Odd Lots - A Top Antitrust Lawyer on How Increased Competition Could Fight Inflation

Episode Date: January 10, 2022

When people think about tools to fight inflation, usually things like taxes or monetary policy come to mind. But lately there’s been more discussion about corporate power (particularly concentrated corporate power) as a source of higher prices. So what can the government actually do? On this episode, we speak with Craig Seebald, a partner at Vinson & Elkins, and leader of the firm’s antitrust group, to understand how the law in this space gets applied.See omnystudio.com/listener for privacy information.

Thanks for listening to Oddlots. Follow the show on Amazon Music for more future episodes or just ask Alexa, play the podcast, OddLots on Amazon Music. And welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway. And I'm Joe Wisenthal. Joe, have I ever told you my favorite conspiracy theory? No, but I'm not surprised you have a favorite conspiracy theory. I don't know what it is, however. I'll try not to take that personally. But my favorite conspiracy theory is a favorite. Does it have something to do with silver price suppression?

Well, now, wait a second. That conspiracy theory actually turned out to be true. But anyway, okay, we're going to go on a really long tangent if we keep heading in that direction. No, my favorite conspiracy theory is, well, it has to do with inflation and eggs and cholesterol. Oh, yeah. This is a good one. Not many people know this, but in the 1960s, when there was high inflation and the president was very worried about it, this is Lyndon B. Johnson back then, he was trying to come up with all these different ways to maybe get prices to start coming down. And one of the things he did was target eggs. And he basically told the surgeon general to issue alerts all about the risk of cholesterol in eggs to try to get people to buy.

fewer of them. And, you know, even to this day, people still think there's lots of cholesterol in eggs and that they're unhealthy. And a lot of that traces back to Lyndon Johnson trying to fight inflation 50 years ago or 60 years ago, I should say. So wait, you said this is a conspiracy theory, but is it true? Like, did this actually happen? Or is it just people think this was the sequence of events? No, no, no. This actually happened. But basically there was a conspiracy theory a conspiracy to tell the public that eggs were terribly unhealthy when, in fact, they certainly aren't. Got it. Got it. That's crazy. So the reason I'm bringing it up is because there are clearly concerns about inflation right now. I think CPI is at something like 6.8%. And when people think

about inflation, I think the first thing their minds turn to is interest rates and monetary policy. inflation is high, so maybe the Fed should start raising rates. But of course, there are these different ways to actually try to bring prices down. Right. This is really the key thing, which is that, you know, obviously, you know, people think of inflation as the purview of the Fed and monetary policy and monetary aggregates. Milton Friedman, inflation is always everywhere, a monetary phenomenon. But like, we see it this year. If we had, if we had had, say, like, more used cars or more semiconductors to make cars or et cetera, we know that headline inflation would be lower.

That's just a fact. And so, like, we clearly see the existence, especially right now, what I would say is non-monitorial inflation, and maybe some economists would get annoyed by that, or they would disagree or whatever. But, like, we could point to maybe overall, it's not just about bottlenecks or whatever, but we could certainly point to, at times, the existence of forces that are not clearly related to the Fed that push up the aggregates of price indices without question. And you know, another area is like medical care. I don't think like the high cost of medical care is something that like obviously is attributable to monetary policy. No. And we are starting to see politicians

pay more attention to these specific issues. So we've been talking a lot about attempts to ease supply chain congestion. And I have to say, one of the more. more interesting efforts that is currently going on has to do with antitrust legislation, which is not necessarily something that you would think of when you think of supply chain problems. Yeah. No, I think that's like really interesting. And, you know, obviously these are sort of like slow moving things and they're probably a limit to what you could do in the next few months. But the idea that a few companies have incredible amounts of buying power because of concentration, because of lack of competition.

It seems like a very interesting avenue and one that at least in the medium to longer term, if not right away, the next few months, could increase the sort of like productive capacity overall if we had more competitive markets. Exactly. So we are going to be digging into that question of whether or not you can use antitrust enforcement

to try to bring down inflation and ease some of these supply constraints, bring down things like food prices, and we do have the perfect guest to talk about this. We're going to be speaking with Craig Seabold. He's a partner at Vincent and Alkins and an expert in antitrust. So Craig, welcome to the show. Well, Tracy and Joe, it's my pleasure to be with you, and I'm excited to talk to you about some of my favorite subjects, antitrust, politics, and a little history.

