-cost discounted products through its large stores and online sales.
The RPA is unnecessary. Truly predatory price-cutting that destroys competition in a market is already addressed by the Sherman Antitrust Act. Moreover, small and medium-sized businesses (not just large dominant firms) often were the target of RPA suits. Thus, discounting by competitors both small and large was chilled.
Recognizing all of this, the U.S. Justice Department (DOJ) and the FTC, under Democratic as well as Republican administrations, essentially stopped enforcing the RPA beginning in the 1980s. Private lawsuits for treble damages, which the RPA authorizes, did, however, continue.
The Antitrust Modernization Commission, a bipartisan congressionally established body of antitrust scholars and practitioners, urged repeal of the RPA in its 2007 public report. Although Congress did not respond, the federal enforcement agencies continued their decades-long policy of RPA nonenforcement until the FTC sued Southern Glazer.
The Southern Glazer Lawsuit
In announcing its suit against Southern Glazer, the FTC stated:
Since at least 2018 and continuing today, Southern has repeatedly discriminated in price between disfavored independent convenience stores, and independently owned wine and spirits shops – and favored large chain purchasers of wine and spirits, such as Total Wine & More, Costco, and Kroger, the FTC’s complaint states.
Southern’s lower prices for large national chains are not derived from differences in Southern’s cost of distributing products to larger retailers, nor do they reflect legitimate attempts to meet prices offered to chain retailers by competing distributors according to the FTC’s complaint.
Three Democrats on the commission –Alvaro Bedoya, joined by Rebecca Slaughter and Chair Lina Khan– issued a statement supporting the FTC’s suit. The majority emphasized that many of Southern’s “price differences cannot be explained by bona fide differences in the costs of ‘manufacture, sale, or delivery’ resulting from the greater quantities purchased by those larger retailers.”
The majority cited case law for their decision. They also argued that there is no formal empirical evidence to show that the RPA actually raises consumer prices. (Substantial scholarship, however, contests that, and holds that “[e]conomics and history make clear that the [RPA’s prohibitions] . . . would raise prices for consumers and reduce overall economic welfare.”)
Republican Commissioners Andrew Ferguson (recently named by President-elect Donald Trump as his choice for FTC chairman) and Melissa Holyoak dissented, issuing separate statements. Commissioner Ferguson’s opinion concluded that:
[T]he Commission must soundly exercise discretion about when to enforce a law. The Commission exercises its discretion poorly by bringing this case. The Commission is unlikely to prevail even on its own theory of the Act, and it would be an imprudent use of the Commission’s enforcement resources even if it were likely to prevail.
Commissioner Holyoak’s opinion stressed that the FTC’s complaint “condemns conduct that is plainly innocuous or even procompetitive. . . . [I]t manifestly defies logic to suggest that the mere presence of discounting is dispositive proof that there has been harm to competition.” While she noted “[t]hat is not to say that enforcement of the Robinson-Patman Act is never warranted[,]” she concluded that Southern’s conduct did not violate the terms of the RPA, properly construed.
The likely outcome of the FTC’s lawsuit is uncertain. Both the majority and the dissenters advance plausible arguments regarding the legality of Southern’s pricing practices under the RPA. Facts regarding actual harm to competitors (and determination of whether small retailers are actually “in competition with” Southern’s large customers) will be key. The reality that this prosecution is more likely to diminish rather than to enhance consumer welfare will not be legally dispositive.
What Happens Next
The Southern case may not be the last word on FTC RPA cases. The Biden administration launched an interagency taskforce on unfair and illegal pricing in March 2024, which was directed to “operationalize the administration’s revival of the” RPA. The FTC is reported to be investigating other possible RPA violations, in the soft drink and food industries. Whether new RPA cases are filed before Jan. 20 remains to be seen.
The new Trump administration may, of course, change course. In addition to naming Commissioner Ferguson as future chair, Trump recently announced he would nominate Mark Meador to be a Republican FTC commissioner when a vacancy arises. Lina Khan is reported to be leaving the commission in January, although that has not yet been confirmed.
