With inflation running hot in the US, obviously there’s a lot of attention being paid to what the Fed will do to cool things down. But there are obviously other measures and tools available, particularly when it comes to specific industries where pricing power or pricing pressure is hot. One area that's seen interest lately is using antitrust to go after uncompetitive markets and corporate power. But how does this work in practice? On this episode of the podcast, we speak with Craig Seebald, a partner at the law firm Vinson & Elkins, and a long time leader in antitrust law.
Tracy Alloway:
Hello, and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway.
Joe Weisenthal:
And I'm Joe Weisenthal.
Tracy:
Joe, have I ever told you my, uh, favorite conspiracy theory?
Joe:
Uh, no, but I'm, I'm not surprised you have a favorite conspiracy theory. I don't know what it is. However,
Tracy:
I'll try not to take that personally. But my favorite conspiracy theory is a..
Joe:
If I had to guess, it had something to do with, uh, silver price suppression.
Tracy:
Well, now wait a second. That conspiracy theory actually turned out to be true, but anyway, okay. We're gonna go on a really long tangent if we keep heading in that direction. No, my favorite conspiracy theory is, well, it has to do with inflation, um, and eggs and cholesterol
Joe:
And oh yeah, this is a good one.
Tracy:
Not many people know this, but in the 1960s, when there was high inflation and, the President was very worried about it. This is Lyndon B. Johnson back then he was trying to come up with all these different ways to maybe get prices, to start coming down. And one of the things he did was target eggs, and he basically told the surgeon general to issue alerts, um, all about the risk of cholesterol in eggs, to try to get people to buy fewer of them. And you know, even to this day, people still think there's lots of cholesterol in eggs and that they're unhealthy. And a lot of that traces back to Lyndon Johnson trying to fall inflation, uh, 50 years ago or 60 years ago, I should say.
Joe:
So wait it, you said this is a conspiracy theory, but is it true? Like, did this actually happen or is it just people think this was the sequence of events?
Tracy:
No, no, no, this actually happened, but basically there was a conspiracy to the tell the public that eggs were terror unhealthy when in fact they certainly aren’t.
Joe:
Got it. That's crazy.
Tracy:
So the reason I'm bringing it up is because there are clearly concerns about inflation right now. I think CPI is at something like 6.8%. And when people think about inflation, I think the first thing their minds is interest rates and monetary policy inflation is high. So maybe the Fed should start raising rates, but of course there are these different ways to actually try to bring prices down.
Joe:
This is really the key thing, which is that, you know, obviously, you know, people think of inflation does the purview of the fed and monetary policy and monetary aggregates, Milton Friedman inflation is always an everywhere. Yeah. A monetary phenomenon. But like we see it this year. If we had, if we had had say like more used cars or more semiconductors to make cars or et cetera, we know that headline inflation would be lower. It's, that's just a fact. And so like we clearly see the existence, especially right now, what I would say is non-monetary inflation and maybe some economists would get annoyed by that, or they would disagree or whatever, but like we could point to maybe overall, it's not just about bottleneck or whatever, but we could certainly point to at times the existence of forces that are not clearly related to the fed that push up the aggregates of pricing and disease without question, and you know, another area's like medical care. Like I don't think like the high cost of medical care is something that like, obviously attributable to monetary policy.
Tracy:
No. And we are starting to see politicians pay more attention to these specific issues. So we've been talking a lot about attempts to ease supply chain congestion. And I have to say one of the more interesting efforts that is currently going on has to do with antitrust legislation, which is not necessarily something that you would think of when you think of supply chain problems.
Joe:
Yeah I think that's like really interesting. And you know, obviously these are sort of like slow moving things and they're probably a limit to what you could do in the next few months, but the idea that a few companies have incredible amounts of buying power because of concentration, because of lack of competition, it seems like a very interesting avenue and one that even at least in the medium to longer term, if not right away, the next few months could increase the sort of like productive capacity overall, if we had more competitive more.
