CEI Experts React to President Biden’s Wide-Ranging Executive Order on Competition

President Joe Biden signed an Executive Order on Promoting Competition in the American Economy today, which the White House claims is aimed at enhancing competition. The wide-ranging, unilateral action included many policy areas, including freight rail, airline fees, shipping, banking, antitrust, net neutrality, and occupational licensing.

BIG PICTURE

Vice President Wayne Crews

“Joe Biden’s new EO on ‘Promoting Competition in the American Economy’ does the opposite. It is an effort to consolidate sweeping government power over agriculture, airlines, banking, broadband, health, and the technology sector – a list that may prove non-inclusive. With some exception, only the government/business alliances will win, not the public. The limited areas in which the EO is deregulatory (over-the-counter hearing aids) are paltry.”

“Unfortunately, the GOP will be caught flatfooted on pharmaceutical controls, for example, that could have been written by former President Trump, while the sections on regulation of Big Tech might as well be a collaboration between the two dominant political parties. Both parties are too unconcerned about the fact Big Tech is often itself asking for—not opposing — regulation.

“This is a missed opportunity to seek a pro-freedom agenda of regulatory liberalization that would prepare us for breakthrough technologies like smart cities, artificial intelligence, automated vehicles, and space commercialization.”

TRANSPORTATION

Vice President for Strategy Iain Murray:

On airline fee disclosure: “The President wants the Department of Transportation to consider rules mandating disclosure of certain ancillary fees charged by airlines, like bag check and cancellation fees. This is a perennial issue already considered by both the Obama and Trump administrations but dropped by both. The Obama era consideration concluded that the quantifiable costs of such a rule outweighed the benefits and was reduced to arguing that unquantifiable benefits like goodwill towards customer service agents made up the difference. The Trump administration wisely withdrew their version of the rule. The probable result of such a rule will be to increase costs to consumers, precisely the reverse of what the Biden order is supposedly all about.”

On rail provisions: “The rail components of the executive order are another example of bad ideas that refuse to die. What the President means by “treat[ing] other freight companies fairly” is that the regulators will require railroads to charge below-market rates for shipping. This effectively reverses by rule the main reforms of the Carter-era Staggers Act, which rescued freight railroads by allowing them to charge market rates and led to massive investment in the nations’ freight rail network, lowering prices for consumers. The end result of this policy will be slower delivery times and increased costs for consumers.

“The Order also displays confusion around passenger rail. Rail network consolidation has nothing to do with passenger rail issues, and the President’s order will tip the scales away from freight use that benefits everyone towards passenger rail that benefits only those who use it (like the President). The end result will, again, be slower delivery times and increased costs for consumers.”

On shipping provisions: “While global shipping networks have indeed consolidated, there is no indication that this has led to increased prices. Much of the time, especially last year, there is more capacity than demand. If the President really wanted to reduce costs associated with shipping, he would urge Congress to repeal the Jones Act, which has decimated American domestic shipping.”

TECHNOLOGY

Director of CEI’s Center for Technology and Innovation Jessica Melugin:

“The Executive Order includes many of the harmful policy ideas under consideration on Capitol Hill and included in regulations rushed through the Federal Trade Commission. Re-instituting investment-deterring net neutrality regulations and threatening innovation with increased merger scrutiny will be as bad for consumers in an Executive Order as it is anywhere else in Washington.”

LABOR

Research Fellow Sean Higgins:

“President Biden’s executive order today calling for occupational licensing and employment non-compete agreements to be rolled back is a good idea that could benefit individual workers. Non-compete agreements and occupational licensing are in most cases limits on competition. They are barriers that prevent workers from being able to get the maximum value for the commodity they sell: their labor.

“Whether the White House actually has the legal authority to regulate them on its own is a different question. Occupational licensing is done at the state level and there is no precedent for federal regulation of non-compete agreements. That said, the administration is at least addressing the right issue: expanding the freedoms of individual workers.

“This is starkly contrasted by the executive order also calling on Congress to pass the Protecting the Right to Organize Act. The PRO Act would roll back numerous long-standing rights enjoyed by individual workers through such actions as the elimination of all state right to work laws. Individual workers deserve more freedom, not less.”

BANKING/FINANCE

Senior Fellow John Berlau:

“President Biden’s executive order bemoans consolidation in banking while ignoring its most significant cause: The costly mandates of the so-called ‘financial reform’ of the Dodd-Frank Act, signed into law by the Obama-Biden administration in 2010. Testimony from community bankers and numerous studies, including from Harvard’s John F. Kennedy School of Government, have found that Dodd-Frank accelerated the decline of the number of community banks.

“Restricting mergers and acquisitions will not reduce the regulatory costs to small banks of Dodd-Frank and other red tape. It will instead deprive consumers of the benefit of market-driven business combinations and will likely result in the simple closure of community banks that can’t deal with the regulatory costs. If the Biden administration is truly concerned about consumer welfare and competition, it should work with Congress to pare back the red tape shackling community banks and credit unions.”

DRUG PRICES

Senior Fellow Joel Zinberg

“The White House fact sheet has a lot of misstatements on drug prices. CPI-Rx actually fell at the end of 2018 in nominal, not just real terms. Drug price inflation is lower, not higher, than general inflation.

“Also, drug pricing has little or nothing to do with consolidation. It has to do with temporary, patent-protected, monopoly pricing. In fact, the pharmaceutical space is quite dynamic, with few barriers to entry and many small biotech entrants. Moreover, nine in ten prescriptions for drugs in this country are for generics. which are cheaper in the U.S. than overseas. Our higher prices are concentrated in specialty drugs and biologics – the price we pay for innovative medicines.

“The fact sheet’s comparison of the profitability of drug companies versus large, non-drug companies is misleading. The pharmaceutical industry is characterized by high investment costs on intangible capital for R&D over the 10-12 years needed to bring a drug to market and low marginal costs of production. Return of invested capital for drug companies is actually below returns for most other industries. Excessive profits are incompatible with an industry that has low barriers to entry and would disappear with competitive entry of new firms.

“Interestingly, the Biden fact sheet reiterates support for the Trump administration policy of allowing state and tribal governments to import drugs from Canada. The policy has been largely unsuccessful thus far with few takers, and it is unlikely to have much impact. The Canadian drug market is a tenth the size of the U.S. market and cannot supply a meaningful amount of drugs to the U.S. There is no indication that Canadians want to buy or that drug companies want to sell extra supplies for that purpose.”