Great. I had a question for you too. I worked on this because it's hard to combine a joke that includes antitrust and supply chain, but here it goes. How many antitrust lawyers does it take to change a light bulb? Oh, gosh. How many? None. The light bulbs are late and not shipping. Solid. Solid. Okay. That was pretty good. I like it. I like it. It's solid. It's tough material, antitrust and logistics. That's the best I can do. Well, I mean, on that note, maybe you could just to begin with, you could start by defining what antitrust actually is and how it could relate.

to supply chain problems? Yeah, let me just give you a quick overview. In the United States, we have three basic antitrust laws. And while in the United States, high prices in them themselves are not an antitrust violation, we do worry, and the greatest sin for the antitrust area is actions that cause higher prices. So we have three laws, as I was saying. One is the Sherman Act, and the Sherman Act goes back to 1890. We have Sherman Act, Section 1, which regulates agreements and restraint and trade.

And we're looking at price fixing, bid rigging, those type of agreements between competitors that raise prices. Those are illegal. The second major antitrust law we have is Section 2 of the Sherman Act, which regulates monopolies. This is getting a lot of press these days because of the government's challenges to Google, to Facebook. Those are all under Section 2. what's interesting under our law, it's not illegal in the United States to be a monopolist,

but it's illegal to engage in monopolization. And what do I mean by that? It means it's okay to be big in the United States, but it's not okay to be big and do bad things. And one of the bad things could be taking actions to raise prices. And so one of the things that we worry about with the big tech companies is what actions they're doing to make markets less competitive. And then finally, we have our merger control laws, which go back to the Clayton Act Section 7, which regulate any competitive mergers. And when we review mergers, and we have a whole regime here in the United States. And actually, we have a unique system in the United States because we have two antitrust agencies. One was apparently not good enough for the United States.

We have the Justice Department, Antitrust Division, and the Federal Trade Commission, both with authority to investigate matters under the antitrust laws, challenged mergers. And the greatest sin with mergers is a merger that increases concentration and raises prices. So increased prices through bad actions are something that the antitrust laws are good at going after. So let me ask you a question about antitrust as applied because there is, or antitrust regulation, there is an impression and that in recent years that by and large, antitrust on any of the avenues that you identified has not been pursued particularly vigor. that in the past, our antitrust laws were taken more seriously, that regulators had a greater appetite to enforce them, whatever they are, and that by and large these days, there's not a lot of regulatory activity or there hasn't been up until recently. Is that a fair characterization, or is that just sort of like a medium myth? You know, I would say it's a mixed record over the

last few years. We are clearly, I think, poised for much more antitrust enforcement. The Biden administration, antitrust regulators are very aggressive and has signaled that they're going to be aggressive in the market. There's almost an attitude of what's happened before didn't work. We're going to change things and do more. When I say it's a mixed record, when we look at enforcement, we've been fairly strong in terms of our criminal enforcement, and that's an important point. The antitrust laws in the United States are prosecuted both criminally. So people go to jail for antitrust crimes and civilly. And so the criminal enforcement, program has been very active in the last 20 years. There's been a lot of cases involving international

cartels, and both Republican and Democratic administrations have gone after them. There's been a fairly rigorous merger enforcement, although I think there's questions about whether we've let too many mergers go through, and we'll talk about that as we talk about shipping. The one area there hasn't been many cases, and I do signal a change in this is the monopolization cases. You look at, you know, just a couple years ago, we were bringing zero monopoly cases. And that started to change at the end of the Trump administration with the high-tech suits. And so I think they're looking to reinvigorate the monopolization cases that they're looking at these days. So you sort of tease this a few minutes ago when you mentioned that we're going to get into some

history. But one of the interesting things when it comes to supply chains and antitrust is that there's actually a carve out for shipping companies. So there's an antitrust exemption. Could you maybe walk us through what that is and how that came to be? So in the antitrust general, there are exemptions to the antitrust rules. The courts have been very consistent in saying antitrust exemptions should be applied very carefully and they should construe very narrowly. One of the most famous antitrust exemptions that exist is major league baseball. There is an exemption for major league baseball.

