Corporate Pricing Fixing

https://mattstoller.substack.com/p/why-are-judges-encouragin…
With first Covid and now the war in Ukraine, supply and demand shocks abound in our economy, driving up prices and increasing volatility in general. I’ve been tracing the effect of consolidation for years, and one of the consequences of consolidation is that these kinds of shocks more often lead to price spikes, volatility, and shortages. It’s not just that supply chains are more brittle, but firms simply have pricing power, and now have an excuse to use it even when they aren’t threatened by supply chain disruptions. Visa and Mastercard, for instance, who have control of the payments system, are raising the fee they take from merchants for accepting credit cards. There’s no reason for this price hike; both firms are highly profitable, and there’s really no increase in input costs to justify it. They are raising prices simply because they can, and doing so in what looks like a coordinated manner.
Other examples are offered by Stoller in the article.

Back in December, I did a back of the envelope calculation that 60% of the inflationary increases are a result of pricing power.
https://mattstoller.substack.com/p/corporate-profits-drive-6…

Business consolidation in the majority of business sectors has led oligarchical pricing power. Plus planned product obsolescence adds even more profit & sales.
Now it appears the corporate power is aided by judiciary.
In the 1970s the Federal Trade Commission and judges considered that exchanging information while moving prices in concert was an illegal method of fixing prices.

But for years, courts have been loosening antitrust law, including those against price-fixing. In 2017, for instance, the Third Circuit Court of Appeals, in a case called Valspar Corp. v. E.I. Du Pont De Nemours & Co, not only found that tacit collusion was legal, but that in the case of a concentrated industry, it’s rational. And so they wouldn’t even let it get to a jury.

Last week, however, the Ninth Circuit handled down another bad decision along the same lines. In this case, memory chip makers Samsung, Micron, and SK Hynix - who control 96% of the market for such chips - were being sued for price fixing. Until 2016, prices of memory chips had been dropping as these firms competed for market share. Then, Samsung unilaterally began producing less, and announced it would keep production lower as long as other industry participants did so. Micron and SK hynix followed suit, and prices of chips, as well as the cartel’s profits, skyrocketed. These firms also cut their investment in factories in unprecedented ways to reduce output, lost money by deliberately withdrawing supply from the market, publicly encouraged each other to engage in supply cuts, and exchanged information relating to future supply and demand.

I suppose campaign contributions to governors & presidential candidates lead to corporate friendly judicial nominations & approvals.

The professional class manages to maintain their standard of living via stock purchases from their well paid positions. The working class not so much. Most decent working class jobs have been automated or off shored. Higher education costs are sky high resulting debt ridden graduates. And those without the intellectual horsepower to gain entry to an university. Well eff’em. They are just flotsam in the new economic system. There IS a fly in the ointment though. They can still vote. That can lead to more 2016 election results.

Brave New World out thar.

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The professional class manages to maintain their standard of living via stock purchases …

If y’all would stop looking at the “professional class” through green eyed glasses and join the race to riches via the stock market
https://www.selfgrowth.com/articles/different_ways_to_invest…
y’all could join them.

Or, do as I do and invest in dividend paying stocks that have been paying increasing dividends for 20 years or more:
https://www.dividend.com/dividend-champions/

Desert (CVX, XOM, T, BNS, BKH, ED, ATGFF, NI, NWN, TRP, ENB, WRE, WGL, XEL, DUK, SO & KO) Dave

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If y’all would stop looking at the “professional class” through green eyed glasses and join the race to riches via the stock market…

Righteous indignation is so very gratifying!

The Captain

If y’all would stop looking at the “professional class” through green eyed glasses and join the race to riches via the stock market

The working class used to have access to jobs with decent pay and thus had disposable income for stock investment. Them jobs are few & far between now that manufacturing was off shored starting with NAFTA—and boy did that come back to bit us with the supply chain disruption. Most working class folks now employed at low pay jobs with no or little health benefit. No money left over for investments. Their offspring have the option of a debt based higher education or military service in US regime meddling foreign policy. No the working class tired of being screwed & tried the Trump option in 2016. I expect the establishment political parties have set up roadblocks & policies to prevent any reoccurrence of that result. The elites like the current set up.

I got the following from an article many moons ago. The web link is no longer active. The words are very accurate description of the USA Today IMO.
The two greatest visions of a future dystopia were George Orwell’s “1984” and Aldous Huxley’s “Brave New World.” The debate, between those who watched our descent towards corporate totalitarianism, was who was right. Would we be, as Orwell wrote, dominated by a repressive surveillance and security state that used crude and violent forms of control? Or would we be, as Huxley envisioned, entranced by entertainment and spectacle, captivated by technology and seduced by profligate consumption to embrace our own oppression? It turns out Orwell and Huxley were both right. Huxley saw the first stage of our enslavement. Orwell saw the second.

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Visa and Mastercard, for instance, who have control of the payments system, are raising the fee they take from merchants for accepting credit cards. There’s no reason for this price hike; both firms are highly profitable, and there’s really no increase in input costs to justify it. They are raising prices simply because they can, and doing so in what looks like a coordinated manner.

