The Open Markets Institute and the Institute for Local Self-Reliance (ILSR) on Thursday co-hosted a half-day forum in Minneapolis, Minnesota to discuss how Americans can reinvigorate antimonopoly and support small businesses, family farms, working people, and communities. The forum featured keynotes by Minnesota Attorney General Keith Ellison and Federal Trade Commission (FTC) Commissioner Alvaro Bedoya. In his first major speech since confirmation, Bedoya made a powerful case against using efficiency to guide enforcement and in favor of reclaiming the Robinson-Patman Antitrust law. ”We cannot let a principle that Congress never wrote into law trump a principle that Congress made a core feature of that law,” Bedoya said. “I think it is time to return to fairness.” Ellison, meanwhile, focused on how monopolists threaten both our democracy and our economic security. “Democracy cannot exist as long as monopoly thrives,” he said, blaming monopolization for much of the political polarization we see in America today. The event was covered by Bloomberg, Politico, and the Minneapolis Star Tribune, among others. 

Last week the nation narrowly avoided a rail strike that could have brought much of the economy to a halt. The sweep of media coverage detailed how disruptive such an action would have been. But let’s not blame workers for this threat. The looting of America’s railroads by private equity has been disrupting the U.S. economy for years. And despite the Biden administration's timely and necessary intervention to prevent the strike, these poorly regulated monopolies continue to threaten our security and prosperity.

Case in point: Early this summer, Foster Poultry Farms, California’s largest chicken grower and processor, filed an emergency order with the Surface Transportation Board because the Union Pacific railroad had continually delayed deliveries of animal feed. Without the deliveries, millions of the farm's chickens and other livestock would die. The Board averted this needless destruction — and the health hazard it would have caused — by issuing an emergency order to Union Pacific to prioritize Foster Farms.

This is just one example of a general breakdown in rail service that’s featured in an increasing number of complaints to Congress and regulators by businesses who say they are being squeezed and in some cases bankrupted by these corporations. The basic equation is simple. On one side monopolies cut essential services — and even entire rail lines — in ways that strand shippers, exacerbate supply chain disruptions, and drive inflation, among other problems described below. On the other side the corporations record the highest profit margins in the entire economy.

The origins of the problem date to 1980 when President Jimmy Carter signed the Staggers Act, which largely deregulated the railroads. Since then, the industry has consolidated from around 40 major railroad companies to just seven today, four of which control some 90 percent of the freight rail market. Most regions of the country are served by just two railroad companies, while most shippers have access to only a single line.

After deregulation, railroads became highly attractive investments for Wall Street firms. Private equity and institutional investors now control all major railroads and use their power to demand cost-cutting measures to boost short-term returns even when it means stripping out capacity and losing market share to trucks. Wall Street calls this practice “precision scheduled railroading,” an Orwellian term designed to hide radical cuts in service and the firing of workers.

Over the past six years, the Big Seven carriers cut their workforces by 29 percent, amounting to a net loss of about 45,000 employees. During this same period, the railroads also diverted much of their cargo onto long-haul trucks that clog roads, burn carbon, and increase the numbers of people killed or hurt in accidents.

To fix the railroads, we'll first need to ensure that rail workers have adequate safety protections and the kind of benefits that used to make it one of the most stable middle class professions. Unionized workers have long served as one of the best checks on the predations of extractive capitalists, in part by using their power to protect the quality and reliability of essential services.

We'll also need to rebuild regulatory guardrails to curb the industry's worst practices and limit financiers' control of railroads. As Policy Director Phil Longman proposed in the Washington Monthly last year, the most effective way to accomplish that would be to make railroads live up to common carriage obligations, forcing them to accept business from everyone on equal terms. 

Another potential solution would be to nationalize the rail infrastructure and allow private companies to run just the trains alone, similar to how rail works in Europe. A Europe-like model would force rail companies to compete over services and prices, undermining the apparent benefits of Wall Street's draconian PSR system.

Last week, Longman issued a statement on the nation’s current railroad crisis, calling for solutions that would lead to a more sustainable industry, including opening it up to competition.

On Wednesday, September 22, Open Markets Institute Legal Director Sandeep Vaheesan testified before the House Committee on Rules’ Subcommittee on Legislative and Budget Process in a hearing entitled “Right to Repair: Legislative and Budgetary Solutions to Unfair Restrictions on Repair.”

Vaheesan described how manufacturers such as Apple, Ford, and John Deere deploy an array of unfair competitive methods within parts and services markets, or aftermarkets. Through their takeover of aftermarkets, these large corporations deprive product owners of the right to fix their appliances, electronic devices, and vehicles at home and/or take them to independent repair shops. Instead, customers are compelled to pay inflated prices for parts and services. In rural areas where manufacturers often offer no service, farmers and hospitals may not be able to repair essential equipment in a timely manner. Vaheesan explained that Congress can restore and protect the public’s right to repair. The Fair Repair Act, introduced by Representative Morelle, would ensure the wide availability of parts and tools on fair and reasonable terms.

Open Markets Institute submitted a comment to the U.S. Department of Agriculture urging the agency to use its legal authority under the Packers and Stockyards Act to ban unfair tournament payment schemes in the poultry industry. The tournament system pays poultry growers based on their relative performance to a group average, docking pay from lower-ranking farmers to fund bonuses for higher performers. But because powerful chicken corporations give farmers the chicks, feed, and medicines that largely determine how well they perform, the system is rife with unequal treatment and unfair remuneration. Open Markets urges the USDA to issue rules ensuring that all poultry contracts guarantee farmers a firm base price and severely restrict the use of performance-based bonuses when chicken corporations influence farmers’ performance outcomes. 

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