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Earlier this month, Taylor Swift fans across several states filed a lawsuit against Ticketmaster, alleging that the company committed fraud and "intentionally and purposefully misled ticket purchasers" during presales for Swift's upcoming tour.
Swifties are clearly enraged. And so are policymakers. State attorneys general and several members of Congress called out Ticketmaster for exploiting consumers through its position as an effective monopoly. The Justice Department opened an investigation into potential antitrust violations. Even President Joe Biden chimed in, tweeting out a message criticizing the "hidden junk fees" that are tacked onto already pricey tickets.
The anger is justified—as is political action. But Ticketmaster isn't the only company profiting from its outsized market share.
Take the wireless market. It's now controlled by just three players—Verizon, AT&T, and T-Mobile—that together provide service to 99 percent of Americans with a mobile phone. It's no wonder one in six mobile users have experienced an unexpected increase in their monthly bill, according to a survey from the Federal Communications Commission. Since consumers have so little choice, these companies feel emboldened to impose surprise charges and fees.
Cable and internet providers offer another example of how limited choice harms consumers. About one in four Americans has just one broadband option, according to a 2020 analysis from the Institute for Local Self-Reliance. The companies that dominate this industry—Comcast and Charter—are infamous for tacking mystery charges onto customers' bills. About 70 percent of cable and internet subscribers have encountered such fees, according to a 2019 survey from Consumer Reports.
Prescription drugs tell a similar tale. Here, the industry is dominated—and manipulated—by middlemen who sit between drug companies and insurers, purportedly to manage prescription drug benefits. Today, the three largest "pharmacy benefit managers" (PBMs)—CVS Caremark, OptumRx, and Express Scripts—cover about 80 percent of the U.S. drug market, and all three are vertically integrated with health insurance companies and affiliated pharmacies. They are owned by three of the largest Fortune 500 corporations—CVS Health, UnitedHealth Group, and Cigna, who have a combined annual profit of more than $30 billion.
PBMs typically tie their fees to a medicine's list price, rather than the amount ultimately paid by the insurer. So the more expensive a medicine, the higher the PBM's profit margin. This setup incentivizes PBMs to steer patients toward more expensive medicines, inflating the cost of medicines for everyone and actively harming patients whose deductibles are tethered to a medicine's list price.
Competition is fundamental to a well-functioning economy. Basic economics dictates that when companies are forced to compete, customers benefit from lower prices, more variety, and better goods and services. Competition also spurs inventors and entrepreneurs to innovate.
Today, too many U.S. industries are broken—dominated by actors with outsized market share who inevitably decide to embrace anticompetitive conduct in pursuit of larger profit margins. Ticketmaster is just one example.
Evidence abounds that policymakers deserve much of the blame for today's dearth of competition. Last year, when President Biden launched a whole-of-government effort to combat growing market power in the U.S. economy, the White House acknowledged that "antitrust enforcement has become more lenient over the last 40 years, and regulators have not had sufficient resources to enforce the laws on the books."
In today's fragile, inflation-ridden economy, it's important to consider how companies' behavior impacts the average consumer. Middlemen who are cloaked in secrecy, like Ticketmaster and the PBMs, make billions off of everyday Americans when they hike prices and reduce choice. It's time for policymakers to do something about it.
David Balto is a public interest antitrust attorney and is the former Policy Director of the Federal Trade Commission.
The views expressed in this article are the writer's own.