Tracy:
Exactly. So we are going to be digging into that question of whether or not you can use antitrust enforcement to try to bring down inflation and ease some of these supply constraints, uh, bring down things like food prices. And we do have the perfect guests to talk about this. We're gonna be speaking with Craig Seebald. He's a partner at Vinson & Elkins and an expert in antitrust. So Craig, welcome to the show.
Craig Seebald:
Well, Tracy and Joe, it's, my pleasure to be with you. And I'm excited to talk to you about, uh, some of my favorite subjects, antitrust politics, and a little history.
Joe:
Great.
Craig:
I had a question for you too. I really, I worked on this because it's to combine a joke that includes antitrust and supply chain, but here it goes. how many antitrust lawyers does it take to change a light bulb?
Joe:
Oh gosh. How many?
Craig:
None the light bulbs are late and not shipping.
Joe:
Solid. Solid. Okay. Solid. that was pretty good. I like it. I like it.
Craig:
It's solid. It's tough material, antitrust and logistics, but uh, that's the best I can do.
Tracy:
Well, I mean, on that note, maybe you could just to begin with, you could start by defining what antitrust actually is and how it could relate to supply chain problems.
Craig:
Yeah. Let me just give you a quick overview. In the United States, we have three basic antitrust laws. And while in the United States, high prices in them themselves are not an antitrust violation. We do worry. And the greatest sin for the antitrust, uh, area is actions that were that cause higher prices. So we have three laws, as I was saying, one is the Sherman act and the Sherman act goes back to 1890. We have Sherman act section one, which regulates agreements and restrain trade. And we're looking at price fixing bid rigging, those type of agreements between competitors that raise prices. Those are early. The second major antitrust law we have is section two of the Sherman act, which regulates monopolies. This is getting a lot of press these days because of the government's challenges to Google, to Facebooks. Those are all under section two. What's interesting under our law, it's not illegal in the United States to be a, a monopolist, but it's illegal to engages in that engage in in monopolies.
And what do I mean by that? It means it's okay to be big in the United States, but it's not okay to be big and do bad things. And one of the bad things could be taking actions to raise prices. And so one of the things that we worry about with the big tech companies is what actions they're doing to make markets less competitive. And then finally we have our merger control laws, which go back to the Clayton act, section seven, which regulate anti-competitive mergers. And when we review mergers and we have a whole regime here in the United States, um, and actually we have a unique system in the United States because we have two anti-trust agencies, a one wasn't apparently good enough for the United States. We have the justice department antitrust division and the federal trade commission, both with authority to, to investigate matters under the antitrusts challenged mergers. And the greatest sin with mergers is a merger that increases concentration and raises prices. So increased prices through a bad action are something that the antitrust laws are good at going after.
Joe:
So let me ask you a question about antitrust as applied because there is, or antitrust regulation. There is an impression and that in recent years, that by and large antitrust on any of the avenues that you identified has not been pursued per particularly vigorously that in the past, our antitrust laws were taken more seriously, that regulators had a greater appetite to enforce them, whatever they are and that by and large these days, there's not a lot of regulatory activity or there hasn't been up until recently. Is that a fair characterization or is that just sort of like a medium myth?
Craig:
You know, I would say it it's a mixed record over the last few years. We are clearly, I think, poised for much more antitrust enforcement. The Biden administration, antitrust regulators are very aggressive and have signaled that they're gonna be aggressive in the market. There's almost an attitude of what's happened before didn't work. We're gonna change things and do more. When I say it's a mixed record. When we look at enforcement, we've been fairly strong in terms of our criminal enforcement. And that's an important point. Antitrust laws in the United States are prosecuted both criminally. So people go to jail for antitrust crimes and civilly. And so the criminal enforcement program has been very active in the last 20 years. There's been a lot of cases involving international cartels and both Republican and democratic administrations have gone after them. There's been a fairly rigorous, uh, merger enforcement.