They are not challenged. What's interesting, they get the benefit of that by other professional sports, football, the NCAA, golf, other sports don't have the benefit of that. So that's a very famous one. And actually, there was some concern this summer over even that exemption because when baseball decided not to have its all-star game in Georgia this summer, there was some talk about getting rid of that exemption. putting that side, talking about the shipping exemption.

So it goes back to this notion that shipping used to be a highly regulated area. And so because of the highly regulatory nature of it, that there was felt that the shippers would need to be able to work together, to organize how they ship freight, to maximize storage capacity, to work together on rates. And so because of this regulatory structure, there was given an antitrust exemption. And the exemption allowed that the shippers could agree on rates, tariffs they charge, so long as those were filed with the Federal Maritime Commission and approved by the Federal Maritime Commission. So you can have a classic cartel, but so long as under this exemption, they were filed with the Federal Maritime Commission, it was allowed. That's kind of evolved over the years as we've had deregulation in the shipping industry so that there is still an exemption, but it's fairly limited.

You could still technically file tariffs, but people don't do that. All the shipping contracts are private contracts these days. So those are not any trust exempt. Where the exemption really lies is that you can have what they call conferences. I think that's just a polite way to talk about competitor meetings, where you can have competitor meetings where they can talk about rates, but they can't agree upon the rates. Now, they have to, if they talk about them, again, it's this filing notion. They still have to file what they're talking about with the Federal Maritime Commission, but they can't agree on it. So it's a little odd, I have to admit, because it's a pretty fine line to be able to say, oh, we're going to talk about rates and have a general,

agreement that we may or may not agree to. So it's a pretty fine line. And it causes, I think, a lot of issues in the shipping industry. And it should say it's not just limit of the shipping industry. We see this in some other industries as well. Canadian women are looking for more. More to themselves, their businesses, their elected leaders, and the world around them. And that's why we're thrilled to introduce the Honest Talk podcast. I'm Jennifer Stewart. And I'm Catherine Clark. And in this podcast, we interview Canada's most inspiring women. Entrepreneurs, artists, athletes, politicians, and newsmakers, all at different stages of their journey. So if you're looking to connect, then we hope you'll join us. Listen to the

Honest Talk podcast on IHeartRadio or wherever you listen to your podcasts. The news doesn't stop on the weekends. Context changes constantly. And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gurra. Join us every Saturday and Sunday for the new Bloomberg this weekend. I'm Christina Ruffini. We'll bring you the latest headlines, in-depth analysis, and big interviews, all the stories that hit home on your days off. And I'm Lisa Mateo. Watch and listen to Bloomberg this weekend for thoughtful, enlightening conversations about business, lifestyle, people, and culture. On Saturday mornings, we put the past week's events into context, examining what happened in the markets and the world. That on Sundays, we speak with journalists, columnists, and key political

figures to prepare you for the week ahead. Join us as soon as soon as as you wake up and bring us with you wherever your weekend plans take you. Watch us on Bloomberg Television. Listen on Bloomberg Radio, stream the show live on the Bloomberg business app, or listen to the podcast. That's Bloomberg this weekend. Saturdays and Sundays starting at 7 a.m. Eastern. Make us part of your weekend routine on Bloomberg Television, radio, and wherever you get your podcasts. So first of all, when it comes to shipping, and you know, this is an area we've talked about a fair amount, most of these companies aren't you.

U.S. based. And I'm just curious, or the big ones anyway, that we talk about, I'm just curious about the extent to which U.S. regulators have reached into this space versus a, you know, how much does that further challenge the ability of U.S. regulators, even in any legal regime, to do anything on shipping competitiveness? The U.S. antitrust laws, I would say, are not unlimited in their jurisdiction, but very fulsome in their jurisdiction. So any action caused by a foreign company that has a direct and foreseeable effect on U.S. Commerce is subject to challenge by the Justice Department. So you can have a conspiracy.

We see this all the time in the cases I work on where two companies, two business people agree on prices in some foreign country, never even met to the United States, but yet the U.S. government can go challenge them and challenge the conduct in U.S. courts. So a couple of years ago, there's this coalition of the shipping companies. They get together and talk about rates. Talk about some things we were just talking about under the exemption. And they came to San Francisco for their meeting. You know who visited their meeting?

