I hope David Dao, the 69-year-old doctor dragged off the United Airlines flight screaming and bleeding, his nose and teeth smashed, will win millions in compensation – he is planning to sue the company.
I also hope his case unleashes a Peoples' Spring against the choice-denying oligopolies that are smothering consumers in the United States and elsewhere in the wealthy world.
Why did United forcibly remove a passenger who refused to "volunteer" to get off an overbooked flight and why did the airline's boss, Oscar Munoz, initially support the passenger-jet raid by his security thugs? (He has since apologized profusely).
The simple answer is: Because United could.
United is one airline in a four-airline oligopoly that utterly dominates air travel within the United States. Businesses that dominate their markets don't have to worry about attracting, pleasing and retaining customers the way that businesses in highly competitive markets do.
Calls for a consumer boycott of United went pretty much nowhere because few competing airlines exist. Boycott United and fly with whom? United Continental shares did fall after video clips of the distraught Dr. Dao burned up the Internet, but not by much. The shares, up 22 per cent over the past year, still trade close to their 52-week high.
There is a reason why savvy investors, such as billionaire Warren Buffett, have changed their stand on U.S. airlines. Not long ago, Mr. Buffett dismissed airlines as capital-destroying monsters. But that was before the merger frenzy turned eight airlines into four. The result was oligopoly profits. Mr. Buffett recently confirmed that he owns stakes in United Continental, American Airlines, Delta Air Lines and Southwest Airlines.
The term "airline oligopoly" is no exaggeration. According to The Associated Press's analysis of airport data collected by airline-tracking firm Diio Mi, a single carrier controls a majority of the market at 40 of the top 100 U.S. airports. That's up from 34 airports a decade ago. At 93 of the top 100 airports, only two airlines control a majority of the airline seats, up from 78. No wonder the share prices of the airline biggies is soaring.
Sadly, airlines are not the only examples of highly concentrated corporate power – monopolies, duopolies and oligopolies – that have snuffed out competition, raised prices and harmed innovation.
The list is extensive. Cable TV pretty much everywhere in the United States and Canada is a local monopoly. The enormous infant nutrition market (baby formula) is dominated by four players – Mead Johnson, Nestlé, Abbott Laboratories and Danone. When Bayer's purchase of Monsanto and ChemChina's purchase of Syngenta are completed, the global seed market and pesticide market will be dominated by four companies. Want a mattress? Not much choice there. Two companies – Tempur-Sealy and Serta – control that market.
Car company mergers are under way. In Canada, the banking industry is dominated by five banks (the number would have been three had the federal government not killed off the industry consolidation attempt in 1998). Amazon's market power in retailing is becoming awesome. Google, whose parent, Alphabet, has a market value of $575-billion (U.S.), is synonymous with the Internet.
How did market concentration in key industries become so extreme? The cult of deregulation that began in earnest in the Ronald Reagan era, and amplified in the Bill Clinton era, ended the anti-trust era. "Natural" market forces were deemed better regulators than bureaucrats sitting in competition bureaus, or so argued neo-liberal economic philosophers such as Milton Friedman. Mr. Clinton repealed the Depression-era Glass-Steagall Act, which had separated commercial and investment banking. The new breed of universal banks, as a result, became too big to fail (with the exception of Lehman Bros.) and many had to be bailed out in the 2008 financial crisis.
The era of ultracheap money turbocharged the merger craze. The flood of money that was pumped into the economy after the crisis to help homeowners was put to use by financiers to launch a mergers-and-acquisitions frenzy. The big airline mergers all happened after 2008.
A recent report in The Economist on "superstar" companies noted that the share of nominal gross domestic product generated by the Fortune 100 – the top American companies – reached 46 per cent in 2013, up from 33 per cent in 1994. Their share is probably higher today. Over the same period, the share of revenues of the Fortune 100 among the Fortune 500 companies went to 63 per cent from 57 per cent. The management consultancy McKinsey calculated that the top 10 per cent of global companies generate 80 per cent of all profits. The five largest banks control 45 per cent of total U.S. banking assets, up from 25 per cent in 2000.
While the merged companies that operate in oligopolies would deny their market influence allows them to shirk on research and development, the share buy-back figures say otherwise. As companies and their profits have climbed, share buy-backs have exploded in value. The S&P 500 companies have spent literally trillions of dollars on buy-backs since the early part of the last decade. These are fortunes spent to please shareholders, not boost innovation or increase wages.
Eventually, duopolies and oligopolies get diluted or broken up as new players enter the market with clever ideas and competitive pricing. But that process can take decades. Who will go after Amazon or Google? Probably no one, at least not in the next few years.
There is a solution, one that would restore competition and its benefits, including innovation and job creation, quickly. Bring back the trust busters to break up industries with obscene corporate concentration. Here's hoping that Dr. Dao, the roughed-up United passenger, will provide the spark.