Although I think there's questions about whether we've let too many mergers go through and we'll talk about that. As we talk about shipping the one area, there hasn't been many cases and I do signal a change in this is the monopolize cases you look at, you know, just a couple years ago we were bringing zero monopoly cases and, uh, that started to change at the end of the Trump administration with the high tech suits. And so I think they're looking to reinvigorate the, uh, monopolize cases that they're, um, uh, they're looking at these days.
Tracy:
So you sort of tease this a few minutes ago when you, when you mentioned, uh, that we're gonna get into some history. But one of the interesting things when it comes to supply chains and antitrust is that there's actually a carve out for shipping companies. So there's an antitrust exemption. Could you maybe walk us through what that is and how that came to be?
Craig:
So in antitrust general, there are exemptions to the antitrust rules. The courts have been very consistent saying antitrust exemptions should be applied very carefully and they should construed very narrowly. One of the most famous antitrust exemptions that exist is major league baseball. There is an exemption for major league baseball. They are not challenged. What's interesting. They get the benefit of that by other professional sports football, the NCAA golf, uh, other sports don't have the benefit of that. So that's a very famous one. And actually there was, uh, some concern this summer over even that exemption because when baseball decided not to have its, um, Allstar game in Georgia this summer, there was some talk about getting rid of that exemption, putting that aside, talking about the shipping exemption. So it goes back to this notion that shipping used to be a highly regulated area. And so because of the highly regulatory nature of it, that there was felt that the shippers would need to be able to work together to organize how they shipped freight, uh, to maximize storage capacity, to work together on rates.
And so because of this regulatory structure, there was given an antitrust exemption and the exemption allowed that, that the shippers could agree on rates tariffs. They charge so long as those were filed with the federal maritime commission and approved by the federal maritime commission. So you can have a classic cartel, but so long as under this exemption, they were filed with the federal maritime commission. It was allowed, that's kind of evolved over the years as we've had dere in the shipping industry, so that there is still an exemption, but it's fairly limited. You could still technically file tariffs, but people don't do that. All the shipping contracts are private contracts these days. So those are, those are not antitrust exempt, where the exemption really lies is, is that you can have what they call conferences. And I think that's just a polite way to talk about competitor meetings, where you can have competitor meetings where they can talk about rates, but they can't agree upon the rates.
Now they have to, if they have, if they talk about them again, it's this filing notion, uh, they still filed what they're talking about with the federal maritime commission, but they can't agree it. So it's a little odd I have to admit because it's a pretty fine line to be able to say, oh, we're gonna talk about rates and have a general agreement that we may or may not agree to. So it's a pretty fine line. And it, cause I think a lot of issues in the shipping industry and I should say, it's not just limit of the shipping industry. We see this in some other industries as well.
Joe:
So first of all, when it comes to shipping and you know, this is a, this is an area we've talked about, a fair amount. Most of these companies aren't us based. And I'm just curious, or the big ones anyway, that we talk about. I'm just curious about the extent to which you, us regulators have reached into this space versus a, you know, how much does that further challenge the ability of us regulators, even in any legal regime to do, uh, anything on, uh, shipping competitiveness,
Craig:
The US antitrust laws, I would say are not unlimited in their jurisdiction, but very fulsome in their jurisdiction. So any action caused by a foreign company that has a direct and foreseeable effect on us. Commerce is subject to challenge by the Justice Department. So you could have a conspiracy. We see this all the time in the cases I work on, where two companies, two business people, you in prices in some foreign country, never even been to the United States, but yet the us government can go challenge them and challenge the conduct, uh, in us sports. So a couple years ago, there's this coalition of the shipping companies. They get together and talk about rates. Talk about some things we were just talking about under the exemption. And they came to San Francisco for their meeting. They knew who visited their meeting, who, who antitrust lawyers and the FBI, they came in and rated this meeting.