Who? Who? Anti-trust lawyers and the FBI. They came in and rated this meeting. And they handed out subpoenas to everybody in the room. So can you imagine you're in this hotel room with all these, you're – it's a group of shipping executives. And it's all the CEOs, all the top guys. So they all come to San Francisco for this meeting to talk about these things that they're

allowed to talk about under the exemption. And who bussen is the FBI and the entrust division handing out subpoenas like their candy. Clearly, they did this investigation. What's interesting, they did an investigation of the shipping industry. I think they were worried about the alliances and some of the other things. Ultimately, there were no action brought. So, you know, I think the exemptions did take a bit of a part of that and why they the Justice Department didn't move forward on that, but it just shows you the view that here you had 13, 14, foreign executives all getting subpoenas.

So the jurisdiction is very broad from the Justice Department's perspective. Why don't we get into specific actions that the U.S. government, the antitrust authorities, could take in order to remedy supply chain issues? Because we already mentioned shipping. That's one aspect of it. But of course, another thing they could do is try to go after large monopoly players in consumer goods and try to bring down prices that way. So could you maybe get into some specifics of what could happen here? What sort of enforcement actions are realistic? So there are several actually that are ongoing at the moment.

The Federal Trade Commission just announced that they're doing an investigation of the supply chain issues. they sent out inquiries to a number of U.S. companies. These are the big companies like Amazon, Kroger, Procter & Gamble, Tysons, those that are trying to bring products in the United States to try to understand what the problems are. So that's a first step there, doing an investigation. Now, this is under a rule of the FTC that allows the FTC to investigate industry-wide practices that may have any trust problems.

So this is really a first step. This is to say, is there an antitrust competitive problem? What that could lead to if they say, gee, they're reducing to be any trust problems are investigations. The Justice Department or the FTC could open up civil, the Justice Department could open a civil or a criminal investigation and thinks that there are antitrust problems. One of the problems about antitrust, though, is it is very, very slow. So while we have these problems now, you know, investigation can take a year, two years. All antitrust cases are driven by documents and evidence. It takes a long time, especially if you're getting them from foreign companies.

It can be troubling. There's issues about getting them from foreign companies, quite frankly. Foreign companies like China have blocking statutes which don't allow foreign companies to produce documents to the U.S. government without the Chinese government signing off on it. And so these investigations can get bogged down. And then even if they bring a case, antitrust cases are super slow. And so you could have a case filed and not even have a court date for four, five, six, seven years. So we could be on three different supply chain events past where we are today before we start having any trust case about what's happening right now.

So antitrust can be helpful, but it's certainly not an immediate solution to the problems we're having today. So this actually leads me right into my next question. And, you know, we sort of said in the intro, it's like, oh, you know, Well, we're talking about inflation right now. Antitrust isn't going to do anything in the next few months. But one of the themes that we come back to a lot on this show is that a lot of what we've run into now is this sort of like compounding price that we pay for diminished markets or atrophied markets.

And we had this long period after the great financial crisis in which many industries maybe due to, you know, usually we talk about mediocre growth or mediocre end demand, simply did not invest particularly much in capacity. And we pay the price now. Maybe we don't pay the price during periods of low demand, but as soon as GDP grows rapidly, we pay the price of atrophied capacity. And I'm curious, like, okay, long term,

like, yeah, or we accept that in the short term, antitrust can't do much. But what about in the medium or longer term, like is the idea that if we had more robust antitrust and we had more competitive markets as the norm, that perhaps productive economic capacity overall in any cycle would be greater than it is today. I think that's true. I think you'll see it especially in merger enforcement. When I was in law school, I had a professor that talked about the fact that we see every 40 years kind of the antitrust pendulum swing.

When I was going to law school was right after the Reagan administration, regulation was disfavored, let the markets do their own thing, let not have very big government enforcement. And I think you're starting to see this movement towards more regulation, towards more enforcement. I think there is a realization by some of our lawmakers, by some of our regulators that maybe they let things go too far. So if you look, for instance, I'm involved in a case right now against some of the railroad companies for some logistics issues,

for some fees that they put in place almost 20 years ago at this point, But really the railroad industry, we used to have a very vibrant railroad industry with lots of competitors. It was highly regulated. Then we had this movement and make it not regulated. And now we're down to four major railroads, which control almost 90, 95% of all the railroad traffic in the United States. And the same as with shipping. You had American competitors. You have foreign competitors.

