From Farms to Pharmaceuticals: It’s the Monopoly, Stupid!

The worst days of the post-COVID pandemic economic disruptions may be behind us. But one thing has clearly not gone away: higher prices for consumers. No matter where you look in the news-scape these days, you’re likely to be confronted by a story of ordinary Americans bending and breaking under the strain of increased costs, whether for food at the grocery store, drugs at the pharmacy or a necessary repair at the local auto body shop.

The explanations for these rising prices vary and drift. Are they a byproduct of new technologies – like battery powered vehicles and innovative new drugs? Or are they a byproduct of geopolitical changes: the erection of new trade barriers and a move away from globalism and its vast, distributed (and low-cost) supply chains of materials and labor?

Market concentration is driving up costs from farms to pharmacies. Smarter laws are needed to stop it.

Such macro economic forces may certainly be at play. But I would argue that one often overlooked driver of higher prices is an “oldie but goodie.” Namely: monopolies. From auto repairs to supermarkets and drugstores to farm equipment, market concentration, the elimination of meaningful competition and the emergence of “New Gilded Age” monopolies across huge sectors of the economy in the U.S. is leaving ordinary consumers, small businesses and communities exposed and exploited like never before, with multi-billion dollar corporations the clear winner.

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Take automobile repair (please!) As this New York Times article from July 3rd points out, the cost of vehicle repairs – and the resultant increases in car insurance premiums – is skyrocketing across the U.S. By one estimate, the average cost of auto repairs following a collision is up 36% since 2018 with insurance premiums up 17 percent in the 12 months through May. The average repair in the U.S. is soon expected to top $5,000, according to data from the firm Mitchell, which provides data to insurers and the auto repair industry.

The article, by Lawrence Ulrich, points the finger of blame in many directions: newer SUVs, pickup trucks, and electric vehicles have become more complex and luxurious, making seemingly simple repairs more expensive. Cars also are more high-tech, with sophisticated sensors and software that are difficult to restore post-collision.

One factor the article doesn’t consider: the growing use of design patents on standard vehicle parts like bumpers and rear view mirrors. Those patents are being used to prevent aftermarket parts providers from making and selling identical replacement parts for vehicles – which are often mandated by insurers. That’s leaving car owners with no choice but to use OEM original parts, which can cost up to 60% more than non OEM replacements. Those increased costs and the lack of competition for parts and service make it ever more likely that vehicles will be declared “totaled,” even following small accidents. And those added costs eventually get handed down to vehicle owners in the form of increased insurance rates. (A US Appeals Court has recently agreed to reconsider a ruling that supported the legitimacy of such design patents.)

The same forces of market concentration are at work in the food sector. As we’ve reported, small, family owned farms are suffering under the thumb of firms like John Deere, which is estimated to control around 37% of the agricultural machinery market in the U.S., and which is being sued in a class action suit alleging it is engaged in anti-competitive practices related to repair of its equipment. Consider also: four large conglomerates control between 55% and 85% of the market for pork, beef, and poultry, as well, the White House noted back in 2021 and are using their market power to increase prices and underpay farmers, maximizing profits for themselves.

Looking down the food chain: a January, 2023 report from the U.S. Department of Agriculture found that food retailing market concentration increased 458 percent between 1990 and 2019, with large national “nontraditional” food retailers like WalMart and Target entering the grocery business. While the exact impact of that consolidation on food prices is a matter of debate, the emergence of “food deserts” in parts of the U.S. is no secret, and correlates with the spread of both big box and small box retail chains like WalMart and Dollar Stores and the corresponding disappearance of small, family owned markets. That has prompted a number of counties and cities to enact bans on new chain retailers like Dollar Stores.

And you can see a similar concentration in the market for pharmacies, where the increasing dominance of large chains like CVS and Walgreens has forced small, locally owned businesses to close and led to “pharmacy deserts” – especially in rural areas, as Stacy Mitchell of the Institute of Local Self Reliance observed at a recent forum in Maine.

What’s the fix? Nothing less than smarter policies and better enforcement of anti-trust laws. In her talk, Mitchell of ILSR noted that North Dakota currently has the lowest ratio of pharmacies per capita. Why? A decades-old state law that prohibits chain pharmacies from operating in the state. We need more laws like that in which governments – local, state, federal – step in to foster competition, level the playing field and create the most advantageous market conditions for families, small business owners and local communities, rather than foregrounding the interests of hedge funds and billionaire executives.

There’s some room for optimism. The Biden Administration has made a point of targeting anti-competitive behavior and taking a dim view of mega-mergers that will further concentrate markets, including a DOJ letter signaling support of the class action suit against Deere. At the same time, proposed legislation on Capitol Hill like the REPAIR and SMART Acts would promote competition by limiting the validity of design patents and making repair tools and information more readily accessible.

We’ll be watching to see what happens.

