Economics: Will The Antitrust Crusade Make Inflation Even Worse?

  (Drivebycuriosity) - Inflation is red hot. To make things worse, President Biden started an antitrust crusade which could make the inflation even worse. The POTUS appointed Lina Khan, a "progressive" activist who became famous with an anti-Amazon pamphlet, to chairperson of the powerful Federal Trade Commission (FTC), America´s antitrust authority. Instead of fighting against price hikes Lina Khan and other Big Tech crusaders fight against low prices. Biden protege Khan laments that Amazon is too cheap which is bad (yalelawjournal reason).  She claims that Amazon`s low prices squeeze competitors out of the market and create a monopoly (lawyers call this predation). If Kahn, the FTC and other trustbusters get their will, Amazon will be forced to reduce their services and to raise prices.

Senator Klobuchar - supported by senators from both parties - started a bill which aims to reduce the services by Apple, Google, Facebook & Amazon and might even break these companies up (klobuchar medium aier  thehill  springboardccia). Klobuchar & Co. attack companies which have been curbing inflation by being efficient and offering cheap - and often free - services and products, like e-commerce, search, maps, entertainment etc. The bill would limit the size of mergers and acquisitions, outlaw firms from using their own platforms to advantage their own products, and give more enforcement powers to federal regulators. If Klobuchear & Co. get their will some of these services will disappear - like Amazon prime - , others will get more expensive ( ppi).  

Some of the crusaders also want to reanimate the Robinson-Patman Act from 1936, which President Franklin Roosevelt signed into law (hbr.org   ). They criticize that powerful buyers — such as Amazon, Target, Walmart, and other chain retailers - force their suppliers to sell to them relatively cheap. When I lived in Germany I bought food and many other things at Aldi - and millions of other consumers did so -  which offers very cheap products. Aldi has low prices because the chain is efficient and forces their suppliers to deliver cheap products. Millions of consumers - including myself - benefited from Aldi´s low prices. This way Aldi, Liedl and similar supermarket chains keep a lid on Germany´s food prices. The suppliers of Aldi, Liedl and similar chains adapted to the requirements and became very efficient and cost conscious themselves in order to keep their prices low. If the US government would prevent Amazon, Target, Walmart & Co. to purchase for low costs the change would raise prices for almost everything - which would reduce the standard of living for low income groups. The change also would reduce the pressure to produce efficiently and with low costs and would so encourage waste and inefficient behavior.

The antitrust crusade aims to throw sand into the gears of the economy and causes a lot of extra costs. The crusade is creating friction and friction creates heat (physics). In the economy friction reduces the amount of available goods & services and raises the price level.