And they handed out subpoenas to everybody in the room. So can you imagine you're in this hotel room with all these, you, it it's, it's, it's a group of shipping executives and it's all the CEOs all the top guys. So they all come to San Francisco for this meeting to talk about these things that they're allowed to talk about under the exemption and who busin is the FBI and the entrust division handing out subpoenas like their candy. Clearly they did this investigation. What's interesting. They did an investigation of the industry. I think they were worried about the alliances and some of the other things, ultimately there were no action brought. So, uh, you know, I think the exemptions did take a bit of a, uh, part of that in why the justice department didn't move forward on that. But it just shows you the, the, the, the, the, the view that here you had 13, 14, 40 executives all getting subpoenas. So the, the, the jurisdiction is very broad from the justice department's perspective.
Tracy:
Why don't we get into, um, like specific actions that the us government, the antitrust authorities could take in order to remedy supply chain issues? Because we already mentioned ship being that's one aspect of it, but of course, another thing they could do is try to go after large monopoly players in consumer goods and try to bring down prices that way. So could you maybe get into some specifics of what could happen here? What sort of enforcement actions are realistic?
Craig:
So there's several actually that are ongoing at the moment, the Federal Trade Commission, uh, just announced that they're, uh, doing an investigation of the supply chain issues. They sent out inquiries to a number of us companies. These are the big companies like Amazon, Kroger, uh, Proctor and Gamble, Tysons. Those that are trying to bring products in the United States to try to understand what the problems are. So that's a first step there doing an investigation. Now, this is under a rule at the FTC that allows the FTC to investigate industrywide practices that may have antitrust problems. So this is really a first step. This is to say, is there an antitrust competitive problem? What that could lead to? If they say, gee, there do soon to be antitrust problems are investigations. The justice department, or the FTC could open up civil. The justice department could open a civil or a criminal investigation if thinks that there are antitrust problems.
One of the problems about antitrust though, is it is very, very slow. So while we have these problems now, you know, investigation can take a year, two years, all antitrust cases are driven by documents and evidence. It takes a long time, especially if you're getting 'em from foreign companies, it's it's can be troubling. There's issues about getting 'em from foreign companies, quite frankly, foreign companies like China have blocking statutes, which don't allow foreign companies to produce documents to the us government without the Chinese government signing off on it. And so these investigations can get bogged down, and then even if they bring a case, antitrust cases are super slow. And so you could have a case filed and not even have a court date for 4, 5, 6, 7 years. So we could be on three different supply chain events past where we are today, before we start having an antitrust case about what's happening right now. So can be helpful, but it's certainly not an immediate, uh, solution to the problems we're having today.
Joe:
So this actually leads me right into my next question. And, you know, we sort of said in the intro, it's like, alright, you know, well, we're talking about inflation right now, antitrust, isn't gonna do anything in the next few months. Well, one of the themes that we come back to a lot on this show is that a lot of what we've run into now is this sort of like compounding price that we pay for diminished markets or aro markets. And we had this long period after the great financial crisis in which many industries, maybe due to, you know, usually we talk about mediocre growth or mediocre and demand simply did not invest particularly much in capacity. And we pay the price. Now, maybe we don't pay the price during periods of low demand, but as soon as GDP grows rapidly, we pay the price of atrophy capacity. And I'm curious like, okay, long term, like, yeah, are we accepted in the short term? Antitrust can't do much, but what about in the medium or longer term, like is the idea that if we had more robust antitrust and we had more competitive markets as the norm that perhaps productive, uh, economic capacity overall in any cycle would be, uh, greater than it is today?
Craig:
I think that's true. Uh, I think you'll see it, especially in merger in enforcement. When I was in law school, I had a professor that talked about the fact that we see every 40 years kind of the antitrust pendulum swing when I was gonna law school. It was right after the Reagan administration regulation was disfavor, let the markets do their own thing, let not have very big government enforcement. And I think you're starting to see this movement towards more regulation towards more enforcement. I think there is a realization by some of our lawmakers by some of our regulators that maybe they let things go too far. So if you look for instance, um, I'm involved in a case right now against some of the railroad companies for, or some logistics issues for some, uh, fees that they put in place almost 20 years ago at this point.
