Obama to sign executive order to ignite corporate competition

 

On Friday, President Barack Obama announced he would sign an Executive Order directing every relevant agency of the Federal government to take steps in identifying bottlenecks to competition and to create new ways to increase competition in the economy. The Executive Order puts agencies on a fast-track path to, within 60 days, identify the steps they’ll take.  

“Competition is good for consumers,” Obama told Yahoo Finance in an interview at the White House on Thursday. “And ultimately it's good for business. That's the way the free market works. The more competition we have, the more products, services, innovation takes place.”

As one of the first actions in this new, government-wide push, the Commerce Department is filing with the Federal Communications Commission (FCC) to call on it to increase competition in the set-top box market.

Cable and satellite TV boxes sit on televisions in hundreds of millions of American homes, showing up on every month’s bill as “converter rental.” According to analysis by the White House, the cost cable set-top boxes — on average $231 to rent per year — has risen 185% while the cost of computers, televisions and mobile phones has dropped by 90%.

“It's been tied to the provider, and you rent it and consumers spend billions of dollars on this every single year,”  Obama said. “There hasn't been much innovation”

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The effort to open up the set-top box market is just part of a broader effort for the administration.

“The idea is that whether we're talking about financial services, whether we're talking about products like the box on your cable TV — across the board if we have more players who can potentially participate, fewer barriers to entry, the rules aren't rigged, then you get more people trying to get your business and you get better products at cheaper prices,” he said.

The Council of Economic Advisors (CEA) released a report on Friday that documented evidence that competition has been reduced in the economy. The report pointed to a decades-long decline in new business formation and increases in industry-specific measures of concentration. The report pointed to efficiencies of scale, increases in merger and acquisition activity, firms’ crowding out potential competitors, and regulatory barriers to entry.

“I think the general theme is that American business is the cornerstone of our economy,” Obama said. “Our private sector thrives and innovation is the hallmark of the United States. That's our big comparative advantage with other countries. But it starts to become less effective, and reduces both what consumers get and the kind of innovation we generate if we get closed systems or if people are gaming the system.”

The CEA noted increasing industry concentration, outsized returns to a few firms, and lower rates of firm entry and labor mobility. The table below shows that in most industries from 1997 and 2012, the top 50 largest firms in each have seen their share of the pie grow.