Other News

Open-Source Your Blender to Fight Electronic Waste – Wired profiles Paul Anca who is trying to restore his grandfather’s way of thinking—one in which products are designed for longevity—through his company Open Funk. The company “aims to change our relationship with hardware for good, to try to stem the fastest-growing domestic waste stream in the world: electronic waste. The idea for Open Funk was born in 2018, when Anca met his cofounder, design engineer Ken Rostand, during a circular-economy event in Berlin. Aside from their shared interest in sustainable supply chains, they realized they had something else in common—both of them had broken blenders that they found impossible to repair. Seeing a pattern, they dug deeper.

“We asked on a Facebook group for broken mixers from people—and we just got flooded with requests,” says Anca. They went around Berlin collecting the damaged blenders, disassembled them, and determined why they weren’t working. Those discoveries informed the design process behind Open Funk’s first product: the re:Mix blender. The small box-blender is almost like a puzzle, with different pieces slotting together—just as easy to make as it is to take apart.

One of the major differences between re:Mix and other blenders is that it is open source, meaning that anyone can find the blueprints for how to build one online. The rationale behind that is to make it as easy as possible for people to replace any part that might break. No matter how simple you make it for a layman to take their tools to a product, if they can’t source a replacement part, the task becomes impossible.

Appeals court to reconsider fender patent ruling – In a case that could determine whether automakers are allowed to patent parts considered obvious, a U.S. appeals court said it will reconsider its previous decision to uphold a GM car fender patent. The appeals court’s decision marks a victory for LKQ. Corp, which is petitioning for a review of GM’s ‘625 patent on the grounds is invalid because it was predated by at least two preexisting and similar designs. LKQ took legal action against GM after a license agreement, which gave LKQ access to many of the OEM’s design patents, expired in February 2022 following a “breakdown of renewal negotiations.”

FairPhone is coming to the US (finally) – The Fairphone 4, a highly-repairable phone built from ethically-sourced parts, is finally available for purchase in the USA. Murena, the company behind /e/OS (a de-Googled version of Android) will sell the Murena Fairphone 4 on their website.

Consumer Reports highlights right to repair advocacy – the leading consumer reviews magazine called out its advocacy for right to repair laws in an article on “Building a Better World Together,” the publication notes that it developed the legislation model on which at least 25 state and federal right-to-repair bills have been based – two of which have been passed into law. Consumer Reports is also hosting a petition (which you can sign) to urge state lawmakers to pass more right to repair laws.

July is Right to Repair Awareness month and the Auto Care Association’s Marketing and Communications committee is calling on the auto care industry to take action. The association said following the recent attempt by the National Highway Traffic Safety Administration (NHTSA) to prevent the automakers from complying with Massachusetts Data Access Law, the association is urging industry-wide participation in spreading awareness about the importance of preserving Americans’ right to repair their vehicles and passing the REPAIR Act at the federal level.

Deere anti-trust suit faces key hearings in July – July is expected to be a crucial month in the ongoing right-to-repair antitrust case against John Deere, as the federal judge in the case is set to hold a hearing on several key motions in the next few weeks.

Among the motions filed in the U.S. District Court for the District of Central Illinois is one by John Deere for a judgement on the pleadings. The motion essentially asks the court to rule on the facts already presented before a trial can be held. Judge Iain D. Johnston told attorneys on both sides last week to come up with a hearing date for the motions. In addition, there is an ongoing discovery dispute in the case.

Framework with hot-swappable graphics card may be the best gaming laptop EVER, according to a review over at TechRadar. The company, which attracted attention for its line of repairable, modular laptops, is getting ready to unveil a new device with a 16 inch screen and internal expansion bays that allow users to swap in graphics cards with relative ease. “The implications of this are huge,” writes Christian Guyton. “Why bother selling dozens of the best gaming laptops, each with subtly different internal specs, when you could just have a single model that can be easily upgraded whenever you need a performance bump?” Guyton’s review is just one of many hailing the new, bigger Framework. This article over at calls the new device the “last laptop you’ll ever buy.”

Agreement reached on EU in-vehicle data access law – Negotiators from the European Parliament and the Council of the European Union reached a provisional agreement on the proposed European Data Act, which aims to regulate access to and sharing of data generated by connected vehicles and other objects. The legislation aims to ensure fairness, stimulate a competitive data market, promote data-driven innovation, make data more accessible, ease data transfer, and provide safeguards against unlawful data transfer. In the U.S., proposed federal legislation including the Right to Equitable and Professional Auto Industry Repair (REPAIR) Act (H.R. 906) would address similar concerns, ensuring access to “all tools and equipment; wireless transmission of repair and diagnostic data; and access to on-board diagnostic and telematic systems needed to repair a vehicle.”

Virgin O2 Media to fund community-led circular economy initiatives – The telecommunications giant Virgin O2 Media and the environmental charity Hubbub launched the second round of their ‘Time After Time Fund’, which supports community-led projects across the UK that enable the repair and reuse of electronics. Under the fund, a total of £500,000 in grants is being made available. Projects can bid for a share of between £25,000 and £100,000 with applications accepted up through Friday 20 October. Ten projects received funding last year, spanning all parts of the UK. The Restart Project, which operates repair café’s across the nation, received funding to launch events at universities and encourage students to bring items that could otherwise end up as e-waste.

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