But usually the railroad industry, we used to have a very vibrant railroad industry with lots of competitors. It was highly regulated. Then we had this move to make it not regulated. And now we're down to four major railroads, which control almost 90, 95% of all the, uh, all the railroad traffic in the United States. And the same as with shipping, you had American competitors, you have foreign competitors from, I understand now you're down to basically nine shippers of control, Ooma, almost all of the export products from the United States. There are no us producers. And on top of it, you have these three alliances. And so I think you're starting to see people say, Ooh, did we go too far in letting some of these mergers go through? And so I think you're seeing this reflected in that we need to take a harder look at some of going on now to make sure it doesn't go any further.
Tracy:
So just on that note, does it feel like attitudes towards antitrust enforcement are starting to change? And I, I guess another way of saying that is, does it feel like there's bipartisan support for more antitrust legislation? Uh, inflation being one of the few things I think that both parties agree, um, is actually bad. And so doing something or anything about it might be a good thing.
Craig:
I used to not worry about antitrust legislation, because I just never thought it had much of a chance to pass because you always had this setup where the Democrat were more pro enforcement, more willing to think about new legislation. And then the Republican party at least 10, 20, 30 years ago was the party of country club Republicans, uh, chamber of commerce. And didn't want to have it that has changed dramatically in the last year or two, as you see the Republican party move away from big business to become more populist. And so now you're seeing this merging of kind of the left, uh, which has traditionally won antitrust enforcement and the right, uh, now that's more, anti-business the summer I was struck. I was reading, um, uh, polling from the Gallup that talked about confidence in big business. And they asked Republicans and Democrats, whether they had a great deal or quite a lot of confidence in business.
And just from this year to last year, Republicans confidence in big business declined by 12 point only 20%, only 20% of Republicans have confidence in big business. And they track kind of the net confidence in each. So the percentage, so that's compares the percentage expressing high confidence in business, minus those expressing little or no confidence. And so in the past, the Republican party over years, I mean over decades was kind of plus 10, 12, 15% in favor of big business. You know, where it was last year, negative 17%. That's incredible. It's incredible. So the Republican party is no longer and it's really in line with where the democratic party is. And so bringing it back to shipping, there was this kind of, out of nowhere, there was this new antitrust bill called ocean shipping reform act. And it was to kind of consistent what we're talking about, give the federal maritime commission, more regulatory powers, more oversight, powers, more teeth to worry about.
Some of the things we've been talking about. And the thing that amazes me, this bill, new antitrust legislation passed in the house of representatives. And we're talking about the house of represenatives. It's divided in everything. This passed 360 4 to 60. I mean, that is about as one sided as you can't have in this. And you here's, here's the thing think Joe and Tracy think about this. This is the lineup of people who voted for this. You had people like on the Liz, Chaney, Devon newness, Kevin McCarthy vote for this while also Madison coth thorn. So some of the new guys coming in, but then you also had OIO Cortez, Omar, the Democrats. So can you imagine a bill where you would have Kevin McCarthy and AOC both supporting it, but that's what we're seeing in antitrust.
Joe:
Sorry, what's the name of this bill? I, I had totally missed this. What, what, what's the name of this bill cuz now I'm definitely gonna have to go look it up.
Craig:
Yeah. So it's called the Ocean Shipping Reform Act and it was just passed by the house in December. The Senate seems very receptive to it. The Biden administration has indicated that they would approve it. It was a bipartisan bill. One of the Congressman was a Republican Congressman, uh, from South Dakota, which is kind of funny that South Dakota would be worried about shipping. Uh, but they are because they would have products. He has a big constituent that needs to get lactose to New Zealand and a democratic sponsor as well. So it just didn't have a lot of hearings that didn't have a lot. He just kind of popped up on the radar and gots proved. And so I think the Senate's gonna improve it. And I think the Biden administration's gonna prove it. And what it does if you're interested is gives the, as I said, the federal maritime commission more powers.
