Biden's competition executive order is big on ambition but lacks teeth


On July 9, President Joe Biden signed the “Executive Order on Promoting Competition in the American Economy.” In a fact sheet accompanying that order, the White House claimed that it “established a whole-of-government effort to promote competition in the American economy, includ[ing] 72 initiatives by more than a dozen federal agencies to promptly tackle some of the most pressing competition problems across our economy.”

These efforts would do several things for people, including make it “easier to change jobs and help raise wages … Lower prescription drug prices … Save Americans with hearing loss thousands of dollars … Save Americans money on their internet bills … Make it easier for people to get refunds from airlines … Make it easier and cheaper to repair items you own … Make it easier and cheaper to switch banks … Empower family farmers and increase their incomes … [and] Increase opportunities for small businesses,” the fact sheet claimed.

There were, indeed, few things that the White House claimed the executive order would not do, through instructions to different regulatory agencies, including antitrust guidance.

Commercial freight rail immediately took umbrage at those instructions and warned of dire effects. “The Biden administration today announced an executive order that included a misguided direction to interfere with functioning freight markets that could ultimately undermine railroads' ability to reliably serve customers. In part, the executive order called on the independent Surface Transportation Board to consider a forced switching rule and other ill-considered policy changes,” the Association of American Railroads said in a statement.

The lobby's president, Ian Jefferies, told the Washington Examiner, “Competition remains fierce across freight providers, and any proposal mandating forced switching would put railroads, an environmentally friendly option that invests $25 billion annually in infrastructure, at an untold disadvantage. Such a rule would roll back the foundational market-driven principle that keeps the industry viable, reduce network fluidity, and ultimately undermine railroads' ability to serve customers at a time when freight demands have dramatically increased.”

Marc Scribner is a transportation policy analyst at the Reason Foundation and a close observer of rail policy. “The Biden administration should better appreciate the severe harms caused by heavy-handed economic regulation of railroads imposed under past administrations and respect the independence of the Surface Transportation Board. President Biden's proposals are fundamentally misguided, and the Surface Transportation Board should reject them in favor of careful analysis based on economic reality and the law,” he told the Washington Examiner.

The Washington Examiner asked the Surface Transportation Board, which regulates the commercial freight rail industry, what it was doing in response to Biden's executive order. “The chairman's own words are probably best for answering that question,” said board spokesman Michael Booth. He directed the Washington Examiner to a news release by Chairman Martin Oberman on the document.

In that release, Oberman reiterated the board's “independence” in law but that it will “welcome the nationwide policy contained in this new Executive Order.”

“In harmony with the White House's policy that the federal government should seek to boost competition nationwide, as I have previously indicated since being named as Chairman, I intend to urge my fellow Board members to prioritize and strongly consider the concepts embodied in several measures which are already pending or have been recommended by Board staff or stakeholders, including but not limited to reforming the Board's competitive access policies; enhancing shipper visibility into first mile/last mile service; and increasing the practical accessibility of rate relief measures to shippers in market-dominant situations,” Oberman said in the statement.

He also added a comment on an issue that is near and dear to Biden's heart. Biden was known as Sen. Amtrak when he served in Congress because of his use of the commuter rail service to get to and from Delaware every day. Amtrak does not own its rail network but piggybacks on commercial rail networks. This can lead to commuting delays.

Oberman insisted that “the Board takes seriously the administration's emphasis on ensuring that passenger rail is not subject to unwarranted delays and interruptions in service. Freight railroads have obligations to facilitate timely passenger rail service. Earlier this year, I formed an internal working group to advise the Board on the resources necessary to fulfill the agency's responsibilities to investigate compliance with the new on-time performance standards and, starting next year, to ensure that those standards are enforced.”

The trade journal Railway Age called the executive order “Much Ado About Not Very Much.” “The 6,861-word document contains very little language directly pertaining to the USDOT, STB, and the railroad industry, with the possible exception of how a Class I merger could affect Amtrak,” the journal explained.

Railway Age also published an analysis by railway economist Jim Blaze that said a “reciprocal switching” or “forced switching” rule would “in some places … work as a public benefit. But in most locations, it could be very complex and time-consuming.”

“Localized or regional added second-carrier access can be an effective tool for railroad customers. But in some physical or traffic level circumstances, the costs may exceed the expected benefits. And in many cases, the possible second rail carrier will decide it's not worth trying to bid for serving selected ‘open' locations — too time-consuming, and a shortage of crews and locomotives will make some movements too complicated for all involved,” Blaze explained.

The executive order would also have some effects on commercial shipping. But efforts to increase competition in the U.S. shipping industry could run into other long-standing policies of the U.S. government.

“There is compelling evidence that the Jones Act, which mandates that ships traveling between domestic ports be built in the United States, has made the American shipbuilding industry less competitive globally and increased the costs for transport of goods between U.S. ports,” R Street fellow Halie Craig told the Washington Examiner.

“Since the enactment of the Jones Act a century ago, the cost of U.S.-built ships has risen dramatically relative to the cost of foreign ships — as much as four times as high for U.S.-built tankers and five times as high for U.S.-built container ships, compared to global prices. Protection from foreign shipbuilders has hampered the competitiveness of the domestic industry (U.S. shipbuilding amounts to only 0.2 global output), and restrictions on who can ship between domestic ports hurt consumers by limiting their access to goods, as we have seen in times of crisis when the requirements of the Jones Act have been waived,” she added.

Matt Stoller is the director of research at the American Economic Liberties Project and a harsh critic of monopoly concentration. When the Washington Examiner asked him about the executive order's effects on competition in freight and shipping, he expressed a rare humility for a policy wonk. “I don't know! It's not my area,” he insisted.

However, Stoller has repeatedly highlighted contradictions of the Biden administration, which were shown off in the fanfare surrounding this executive order.

On the one hand, this administration is very ambitious, rhetorically. “Capitalism without competition isn't capitalism. It's exploitation,” Biden said in remarks on the same day he signed the executive order. The president even went so far as to criticize the Chicago school of economics, which has curbed antitrust enforcement by attacking many inefficiencies and ill effects of said enforcements.

On the other hand, the administration hasn't yet shown the willingness to see this ambitious agenda through. For example, the administration has dragged its feet on appointing a person to run the Justice Department's antitrust division.

“Both are true. Biden proposed the most significant policy changes on corporate power in 40 years, and Dems don't know how to do something they haven't done in 40 years,” Stoller said on Twitter.

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