A new Republican FTC majority could potentially vote to discontinue the prosecution of the Southern injunction action, if the matter is still in litigation. It could also choose to drop the other RPA investigations, or to discontinue prosecution of any new complaints that may be filed before Jan. 20.
The new commission majority might also chose to announce that it is discontinuing RPA enforcement, as a matter of prosecutorial discretion. It could explain that the FTC’s limited enforcement resources would be better utilized pursuing cases that are likely to substantially raise consumer welfare and benefit the American economy.
The economic arguments for shutting down the Biden administration’s RPA enforcement program are extremely solid. Even if that occurs, however, there is no guarantee that RPA enforcement would not be revived by some future administration.
The new Trump administration, led by the FTC, may therefore wish to study and report to Congress on the case for finally repealing the RPA. Such a reallocation of government legal resources to higher-valued uses might become a valuable component of sound economic reform."
Privatize the Postal Service, Amtrak, Airports, and More
Privatization isn't about cutting corners; it's about unleashing and leveraging the ingenuity and competitiveness of the private sector to deliver better services at lower costs.
By Veronique de Rugy. Excerpt:
"The U.S. Postal Service, on the other hand, is more like a lopsided toboggan pulled by one reindeer threatening to go on strike. Despite its monopoly on letters and mailboxes, it's running a tab bigger than a Black Friday shopping spree. In 2024 alone, the Postal Service lost $9.5 billion. Without changes, it's on track to lose another $80 billion in the coming decade. Even the Grinch would be shocked by that.
How did we get here? The government post office has some advantages—like sweetheart loans from the Department of Treasury—but this one still can't turn a profit. It's bogged down by inefficiencies and prohibitive union contracts that have eaten up around 75 percent of past budgets. That leaves little room for modernization or improvements. But it still had room for a multibillion-dollar taxpayer-funded program that was supposed to deliver 3,000 electric mail vehicles by now. Only 93 have rolled out.
Privatization could be the gift that saves the Postal Service. Under private ownership, we'd see competition drive down costs and spur innovation. Just look at Germany's Deutsche Post (aka DHL), a largely private entity delivering top-notch service. Or consider the United Kingdom's Royal Mail, privatized a decade ago and now operating with greater efficiency and customer satisfaction. Imagine a Postal Service that works as efficiently as Santa's elves on Christmas Eve. That's the magic of privatization.
Let's privatize Amtrak too. Despite being structured like a corporation, it's owned by the federal government and operates with chronic deficits. Taxpayers fork over more than $3 billion annually to keep it on the tracks, and in 2023 the company lost $150 per passenger on long-distance routes.
And what do we get for our money? If Santa's sleigh ran like Amtrak, Christmas would be delayed until sometime in March. Trains are late, service is underwhelming, and there's little hope for improvement. Much like the Postal Service, Amtrak's inefficiency is tied to union agreements that make it hard to reward high performers or hold poor performers accountable.
Japan offers a shining example of what privatization can do. In 1987, it split its national railways into six regional companies and one freight company, all privately owned. The result? Trains that run on time, efficient service, and satisfied passengers. Privatizing Amtrak could deliver the kind of rail service Americans dream of—without breaking the bank.
Ever felt like navigating an airport is the travel equivalent of untangling strings of Christmas lights? That's because most U.S. airports are government-owned. They're monopolies that don't entertain real competition or innovate in a responsive way. From runway expansions to terminal upgrades, decisions are often driven by politics rather than market demand.
Private ownership of more airports would introduce much-needed holiday spirit. With market competition, airports would have every incentive to improve amenities, reduce wait times, and optimize space. Look at London's Heathrow or airports in Frankfurt and Sydney. All have shown how private operations deliver superior service and financial performance.
Even partial privatization through public-private partnerships has worked wonders, boosting efficiency and capital investment. It might even make holiday travel—dare we say it—enjoyable. Imagine shorter Transportation Security Administration (TSA) lines, cozier waiting areas, and restaurants with food you want to eat and respectable cocktail and wine lists. Santa would surely approve."