One of the things that's really focused on is some of these fees, these merge fees that people are incurring. Apparently people are paying incredible fees as their product is sitting in a port and not being shipped. And there are people throughout the country, shippers that are very upset about it. So it puts upon the shippers and the dock owners that they have to show that the fees are reasonable. The burden is on them to prove it's reasonable there's reporting requirements. And it authorizes the federal maritime commission to have investigations related to fees and charges. It prevents ocean carriers from declining opportunities for us export. So there was apparently an issue that was of great concern where, you know, products would come to the United States and then empty containers would leave without being anything in it. Uh, and so they wanna stop that. So it's a, a pretty comprehensive bill in the shipping area that's going to be targeted. So it's right on point with what we're talking about. Wow.
Tracy:
Yeah, Joe, this is one of the things that when we spoke to John Porcari, the White House' envoy to the ports, we actually asked him about this, but he kind of didn't answer the question, which is one reason why we're having this follow up conversations.
Joe:
Yeah. Right, right. And I do, I, I remember that, uh, now, and I remember this sort of like the lack of substance or the lack of, uh, a, a very clear response about where this was going, something I'm, uh, sort of interested in is what I guess I would say is the other side of the coin when I, so you mentioned, okay. Shipping and rail, and, you know, we could talk about with the optimal number of competitors of the space or so forth. But another area that we've talked about a lot on the show is trucking, which seems like it has, it's 180 degree is different. The barriers to entry into the space are essentially non-existent huge boom and bus cycles. Uh, even in boom times, right now companies regularly go out of business due to lack of pricing power. Do you see industries in which, uh, essentially would benefit from, you know, some sort of greater barriers to entry in which the supply of goods, the supply, the stableness of prices might benefit from some sort of like, you know, where it's, where may make it a little bit harder to enter and exit the exit, the industry?
Craig:
Well, that's a dangerous question for an antitrust lawyer. right. But, you know, I think the, you know, the thing, the answer might be more government regulation, you know, back in the early seventies, eighties, there used to be tons of regulation about who could drive trucks and which is
Joe:
Kind of a backdoor way of, it's a kind of a backdoor antitrust on some level. So maybe you don't necessarily cap the competitors or whatever, but, or, but you like make it a, the bar a little bit
Craig:
Higher and believe it or not, there is a ton of antitrust activity in this area because there's another, I call it exemption to the Arus laws, but it's really grounded in constitutional rights competitors get together and lobby the government to do legislative things that may have a, a effect, but because you're lobbying because you're stressing your first amendment, right. You can pushed for legislation that would have the, of recent barriers that would make it harder for competitors, you know, and that's all exempt from challenge, uh, under the antitrust laws, because it's part of your right to petition.
Tracy:
I wanna go back to the, what we were talking about with the, the ocean shipping reform act of 2021 and the federal maritime commission, the, um, FMC, because I guess my question is how well suited is the commission to actually take on antitrust issues? Cause my understanding is th this is not something that they've been doing historically because of that, uh, antitrust exemption that you just described. So presumably this would be a, a pretty big shift for them.
Craig:
It would be, I mean, let's start out with one fundamental problem of the FMC. It is a really small organization. I looked it up, uh, yesterday they're apparently only 130 employees at the FMC. There's five commissioners and they only have a budget of 30 million. So I'm hoping that we'll see Congress fund them more. One thing that has happened. Uh, so this summer of big things that happened in antitrust in 2021 was that president Biden issued this executive order on antitrust right around July 4th. And he has, uh, asked all the agencies to work, to just look and try to solve lots of antitrust problems. He used the world that there's been too much consolidation, too many antitrust things of let slide. And so he's really invigorated the government to look for wearing trust issues. And so one of the things he's worried about is shipping and coming out of that just a couple days after the justice department, antitrust division and the FMC have signed it MOU, pledging to work more closely together.