From I understand, now you're down to basically nine shippers that control almost all of the export products from the United States. There are no U.S. producers. And on top of it, you have these three alliances. And so I think you're starting to see people say, ooh, did we go too far in letting some of these mergers go through? And so I think you're seeing this reflected in that we need to take a harder look at some of the mergers going on now to make sure it doesn't go any further. So just on that note, does it feel like attitudes towards antitrust enforcement are starting to change. And I guess another way of saying that is does it feel like there's bipartisan support for more antitrust legislation, inflation being one of the few things I think that both parties agree

is actually bad. And so doing something or anything about it might be a good thing. I used to not worry about antitrust legislation because I just never thought it had much of a chance to pass because you always had the setup where the Democrats were. more pro-enforcement, more willing to think about new legislation. And then the Republican Party, at least 10, 20, 30 years ago was the party of Country Club Republicans, Chamber of Commerce, and didn't want to have it. That has changed dramatically in the last year or two, as you see the Republican Party move away from big business to become more populist. And so now you're seeing this merging of kind of the left, which has traditionally wanted antitrust enforcement,

and the right, now that's more anti-business. This summer, I was struck, I was reading, polling from the Gallup organization that talked about confidence in big business, and they asked Republicans and Democrats whether they had a great deal or quite a lot of confidence in business. And just from this year to last year, Republicans' confidence, in big business declined by 12. Only 20%. Only 20% of Republicans have confidence in big business. And they track kind of the net confidence in each.

So the percentage, so it compares the percentage expressing high confidence in business minus those expressing little or no confidence. And so in the past, the Republican Party, over years, I mean, over decades, was kind of plus 10, 12, 15% in favor of big business. You know where it was last year? Negative 17%. That's incredible. It's incredible.

So the Republican Party is no longer, and it's really in line with where the Democratic Party is. And so bringing it back to shipping, there was this kind of out of nowhere, there was this new antitrust bill called Ocean Shipping Reform Act. And it was to kind of consistent what we're talking about. Give the Federal Maritime Commission more regulatory powers, more oversight powers, more teeth to worry about some of the things we've been talking about. And the thing that amazes me, this bill, new antitrust legislation passed in the House of Representatives. And we're talking about the House of Representatives that's divided on everything. This passed 364 to 60. I mean, that is about as one-sided as you can have in this.

And here's the thing. Think Joe and Tracy, think about this. This is the lineup of people who voted for this. You had people like on the right, Liz Cheney, Devin Nunes, Kevin McCarthy vote for this, well, also Madison-Col. Hawthorne, so some of the new guys coming in. But then you also had Ocasio-Cortez, Omar, the Democrats. So can you imagine a bill where you would have Kevin McCarthy and AOC both supporting it? But that's what we're seeing in antitrust. So what's the name of this bill? I had totally missed this. What's the name of this bill?

Because now I'm definitely going to have to like go and read. Yeah. So it's called the Ocean Shipping Reform Act. And it was just passed by the House in December. the Senate seems very receptive to it. The Biden administration has indicated that they would approve it. It was a bipartisan bill. One of the congressmen was a Republican congressman from South Dakota, which is kind of funny that South Dakota would be worried about shipping, but they are because they would have products. He has a big constituents that needs to get lactose to New Zealand and a Democratic sponsor as well. So it just didn't have a lot of hearings. It just kind of popped up on the radar and got approved. And so I think the Senate's going to prove it. I think the Biden administration is going to prove it. And what it does, if you're interested, is gives the, as I said, the Federal Maritime Commission more powers. One of the things it's really focused on is some of these fees, these demurge fees that people are incurring. Apparently, people are paying incredible fees as their product is sitting in a port and not being shipped. And there are people throughout the country,

shippers that are very upset about it. So it puts upon the shippers and the dockholders that they have to show that the fees are reasonable. The burden is on them to prove it's reasonable. There's reporting requirements. It authorizes the Federal Maritime Commission to have investigations related to fees and charges. It prevents ocean carriers from declining opportunities for U.S. export. So there was apparently an issue that was of great concern where products would come to the United States and then empty containers would leave without being anything in it.

