While the FTC is trying to break up a monopoly that, in my current but open to revision opinion, isn’t a monopoly, the most efficiently labor-extractive cartel in US history is literally sitting inside the Capitol begging Congress to give them back their (near) zero wage labor.
I’m not going to make the case against Lina Khan’s FTC lawsuit against Amazon (and by all accounts I’ve come across, it is very much her lawsuit). I’ll leave that to people who know a lot more about monopoly and antitrust than me. What I would like to humbly suggest, however, is that there is something kafkaesque about dedicating significant resources and political capital to pursue a case that is at least not unreasonable to say is wrong-headed while an obvious cartel that spent decades enforcing a zero-wage policy on labor in physically dangerous occupations is at this very moment actively lobbying for legislation to create a legal firewall ensuring that billions of dollars never suffer the ignomius fate of falling into the hands of their employees.
Yes, I know, I just wrote the same paragraph twice, but it’s just that flabbergasting, a “too-on-the-nose” political cartoon come to life. I’m not even sure that else to write.
I could talk about the pure powers of rationalization and cognitive dissonance. Nothing will lead to a more clear-eyed, full-hearted, open-throated defense of the purity of amateur sports and the inevitable destructive powers of wages than the $1.14 billion cut in rents the NCAA receives each year. And that’s just the NCAA, the governing body that oversees the cartel. The chief participants earned $3.3 billion in revenue from sports. You don’t have to be a sociopath sincerely spouting bald-faced lies with those kinds of incentives. The human capacity for narrative internalization and rationalization will do the trick for you, no sweat.
I could delve into classic the capture theory of regulation, how monopolies and cartels are often the only people sufficiently informed and motivated on niche issues to tilt the balance of democratic forces in their favor. I could reference the classic prisoner’s dilemma/collective action problems that plague even the most successful cartels. The network-structure of competitive sports leagues allowed the NCAA to successfully monitor and enforce the rules of their cartel (no compensation for players other than in-kind tuition, room, and board), but even such a successful cartel was still on borrowed time against the incentives facing top programs combined with the march of innovation and the rival collective of players.
No, what disappoints me is our regulatory institutions ignoring low-hanging fruit. I get it, political appointees are political animals, as well as just standard humans trying to make a secure living. Any FTC chair that sues Amazon, successful or not, will never want for law school appointments for the rest of their career. More than 70% of US adults are in households subscribed to Amazon Prime, which is affects a lot of voters and will lead to a lot of thinkpieces. For a $139 a year they get a bundle of goods and services, including the rough equivalent of Netflix. Is that too high? Is exit from the service too costly? Even if the answer is yes, what is the preferred outcome? A $7 lower price? Three-clicks fewer to unsubscribe? Even spread across the entirety of the US adult population, the costs seem fairly trivial, and added up in aggregate that’s not that much either. If it’s suppression of competition, well that’s a far tougher argument to win, which is why they aren’t making it.
The NCAA, on the other hand, has extracted a) enormous rents, likely > 50% of the marginal product of labor, b) from employees in physically dangerous and demanding jobs, many of whom c) are engaged in the task for which they have the peak marginal revenue product of their entire career. That last part is often under-appreciated. Very few of us, myself included, will ever have a marginal revenue product from our labor that compares to a starter on a Division I sports team that is regularly televised. They’re literally being denied earnings in what should be the highest 1 to 4 years of their career earning power. Maybe that doesn’t add up to as much in the aggregate of shaving $7 off of Amazon Prime, but the the number of households for whom Prime fees are salient to the trajectories of their lives is absolutely trivial compared to the NCAA cartel.
One of the big questions in governance is what do we want out of our regulatory agencies? A not unreasonable school of thought is to say we want a counterbalance to scale. Government forces with enough heft that they can bring the mightiest companies to heel. A reasonable person might say we want to maximize welfare, which could mean targeting cartels and monopolies of any size, looking strictly at the bottom line for consumers. A third might say the world is noisy and constantly changing. Cases are confusing and take years to adjudicate. What we should pursue are the most obvious transgressions, where we can operate with a high degree of confidence that government action will lead to better outcomes in contexts that matter.
If you count yourself in that third camp, as I do, then let me suggest there is no easier antitrust case to make than when a multi-billion dollar entity comes to you hat in hand begging for an antitrust exemption. Legal rhetoric and economic evidence are great, but nothing beats an old-fashioned confession.
Economist Writing Every Day 