So I don't think it's gonna be the FMC see by itself. But I think also working with the justice department now, the flip side of this is the justice department and the FTC have more resources, but there's still also resource constraint. We're in the middle of a major merger wave and they are overwhelmed with the number of mergers that they have to review. They're on big tech, they're doing lots of investigations. So yeah, they'll be interesting going after shipping, but when you put their list of priorities, I the top 10, but it's not probably at the very top. So we're dealing with two, uh, agencies, the FMC and the antitrust agencies who are gonna resource constrain.
Joe:
Can you just talk a little bit more about math and numbers of the short staffing or the, the capacity constraints? Because it, you know, I, you have this idea. It's like, oh no private entity could ever match the government, but realistically of course they can. And these institutions only have so many lawyers at any given time and only so much budget. What does it often look like in terms of the amount, you know, in terms of the legal fire power for some of these mergers versus, uh, on the private side versus the public side.
Craig:
So the agencies have number of attorneys and economists that are staffed up to look at these, but, you know, you're dealing with companies that are very sophisticated that have outside council. I work for Vincent Elkins and we are a big law firm in the United States, but we have only, I mean, we have a 720 attorneys, uh, there's law firms that have 3000, 2000 attorneys. So you're dealing with situation where, you know, companies can afford a lot of attorneys and you come to meetings and the eternity, the merchant parties may have 20, 30 attorneys and the government may have, uh, five or six attorneys in the, so it is an issue.
Joe:
So we're talking about, uh, obviously supply chains and logistics. And I wanna like, just go back to something again on the sort of market structure. And you mentioned the number of competitors that on rail and obviously the number of competitors that are in shipping. And one of the aspects of both of those industries is there is a sort of like, I guess I'd say very limited constrained public infrastructure. There's only so many ports that are available and there's sort of like quasi public or quasi-private, and there's only, uh, so many rail tracks available. And it's sort of, you know, on rail is sort of reminiscence of the cable up companies where there's always been challenges with shipping. How much are these industries inherently constrained in terms of what the government can do by simply like the lack of like, uh, public infrastructure basically to support new competitors?
Craig:
I think you're seeing it with the new legislation we were just talking about. I think the one thing they could do is, uh, step in and try to regulate more, the notion that you're gonna have the federal maritime commission regulate rates and think about what's reasonable, I think is something that, uh, we may see more of. I that's probably as much as they can do. I mean, we're a capitalist society and we can't start, uh, doing industrial planning. I don't think so. Uh, I think we'll just see probably more legis, more, more regulation.
Tracy:
So maybe just to summit all up, what, what's your sort of gut sense about the degree to which antitrust in or legislation would actually bring down inflation and ease some of these supply chain pressures that we've been talking about?
Craig:
I think it'll be a useful tool, but it's not gonna be the cure all, as I said, some of these cases just last for a long time, I'm involved in two cases right now that involves supply chain management mentioned one earlier, we're litigating against the railroads related to fuel surcharges that were imposed in 2003. Uh, so we're dealing with that in 2021. Wow. Yeah. and I am involved in another case where we're dealing with supply shortages from kind of the 2015, 2016 era. So anti trust is generally retrospective, obviously looking at problems in the past. What it can be helpful though, is as these cases get decided, the case law is established and, you know, I think it'll have an impact on how people do business. I also think one of the things coming out of this is that compliance of big companies is gonna be very important if you know that there's gonna be an increased regulatory environment.
And we've just been talking about the United States, it's the European commission, it's Australians, it's, it's the Chinese it's, everybody is, uh, becoming more antitrust focused and, uh, focused. So if you're a company, I think it's gonna be more important to have very strong compliance programs. In fact, the justice department has a program that if you can come in and show that you had extremely good compliance program, even though you had some antitrust problems, you can get some benefits and some, uh, leniency from the justice department as a result of that. Um, so I think that's gonna be important and maybe stepping up the compliance will have some impact, but so I think it's kind of more the secondary effects of antitrust cases. I will say. One thing that has, uh, immediate effect is if the justice department sends you a grand jury, criminal subpoena in your company get, gets the attention of this CEO and the general council and a lot of other folks in the company. And so that can sometimes have a in interim effect at change, uh, behavior if it's illegal. But, um, it's just a slow, it's, it's a useful, uh, tool, but it's a slow moving tool.