And so they want to stop that. So it's a pretty comprehensive bill in the shipping area that's going to be targeted. So it's right on point with what we're talking about. Wow. Yeah, Joe, this is one of the things that when we spoke to John Porcari, the White House's envoy to the ports, we actually asked him about this. But he kind of didn't answer the question, which is one reason why we're having this follow-up conversations. Yeah, right, right. I remember that now.

And I remember this sort of like the lack of substance. or the lack of a very clear response about where this was going. Something that I'm sort of interested in is what I guess I would say is the other side of the coin. So you mentioned, okay, shipping and rail. And, you know, we can talk about the optimal number of competitors of the space or so forth. But another area that we've talked about a lot on this show is trucking, which seems like it

has, it's 180 degrees different. The barriers to entry into the space or essentially non-existent. huge boom and bus cycles, even in boom times right now. Companies regularly go out of business due to lack of pricing power. Do you see industries in which essentially would benefit from, you know, some sort of greater barriers to entry in which the supply of goods, the supply, the stapleness of prices might benefit from some sort of like, you know, where it's, where maybe make it a little bit harder to enter and exit the, exit the industry. Well, that's a dangerous question for an antitrust lawyer.

But, you know, I think the answer might be more government regulation. You know, back in the early 70s, 80s, there used to be tons of regulation about who could drive trucks. Which is kind of a backdoor way of, it's kind of a backdoor antitrust on some level. So maybe you don't necessarily cap the competitors or whatever, but you like make it a little, the bar a little bit higher. And believe it or not, there is a ton of antitrust activity in this area because there's another, I'm going to call it an exemption to the antitrust laws, but it's really grounded in constitutional rights. Competitors can get together and lobby the government to do legislative things that may have an adverse competitive effect. But because you're lobbying, because you're expressing your First Amendment rights, you can push for legislation that would have the effect of recent barriers that would make it harder for. editors. And that's all exempt from challenge under the any trust laws because it's part of your

right to petition. Canadian women are looking for more. More to themselves, their businesses, their elected leaders, and the world are out of them. And that's why we're thrilled to introduce the honest talk podcast. I'm Jennifer Stewart. And I'm Catherine Clark. And in this podcast, we interview Canada's most inspiring women. Entrepreneurs, artists, athletes, politicians, and newsmakers, all at different stages of their journey. So if you're are looking to connect, then we hope you'll join us. Listen to the Honest Talk podcast on I Heart Radio or wherever you listen to your podcasts. You can get the news whenever you want it with Bloomberg News Now. I'm Amy Morris.

And I'm Karen Moscow here to tell you about our new on-demand news report delivered right to your podcast feed. Bloomberg News Now is a short five-minute audio report on the day's top stories. Episodes are published throughout the day with the latest information and data to keep you informed. Yes, there are other products like this from a variety of news organizations, but they usually rerun their radio newscasts throughout the day. That's not what we do. We create customized episodes that can only be heard on Bloomberg News Now. And we don't wait an hour to publish breaking news. When news breaks, we'll have an episode up in your podcast feed within minutes, so you're always getting the latest stories and developments. Get the reporting and the context from Bloomberg's

3,000 journalists and analysts. We're all over. over the world. Listen to the latest from Bloomberg News Now on Apple, Spotify, or anywhere you listen. I want to go back to the what we were talking about with the Ocean Shipping Reform Act of 2021 and the Federal Maritime Commission, the FMC, because I guess my question is how well-suited is the commission to actually take on antitrust issues? Because my understanding is this is not something that they've been doing historically because of that antitrust exemption that you just described. So presumably this would be a pretty big shift for them. It would be. I mean, let's start out with one fundamental problem. It is a really small

organization. I looked at it up yesterday. There are apparently only 130 employees at the FMC. There's five commissioners. And they only have a budget of $30 million or so. I'm hoping that we'll see Congress fund them more. One thing that has happened, so this summer, one of the big things that happened in antitrust in 2021 was that President Biden issued this executive order on antitrust right around July 4th,

