FOR IMMEDIATE RELEASE: JUNE 15, 2022

CONTACT: Ashley Woolheater, Open Markets Institute, woolheater@openmarketsinstitute.org  

Barry Lynn Testifies at Senate Antitrust Sub-Committee on How Consolidation Resulted in the Baby Formula Shortage & How to Fix It

Read Barry Lynn’s Written Testimony, “Built to Break: How Bad Law Undermines the Resiliency and Stability of the U.S. Industrial System” & Watch the Hearing

WASHINGTON, DC — On Wednesday, June 15, 2022 at 2:30 PM ET, Open Markets Institute Executive Director Barry Lynn will testify before the Senate Judiciary Committee, Subcommittee on Competition Policy, Antitrust, and Consumer Rights. In his testimony Lynn explains how twenty years of increasing and acute consolidation the U.S. production systems has created dangerous choke points in supply that ultimately led to today’s baby formula shortage. 

“The problem goes far beyond private avarice or any failure to adequately fund the FDA,” according to Lynn’s prepared testimony. “This breakdown is simply the latest in a long list of failures of the production systems on which Americans depend.” 

Lynn’s testimony points the committee to six steps the U.S. can take to alleviate this problem: 

1. Restore our ability to identify and manage physical risk by recognizing the role competition policy plays in engineering production and financial systems

2. Restore a structural “bright-line” approach to antimonopoly enforcement, in keeping with the basic principles of checks and balances.

3. Radically reduce the role in competition policy of economics and any intellectual tools unable to identify the effects of power on structure.

4. Identify all chokepoints in every supply chain on which the American people depend.

5. Rebuild sufficient industrial capacity to ensure the resiliency and stability of industrial systems.

6. Rebuild the capacity of federal and state agencies to use competition policy to identify and break dangerous chokepoints

Additionally, on Tuesday, June 14th, Open Markets Institute, in partnership with Farm Action, released a report card on federal agencies’ progress improving competition in the U.S. food system in accordance with President Biden’s 2021 executive order. Read more here about what the USDA, FTC, and Justice Department can do to better promote competition.

BARRY LYNN’S TESTIMONY AS PREPARED FOR DELIVERY

JUNE 15, 2022

The shortage of baby formula is a deeply upsetting event, for the families affected and the American people as a whole. 

Ensuring that every family with young children has access to high quality formula at low prices is a challenge we should have mastered long ago.  

There is plenty of blame to share - both for the private corporations that dominate this business and the agencies that oversee it.

But the problem goes far beyond private avarice or any failure to adequately fund the FDA. This breakdown is simply the latest in a long list of failures of the production systems on which Americans depend. 

Just over the last two years, this includes:

• Extreme shortages of facemasks and other PPE in the early months of the COVID-19, causing thousands of avoidable deaths.

• The shutdown by COVID-19 of super-large slaughterhouses, resulting in empty meat cases across America

• Deep shortages of semiconductors due to monopolization by TSMC, Samsung, and Intel, which shut assembly lines for cars, medical devices, electronics.

• The freezing up of container shipping systems, which disrupted thousands of manufacturing and construction businesses

• The breakdown of gasoline distribution across the southeastern United States, after a single cyber attack.

Worse, we can trace this pattern of disruption back 20 years. This includes:

• The near breakdown of food supplies in New York following Hurricane Sandy.

• Deep, persistent, and widespread structural shortages of drugs.

• The near breakdown of Big 6 automobile production in 2009 and the subsequent bailout of GM and Chrysler.

• The collapse of the U.S. system for production of cat food in 2007

In every instance, the cause of the shutdown was concentration and choke pointing of industrial capacity.

Then there are the many disruptions and threats intimately interrelated to this choke pointing. This includes:

• The potential for catastrophic cascading collapse of the industrial and financial systems as a whole.

• Direct dependence on China and other antagonistic regimes for essential goods and services, in ways that expose our nation – and individual businesses and citizens – to coercion and extortion.

• Lack of capacity to produce weapons and other items essential to national defense in a timely manner.

• Inflation driven by the chokepointing of oil refining, semiconductors, and meat processing. And by monopolists taking opportunistic advantage of the crisis to jack up prices, as with airlines and credit cards.

• The suppression of production technologies that would lower costs and boost efficiency.

None of these threats are new. I myself first detailed the fragility of international production systems – and America’s industrial exposure to the power of China – in a article in Harper’s in 2002, titled “Unmade in America: The True Cost of a Global Assembly Line.” 

I was not alone. The epidemiologist Michael Osterholm in 2005 described how a pandemic would disrupt highly concentrated supply chains, including for the facemasks we need to protect ourselves against the disease itself. 

In 2010, a World Bank study of the financial crash of 2008 concluded that concentration in production networks has an “inherent magnification effect” on shocks. 

In short, Ronald Reagan’s embrace of Robert Bork’s radical efficiency theory for antitrust, in combination with Bill Clinton’s embrace of Larry Summer’s radical efficiency theory for trade, have resulted in the bulldozing of almost every industrial system on which we depend, and pushed us to the brink of catastrophe.

So what can we do today?

First, restore our ability to identify and manage physical risk by recognizing the role competition policy plays in engineering production and financial systems

Second, restore a structural “bright-line” approach to antimonopoly enforcement, in keeping with the basic principles of checks and balances. 

Third, radically reduce the role in competition policy of economics and any intellectual tools unable to identify the effects of power on structure.

Fourth, identify all chokepoints in every supply chain on which the American people depend.

Fifth, rebuild sufficient industrial capacity to ensure the resiliency and stability of industrial systems.

Sixth, rebuild the capacity of federal and state agencies to use competition policy to identify and break dangerous chokepoints

Thank you.

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The Open Markets Institute is a team of journalists, researchers, lawyers, economists, and advocates working together to expose and reverse the stranglehold that corporate monopolies have on our country.