Tracy:
Well, Craig, that was a, that was really fascinating. And I, I'm glad you could walk us through, uh, one, one of the more interesting ways of, uh, fighting inflation. Thank you so much.
Craig:
My pleasure enjoyed talking to you. That
Joe:
Was fascinating. Thank you so much. Really appreciate it.
Tracy:
So, Joe, obviously I thought that was really interesting and one of the things that keeps coming out of these conversations and, you know, Gene Seroka kind of talked about it too. The, um, the executive director of the port of Los Angeles is this idea of, okay, maybe antitrust enforcement, isn't going to actually do what it's supposed to do or what it's explicitly written to do for a very long time, because it's tough to push those enforcement actions through, but maybe the threat of future enforcement action is enough to start some sort of change of behavior within the shipping industry itself. And this again seems to be a recurring theme, like just the idea of getting people involved in the supply chain to actually change habits that have been ingrained for decades at this point. That that seems to be something that people are really trying to do right now. Yeah,
Joe:
No, absolutely. This idea of like, okay. And he made that point about compliance departments and the changing norms. I do think like ultimately like, okay, anti-competitive behavior part of competitive behavior is actually competing and investing and trying to win and market share and offering something better. And I do think that like one of the problems I have with this in general, or is like, okay, but what is going to actually get people to invest and increase capacity? And I still feel like, you know, obviously the legal aspect is a big is part of it and maybe a very big part of it, but I'm still like trying to wrap my head. I was like, yeah, well, okay, you could change norms around pricing or fees or penalties or whatever, but what is going to like increase competition in like the sort of like pure capitalist sense, right.
Tracy:
But conversely you to argue that anti-competitive behavior right now leads to higher shipping prices. And so people have very, very little incentive to actually increase capacity, cuz they're already making billions of dollars. And I think, right, didn't didn't me like unveil a quarterly profit recently that was like, it's highest in over a tree, something like
Joe:
That. And a hundred percent. And it seems like this is like the type of thing, which is like, the goal is hopefully to like, I guess I would say like reach new equilibrium or like change overall like norms throughout multiple cycles going forward rather than something that we hope is gonna solve the problem now. But you know, maybe at the margins, there will be some, uh, some potential solution now.
Tracy:
Yeah. The other interesting thing, I mean on that note is this idea of deregulation cycles and the idea that this actually has a lot of bipartisan support. So maybe we are starting to enter a new cycle where people are more interested well, where Washington is more interested in actually bringing down some of the monopolies. And again, uh, Craig was talking about this, but we've already seen that in tech, but it, it is really striking. the sort of spectrum of interest that this is attracting from both the left and the right.
Joe:
Yeah, no, I thought that was probably one of the most, uh, interesting. And it's like sort to like T Trumpism and to sort of like disdain for anyone in power. I guess I've always been like a little bit skeptical at this idea that, okay, are we actually ever gonna pass legislation? But you know, he pointed out a pretty big bill is past the house and maybe this changing political environment will have some real downstream legislative effects. I maybe a been, uh, skeptical of this sort of like changing public mood, actually changing and changing public
Tracy:
Law. Mm-hmm , you've underestimated. People's uh, hatred of big business, I guess. Yeah.
Joe:
I maybe I have, I not have to, uh, sort of change some of my, uh, my priors. So they speak, no, I haven't really underestimated people's hatred. I've underestimated. Whether they at hatred will change laws and maybe
Tracy:
It will. Yeah. Okay. That's fair. Yeah. Um, okay, well, shall we leave it there?
Joe:
Let's leave it there.