and he has asked all the agencies to work to just look and try to solve lots of antitrust problems. He views the world that there's been too much consolidation. Too many antitrust things have let slide. And so he's really invigorated the government to look for more than trust issues. And so one of the things he's worried about is shipping. And coming out of that just a couple days after the Justice Department and a trust

division and the FMC have signed an MOU pledging to work more closely together. So I don't think it's going to be the FMC by itself, but I think also working with the Justice Department. Now, the flip side of this is the Justice Department and the FDC have more resources, but there's still also a resource constraint. we're in the middle of a major merger wave, and they are overwhelmed with the number of mergers that they have to review. They're taking on big tech.

They're doing lots of investigations. So, yeah, they'll be interesting going after shipping, but when you put their list of priorities, you need in the top ten, but it's not probably at the very top. So we're dealing with two agencies, the FMC and the antitrust agencies who are going to be fairly resource-constrained. Can you just talk a little bit more about? math and numbers of the short staffing or the capacity constraints because, you know, I have this idea. It's like, oh, no private entity could ever match the government. But realistically, of course

they can. And these institutions only have so many lawyers at any given time and only so much budget. What does it often look like in terms of the amount, you know, in terms of the legal firepower for some of these mergers on the private side versus the public side? So the agencies have a number of attorneys and economists that are staffed. to look at these, but you know, you're dealing with companies that are very sophisticated that have outside counsel. I work for Vincent Milliken, and we are a big law firm in the United States, but we have only, I mean, we have 720 attorneys.

There's law firms that have 3,000, 2,000 attorneys, so you're dealing with situation where, you know, companies can afford a lot of attorneys, and you come to meetings, and the attorney, the merchant parties may have 20, 30 attorneys, and the government may have five or six attorneys and an economy. So it is an issue. So we're talking about obviously supply chains and logistics. And I want to like just go back to something again on this sort of market structure. And you mentioned the number of competitors that are in rail and obviously the number of competitors that are in shipping. And one of the aspects of both of those industries is there is a sort of like, I guess I would say very limited, constrained public infrastructure. There's only so many

ports that are available and they're sort of like quasi public or quasi private. And there's only so many rail tracks available. And it's sort of, you know, on rail is sort of reminiscent of the cable companies where there's always been challenges with shipping. How much are these industries inherently constrained in terms of what the government can do by simply like the lack of like public infrastructure basically to support new competitors? I think you're seeing it with the new legislation we were just talking about, I think the one thing they could do is step in and try to regulate more. The notion that you're going to have the Federal Maritime Commission regulate rates and think about what's reasonable, I think is something that we may see more of. That's probably

as much as they can do. I mean, we're a capitalist society and we can't start doing industrial planning, I don't think. So I think we'll just see probably more regulation. So maybe just to sum it all up, what's your sort of gut sense about the degree to which antitrust enforcement or legislation would actually bring down inflation and ease some of these supply chain pressures that we've been talking about? I think it'll be a useful tool, but it's not going to be the cure. As I said, some of these cases just last for a long time. I'm involved in two cases right now that involves supply chain. management mentioned one earlier. We're litigating against the railroads related to fuel surcharges that were imposed in 2003. So we're dealing with that in 2021. And I am involved in another case where

we're dealing with supply shortages from kind of the 2015-2016 era. So antitrust is generally retrospective, obviously looking at problems in the past. What it can be helpful, though, is as these cases get decided, the case law is established, and I think it'll have an impact on how people do business. I also think one of the things coming out of this is that compliance of big companies is going to be very important. If you know that there's going to be an increased regulatory environment, and we've just been talking about the United States, it's the European Commission, it's Australians, it's the Chinese, it's everybody is becoming more antitrust-focused and focus. So if you're a company, I think it's going to be more important to have very strong

compliance programs. In fact, the Justice Department has a program that if you can come in and show that you had a extremely good compliance program, even though you had some antitrust problems, you can get some benefits and some leniency from the Justice Department as a result of that. So I think that's going to be important. And maybe stepping up the compliance will have some impact. But so I think it's kind of more the secondary effects of antitrust cases. I will say one thing that has immediate effect is if the Justice Department sends you a grand jury criminal subpoena and your company gets the attention of the CEO and the general counsel and a lot of other folks in the company. And so that can sometimes have an interim effect to change behavior if it's illegal. But it's just a slow, it's a useful tool, but it's a slow moving tool.

