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Antitrust Division to Department of Agriculture: Your Economists Are Corrupt
The Department of Agriculture can't address consolidation, because its own economists think that consolidation is good.
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“The last I heard, the Biden administration was trying to revive the antitrust division, but I haven’t heard much out of them,” said Democratic Congressman Peter DeFazio this week to the Hill. “I don’t know what they’re up to.” While the FTC has only had a majority for a short period, and Kanter has only been at the Antitrust Division for nine months, DeFazio isn’t wrong. It’s taking a long time to revive antitrust enforcement. And while the pace of action will speed up, the bureaucratic problems are intense and deep rooted.
It’s not just the judiciary, or the defense bar. Within the government bureaucracies themselves, there is deep resistance to addressing consolidation. Most of this is just natural, it takes a lot of work to rewrite guidelines and processes and retrain large numbers of people. But there are also ideologues sprinkled throughout government who oppose the very project that the White House laid out last year on doing a ‘whole-of-government’ approach to competition policy.
An excellent illustration of this bureaucratic political resistance is a story published by the Capitol Forum about an ongoing trial around a merger in the sugar industry. (The Capitol Forum is expensive, but it is also the single best source of news on mergers and fraud.)
Here’s the story. Right now, antitrust enforcers are trying to block the combination of food giants U.S. Sugar and Imperial Sugar, who are two of the key suppliers of sugars in the southeast of the United States. Since transportation is a significant part of the cost of sugar, combining these two would put the “overwhelming majority of refined sugar sales across the Southeast in the hands of only two producers.” The trial is your basic horizontal merger case, two rivals combining in a way that would elevate their market power.
What’s interesting here is what U.S. Sugar and Imperial Sugar used as their defense. They called upon testimony from a senior official at the Department of Agriculture, an economist named Barbara Fecso. Fecso is at the Commodity Analysis Branch of USDA, and has immense power over sugar. As Eastern Illinois University economist Ali Moshtagh said, Fesco “is the person that has the most influence on the price of sugar in the United States.” People are in government for many reasons, but being able to wield power, as Fesco does, is often personally gratifying.
Fesco’s testimony was nothing special, your basic economist argument that large firms are good and efficient. But she did say one remarkable thing, testifying that she believed this merger would be a net positive because, “knowing these people as long as I have, I had high faith the [transaction] was good.” Basically, she argued, these are good guys. That’s a remarkable statement, almost as clear an admission of social capture as you can get.
Think about what her testimony shows, aside from her personal belief system. One part of the government - the Department of Justice Antitrust Division - is fighting another part of the government - the Department of Agriculture - over the structure of the sugar industry. Despite Biden’s executive order on a whole-of-government approach to competition, the USDA economics heavy senior staff is openly flouting this policy. The Antitrust Division had to call the USDA a ‘captured’ agency in an attempt discredit her testimony.
And think about what her testimony does not show. Fesco is NOT corrupt, she is not being paid off to say what she is saying. She is simply an aggressive proponent of consolidation because it’s what she believes. And she’s the one who has immense power and influence over an industry, regardless of the law, and despite not being appointed or voted into her position.
If you want to know why it’s taking a long time to turn around our highly monopolized economic order, people like Fesco are a key answer. Yes there is corruption and lobbying, but there are also thousands of people in government who simply believe that the last forty years of consolidating power in our markets has been an immense success. The power of ideas is real, even when those ideas are bad.