The Sling - State Antimonopoly Enforcement Must Be a Guardian of American Democracy. Here’s How.

Senior legal analyst Daniel Hanley contends that state antimonopoly enforcement should aggressively target concentrated corporate power—especially in sectors like Big Tech and housing—to protect democratic institutions and economic liberty amid weakening federal oversight.

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After Elon Musk poured almost $300 million into his campaign last year, President Trump returned the favor by endowing Musk with unrestricted authority to restructure the federal government. In just over two months, Musk has usurped congressional power and initiated the dismantling of agencies like USAID, the Consumer Financial Protection Bureau, and the Department of Education. Even while the courts have paused some of Musk’s and Trump’s more egregious actions, such as firing all probationary employees, the most conservative Supreme Court in a century cannot be counted on to stop their institutional destruction. Despite the ongoing gutting of federal institutional capacity to rein in big business abuses, Americans still have robust tools for controlling corporate power, most notably the states.

Indeed, the states were the first to take action against the threat to our economic liberties posed by corporate autocracy. Iowa enacted the first antitrust law in 1888, and Kansas followed with a substantially more forceful bill that would be a model for the Sherman Antitrust Act of 1890, which itself was designed for the “preservation of our democratic political and social institutions.” Throughout the 20th century, the federal government and the states enacted policies like public utility laws aimed at regulating corporate misconduct. It was precisely these laboratories of democracy that would assist federal efforts to rein in concentrated corporate power. With democracy under siege, states must once again take up the antimonopoly mantle and use the legal tools available to them to serve as a bulwark against corporate domination and as a force for democratic renewal in America. States have at least five powerful tools at their disposal—each ready for immediate use.

First, state enforcers can pursue policies that directly enhance workers’ individual freedom, mobility, and dignity. They should start by targeting coercive contracts or vertical restraints in antitrust parlance. Vertical restraints are contracts of domination by firms in a vertical relationship like a franchisor and its franchisees—that, in the words of the Supreme Court, “cripple the freedom” of workers and independent businesses.

A good first step is tackling non-competes. Non-competes deprive workers of a fundamental right—the ability to quit a job and obtain better employment elsewhere. Copious research, which has been conscientiously detailed in the FTC’s rule to ban non-competes nationwide, shows that these coercive contracts have little justification, depress wages, suppress business formation, and deter businesses from engaging in more socially beneficial conduct to retain workers, such as improving working conditions.

Over the past several years, many states, like California and Minnesota, have enacted laws that substantially restrict the use of non-competes across the economy. Recently, Ohio lawmakers proposed a sweeping bill that bans non-competes and their functional equivalents. Others must follow suit.

States have also enacted other laws that target vertical restraints aimed at distributors by a supplier. For example, Maryland enacted a law that makes resale price maintenance (RPM) illegal under state antitrust law soon after the Supreme Court broadly legalized the practice under federal law in 2007. RPM restricts the price at which a distributor can sell that good by establishing a price floor. For example, an RPM contract could prohibit a retailer from selling a pair of Nike shoes below the price specified by the company. The Supreme Court once classified RPM agreements as a contract of domination that deprived businesses of “the only power they have to be wholly independent businessmen.” Like other vertical restraints, these agreements can harm workers. The effect of these agreements was made clear after a McDonald’s franchisee complained to corporate about the crushing price ceilings (think of the McDonald’s dollar menu) imposed by the company’s RPM agreements. A representative told her to “just pay your employees less.”

At least in Maryland, Schonette Jones Walker, the chief of the state’s antitrust division, expressed her office’s willingness to enforce the state’s law during a recent American Bar Association event. Again, other states must swiftly do the same by initiating lawsuits targeting vertical restraints or enacting new legislation.

Second, public enforcers have a crucial role in holding corporations accountable to the communities they impact, not only by preventing further harm but also by fostering greater responsiveness to local economies. Corporate executives—increasingly private equity financiers—often treat their workers, trading partners, and local enterprises as nothing more than commodities to be discarded at will, with no regard for community welfare or the livelihoods destroyed. The primary way this harm occurs is through mergers. Antitrust law provides states with a readily available tool to address this problem.

Congress amended Section 7 of the Clayton Act in 1950 to restrict mergers and ensure corporations were accountable to the public. Senator Estes Kefauver—one of the lead drafters of the 1950 amendments—stated during the legislative debates that:

The control of American business is steadily being transferred …from local communities to…central managers [that] decide the policies and the fate of the far-flung enterprises they control…Through monopolistic mergers the people are losing power to direct their own economic welfare.

States can use Section 7 to tackle mergers head-on, particularly because robust case law from the 1960s remains controlling. For example, in Philadelphia National Bank, the Supreme Court held that a merger forming a firm with a 30 percent market share is “so inherently likely to lessen competition substantially that it must be enjoined.” Recently, too, Colorado and Washington State successfully stopped a merger between grocery giants Kroger and Albertsons using their state laws—demonstrating that these legal pathways can be just as viable avenues for restraining corporate power as their federal counterparts.

Third, states can enact policies that grant small businesses and workers a more direct role in governing the economy by endowing them with the power to shape the rules of the marketplace. As I have previously described in The Sling, nail salonists in New York endure terrible working conditions—including breathing in large quantities of toxic chemicals—and receive sub-living wages. New York has previously proposed to address this problem by creating a wage and standards council. The council would authorize small businesses to collectively determine the wages and work standards to which all salonists must adhere. Traditionally, such coordination among market participants violates the antitrust laws, but due to a doctrine called Parker Immunity, state legislatures are able to shield the behavior from antitrust scrutiny.

This democratic process enables market participants to shift the variables of competition that are corrosive to workers and businesses to more desirable factors such as service quality. Simply put, states exercising their power under Parker Immunity can make our markets more democratic by granting workers and firms a mechanism to voice their concerns and make collective wage and price decisions.

Many states have started recognizing the value of increased democratic coordination between market participants and enacting their own piecemeal legislation. California recently enacted a law to raise wages and improve working conditions for fast-food workers. The law establishes a council of franchisors, franchisees, and workers to determine minimum standards and wages for the industry. The council established a $20/hour minimum wage in 2024. In 2023, Minnesota enacted a similar law for nurses.

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