Well, Craig, that was really fascinating. And I'm glad you could walk us through one of the more interesting ways of fighting inflation. Thank you so much. My pleasure. Enjoy talking to you. That was fascinating. Thank you so much. Really appreciate it. So, Joe, obviously, I thought that was really interesting. And one of the things that keeps coming out of these conversations and, you know, Gene Soroka kind of talked about it to the executive director of the Port of Los Angeles is this idea of, okay, Maybe antitrust enforcement isn't going to actually do what it's supposed to do or what it's explicitly written to do for a very long time because it's tough to push those enforcement actions through. But maybe the threat of future enforcement action is enough to start some sort of change of behavior within the shipping industry itself.

And this, again, seems to be a recurring theme. like just the idea of getting people involved in the supply chain to actually change habits that have been ingrained for decades at this point. That seems to be something that people are really trying to do right now. Yeah. No, absolutely this idea of like, okay. And he made that point about compliance departments and the changing norms. I do think like ultimately like, okay, anti-competitive behavior.

Part of the competitive behavior is actually competing. and investing and trying to win and market share and offering something better. And I do think that like one of the problems I have with this in general is like, okay, but what is going to actually get people to invest and increase capacity? And I still feel like, you know, obviously the legal aspect is a big, is part of it and maybe a very big part of it. But I'm still like trying to wrap my head or I was like, yeah, but okay, you can change norms around pricing or fees or penalties or whatever.

but what is going to like increase competition in like the sort of like pure capitalist sense? Right. But conversely, you could argue that anti-competitive behavior right now leads to higher shipping prices. And so people have very, very little incentive to actually increase capacity because they're already making billions of dollars. And I think didn't, didn't Marisk like unveil a quarterly profit recently that was like its highest in over a century, something like that? And 100%, and it seems like this is like the type of thing, which is like the goal is hopefully to like, I guess I would say like reach new equilibrium or like change overall like norms throughout multiple cycles going forward rather than something that we hope is going to solve the problem now. But, you know, maybe at the margins there will be some potential solution now. Yeah. The other interesting thing, I mean, on that note, is this idea of deregulation cycles and the idea that this actually has a lot of bipartisan support. So maybe we are starting to enter a new cycle where people are more interested, where Washington is more interested in actually bringing down some of the monopolies. And again, Craig was talking about this, but we've already seen that in tech. But it is really striking this sort of spectrum. of interest that this is attracting from both the left and the right.

Yeah. No, I thought that was probably one of the most interesting. And it's like sort of like Trumpism and the sort of like disdain for anyone in power. I guess I've always been like it's a little bit skeptical at this idea that, okay, are we actually ever going to pass legislation? But, you know, he pointed out a pretty big bill is past the House and maybe this changing political environment will have some real downstream legislative effects. Maybe I've been too skeptical of this sort of like changing public mood, actually changing and changing public law. You've underestimated people's hatred of big business, I guess. Yeah, maybe I have.

I don't have to sort of change some of my priors, so they speak. No, I haven't really underestimated people's hatred. I've underestimated whether that hatred will change laws. Maybe it will. Yeah, okay, that's fair. Yeah. Okay, well, shall we leave it there? Let's leave it there.

All right, this has been another episode of the Odd Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Allaway. And I'm Jill Wisenthall. You can follow me on Twitter at The Stallwork. Follow our producer on Twitter, Laura Carlson. She's at Laura M. Carlson. Follow the Bloomberg head of podcast, Francesca Levy, at Francesca Today.

And check out all of our podcasts at Bloomberg under the handle at podcasts. Thanks for listening. I'm Francie Lacqua, an award-winning journalist. And I've got a new podcast. Leaders with Francine Lacroa from Bloomberg podcasts. I've interviewed everyone from Heads of State to fashion icons about the news of the moment. But I've always been curious who are these people as leaders. I don't think there's one right way to be a leader.

Make decisions. A poor decision is always better than no decision. Listen to new episodes every other Monday. Follow Leaders with Francine Lacroix wherever you get your podcasts.