Editors’ Note: Our political analysis is intentionally nonpartisan. We favor no politician nor any party and assess developments solely for their influence on markets and personal finance.
Last Friday, following days of rumors, President Joe Biden unveiled a new, far-reaching executive order aimed at promoting competition in the US economy. It discusses what the administration alleges are anti-competitive practices across a range of major industries, from shipping and Tech to pharma and medical devices. Since then, financial news has teemed with analysis of this-or-that plank, with many presuming it is a huge deal for the economy and, by extension, markets. But, in our view, this is little more than a mission statement, or statement of philosophical intent, with little actual action underlying it. There would need to be downstream actions by regulators for it to accomplish much of anything.
This is pretty much par for the course as it pertains to executive actions. The president doesn’t have carte blanche to effect big change via this avenue. They are limited to interpreting laws and giving enforcement guidelines. But they come out of the blue and often use language that makes them seem to pack a big punch. This was the story behind folks’ overrating both of the last two presidents’ orders and it seems to be at work now, too.
At 6,804 words and 72 different initiatives, Friday’s order is definitely broad and lengthy. The Biden administration alleges anti-competitive practices plague America’s economy across a host of industries, creating a lack of innovation, forcing consumers to pay more and causing farmers, small businesses and workers to earn less. These are, of course, debatable assumptions. We won’t get into that here, as our focus is on the potential investment takeaways. To sum up our thoughts, we see few things for investors to cheer or fear here.
Here is a quick and far-from-complete run down of the order’s major provisions.
Across basically every one of the following industries, Biden’s order encourages various regulators from the Federal Trade Commission (FTC) to the Department of Justice and others to scrutinize possible mergers for reducing competition—including completed mergers in some cases.
Right to Repair
The administration wants to end manufacturers’ practice of restricting users’ ability to find independent (and, in theory, cheaper) repair options for things like cellphones and farm equipment. It directed various regulators to look into the matter.
The order encourages the Federal Maritime Commission to pursue seaborne shippers it thinks are overcharging American exporters.
The order alleges railroad operators overcharge other railroads for moving cars across track they own, particularly when the region is served by only one or a few tracks. It “encourages the Surface Transportation Board [the agency that regulates railroads] to require railroad track owners to provide rights of way to passenger rail and to strengthen their obligations to treat other freight companies fairly.”
Biden’s order requests the Department of Transportation craft rules requiring greater fee transparency and refunds of fees paid for checked luggage if the bags are late and wifi if the service fails.
In a curious move, Biden’s order encourages the Consumer Financial Protection Bureau to issue rules allowing customers to download their own banking data, thereby (in the administration’s view) enabling customers to switch banks more easily. We say “curious” because this rule was already included in 2010’s Dodd-Frank Wall Street Reform and Consumer Protection Act. Also, we kind of figure the number of people who would deem downloading this data necessary to change banks is pretty small. We have done it several times and never downloaded a thing.
In addition to a specific callout on mergers, the order encourages the FTC to create rules governing how Tech firms accumulate users’ personal data. Also, it encourages the FTC to consider creating rules that prevent big online retail platform operators (think: a company named for a large, ecologically significant river in South America) from competing with smaller firms that use its platform to market to consumers.
Biden encouraged the Federal Communications Commission (FCC) to rekindle the “Broadband Nutrition Label”[i] that informs consumers about pricing and service details. He also wants the FCC to reinstate the “net neutrality” rules the Trump administration scrapped four years ago.
The order directs the Food and Drug Administration to work with the states in order to import prescription drugs from Canada. It also directs the Health and Human Services Department (HHS) to issue “a comprehensive plan within 45 days to combat high prescription drug prices and price gouging.” Lastly, it directs HHS to “consider” issuing rules that allow hearing aids to be sold over the counter at drug stores and the like.
The order encourages the FTC to “ban or limit” the use of non-compete agreements in employment while also banning unnecessary occupational licenses. (For the latter, the example people seem fond of citing is hairdressers.)
You no doubt noticed that the order does a lot of “encouraging” or, in other words, suggesting regulators look into things as opposed to actually creating rules. This is requisite. Many of the regulatory bodies the order addresses are independent—agencies that are designed to be apolitical and outside the reach of partisanship. Of course, the extent to which this apolitical-ness is reality is up for debate, too.
Regardless, though, this speaks to a basic reality. This executive order, like many before it, isn’t a game changer. It merely directs regulatory aides to look into rulemakings. Rulemakings that follow a process of drafting, review, comment and then publication. It takes a lot of time!
Even then, the rules may not be done. As former FTC Chief Legal Counsel Alden Abbott put it after reviewing the order, “… the order’s call for new regulations and the elimination of various existing legal policies will spawn matter-specific legal challenges, and may, in many cases, not succeed in court.”[ii] Not to mention that some of these items (e.g., licenses and non-competes) are state, not federal, matters.
Perhaps rules stemming from this order eventually emerge that are bad for stocks in an industry or sector or category. That is entirely possible. But markets don’t deal in what is possible; they focus on probabilities. Right now, whatever you think of the ideas included in Biden’s executive order, there is little sign of anything probable to emerge that is a plus or minus for markets.
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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.