Washington, D.C. – House Judiciary Committee Chairman Bob Goodlatte (R-Va.) issued the following statement at the Regulatory Reform, Commercial and Antitrust Law Subcommittee Oversight Hearing for the Antitrust Enforcement Agencies (Federal Trade Commission’s Bureau of Competition and the Department of Justice’s Antitrust Division).
Chairman Goodlatte: Welcome. It has been two years since our last antitrust enforcement oversight hearing, so there is much to discuss.
The average U.S. household spends over $2,000 a year just on gasoline. That might be one thing if fuel prices were set by the free market, but they are not. Instead, the Organization of Petroleum Exporting Countries (OPEC) colludes to fix prices. It is estimated that OPEC’s cartel behavior currently costs U.S. consumers as much as an extra $250 billion per year.
The fact that OPEC is not being held accountable for its anticompetitive behavior makes a mockery of U.S. antitrust law. The “No Oil Producing and Exporting Cartels Act of 2018,” or “NOPEC,” explicitly authorizes the Department of Justice to bring lawsuits in Federal court against nations that engage in conduct designed to fix the price of oil. It passed the Committee in June by voice vote.
OPEC just cut supplies at its December meeting to prop up prices yet again. That is the last thing Americans need around the Holidays. I would like the Administration’s support for this bill so we can deliver a bipartisan victory before this term of Congress ends.
Another major concern for U.S. households is the rising cost of prescription drugs. Pharmacy Benefit Managers, or PBMs, act as buying intermediaries between drug manufacturers and health plans. Three pharmacy benefit managers (PBMs) control 85% of the market.
A 2018 report by the White House Council of Economic Advisors found that because of market consolidation PBMs “exercise undue market power . . . generating outsized profits.” Because pricing and rebate terms are kept secret, the “system encourages manufacturers to set artificially high list prices, which are reduced via manufacturers’ rebates but leave uninsured individuals facing high drug prices.”
Independent pharmacies in my district have raised significant concerns about PBM business practices. These include gag clauses that prohibit pharmacies from guiding patients to cheaper alternatives; exclusionary tactics that advantage PBM-owned mail-order pharmacies; and opaque and effectively non-negotiable contract terms that result in skyrocketing penalties known as direct-and-indirect remuneration fees.
The FTC has previously stated that PBMs help lower prices by aggregating demand which increases negotiating power. However, a recent analysis comparing Medicaid drug spending with actual acquisition costs determined that the savings are not consistently passed-on “due to opaque PBM pricing practices.” In one representative example, Medicaid was paying nine times the acquisition cost of a heavily prescribed drug. Recent vertical mergers in the PBM market offer a springboard for broader study of these issues.
Market power in the tech sector is another focus. Both witnesses have recently suggested that there are valid concerns about competition in the tech sector.
In September, a lawyer for a former Google engineer testified before the Committee about “anti-conservative discrimination, harassment, and institutionalized bias faced by many conservative Americans at the hands of large technology companies.” She provided numerous and startling examples, including an employee fired after stating that “Trump supporters are a hated and despised minority at Google” and pleading for better treatment.
A recent Wall Street Journal article reported that Google workers discussed tweaking Google’s search function to counter President Trump’s travel ban. This particular plan was not implemented, but together with the hostile environment stories, they suggest both motive and opportunity.
Some are tempted to fight such developments by declaring tech platforms public squares and regulating them. A better path would be to explore whether more effective competition in the tech sector could provide the cure.
Relatedly, there is a movement afoot to replace antitrust law’s “consumer welfare standard” with alternatives that encompass broader social welfare goals. I am skeptical of moving away from objective, empirical economic analysis under the consumer welfare standard towards analysis under malleable and subjective social welfare standards that can be manipulated to suit regulators’ political or ideological goals.
I look forward to hearing from our witnesses on these matters and other issues of importance within their jurisdiction.