I don’t disagree that VISA/MC shouldn’t be doing this.
But there is more to the story.
The interchange fee increase is about 5-10 cents on $100 transaction,
They both had announced these increases to go into effect in 2020, but delayed due to the pandemic.
They also aren’t raising fees on most businesses that transact less than $250K…so the so-called funds going to improve security is being paid for by the medium-to-big merchants.
Fees are not being increased on hotels, dining, daycare and others most hard hit by the shutdowns.

behind paywall probably:
https://www.wsj.com/articles/visa-mastercard-prepare-to-rais…

Mike

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As business sector continue to concentrate into fewer hands; it is easer to work together to raise pricing if competition is limited. I remember Steve Jobs & other tech CEOs colluded together to not to hire each other workers to keep wages stagnant. It worked until they were caught.

https://www.salon.com/2018/11/23/why-so-many-tech-workers-wo…
John and Barbara Ehrenreich, social critics and essayists who have written extensively about the state of labor in the United States, coined the term “professional-managerial class” to describe the class of employees who, though performing the same kind of wage-labor, feel a kinship with the rich owners, bosses and managers rather with than the blue-collar class more likely to be performing manual labor. “Historically, the [Professional-Managerial Class] have designed and managed capital’s systems of social control, oftentimes treating working-class people with a mixture of paternalism and hostility,” they write. This may account partly for Silicon Valley’s class-blindness.

And I would argue for any industry group.

Even in the early days of Silicon Valley, this tendency of programmers to identify with founders was commonplace. Though generally well-paid professional workers, programmers are still commonly exploited by tech companies who prey on their goodwill and strong sense of company loyalty.

The professional class is merely just further up the food chain. If their jobs could be done by AI; they are toast along with the working class. The professional class is a protect class until it’s not.

“If y’all would stop looking at the “professional class” through green eyed glasses and join the race to riches via the stock market”

I’d guess that the vast majority of people on this board are stock market investors.
But you have to have disposable income to do that. Of the people that don’t have disposable
income, some are overspenders, and some just don’t make enough to save. I have empathy for
those who simply don’t make enough, and I don’t mind contributing to a social safety net.

Heck, everybody in America that gets social security and medicare is on the social safety
net, but a lot of them are too blind to even consider that they’re on a version of
“welfare”. And I don’t buy into the argument that if the government wouldn’t take the SS
and Medicare money, then the majority of Americans would invest that on their own and
they’d all be millionaires. Some would, like most people on this board, but that’s a
small percentage. More likely outcome is that most people would buy a bigger boat, bigger
house,… That sounds like a winning formula for the JC’s, so it’s pretty easy to
guess who the driving force is behind calls to eliminate “entitlements”.

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Though generally well-paid professional workers, programmers are still commonly exploited by tech companies who prey on their goodwill and strong sense of company loyalty.

What a pile of steaming garbage!

The Captain
was a programmer and never felt exploited. Exploited in the above construct means powerless. It’s an insult to a whole lot of people. It’s the garbage Marx was spewing.

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As business sector continue to concentrate into fewer hands

In the case of (credit card like) payments…

Back “in the day” we had Visa & MC and a few had Amex. Then came along the Discover Card from Sears in the 1980s.
Today we have many more choices than that depending on if you are a consumer or merchant, etc. Square, Paypal, Venmo, crypto, easy internet-enabled wire transfers, store gift cards and the like. And we can link many of these into our phones with Apple Pay, Google Pay, Samsung pay, etc. And Ebay and Amazon have their own payment methods. And there are a few “buy now pay later” services such as Klarna, After pay…

Seems like “more” hands today.

Mike

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…social security and medicare is on the social safety net, but a lot of them are too blind to even consider that they’re on a version of “welfare”.

Technically, SS and Medicare aren’t “welfare” as SS and one part of Medicare are paid by a specific tax, assessed on the people who eventually receive benefits from the programs. SS is no more “welfare” than an annuity you buy from an insurance company. The only problem with SS is the “JCs” can’t skim the cash flow, hence the drumbeat for privatization, so they can skim it.

Some years ago, I saw a guy on FB post “build the wall, repeal Medicare”. His friends immediately jumped on him “we PAID for Medicare”.

As David Stockman commented some years ago, their ideology was defeated by democracy. You can’t roger a large majority of the people for the benefit of a few who already have the most, as long as the majority has a voice.

…then the majority of Americans would invest that on their own and
they’d all be millionaires.

I read a SS privatization proposal that was floated in the early 2000s, while the POTUS was waving a binder, kept in a file cabinet, and saying words to the effect 'there’s your trust fund, worthless IOUs kept in a file cabinet". The contents of those binders were receipts for United States Treasury bonds, backed by the “full faith and credit of the United States”, and far from worthless.

The proposal was for all the SS tax revenue to be diverted to an approved list of Wall St firms, who would invest the money according to a specified schedule. On retirement, the money was required to be rolled over to an annuity from a Wall St firm. So, in spite of the talking points, the retirement money was never “your money”, because you never had any control over it, before, or after, retirement. The major difference was that Wall St could skim the money every year from the day you start working to the day you die.

As SS is a pay-as-you-go system, current benefits paid from current tax revenue, the effect of diverting all the tax revenue to Wall St was that the government would have to borrow to cover existing benefit payments to people already on SS. So the government debt and debt service costs soar, while Wall St makes money off it. Sort of the way Medicare Advantage and Medicare Part D, which were passed during the same era work: increased cost to the government for the benefit of private insurance companies.

Steve

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Credit card market share data from 2020:https://upgradedpoints.com/credit-cards/us-credit-card-marke…
4 major players: Visa, Mastercard, American Express, and Discover.
In 2020, Visa had nearly 50% of all credit cards in circulation in the U.S.4
Visa and Mastercard combined to dominate the market in 2020 with over 75% of spending by purchase volume.

There is a graph at the link
Visa:2 trillion in volume
Master Card:700 billion in volume
AXP:650 billion in volume
Discover:100 billion in volume

“Technically, SS and Medicare aren’t “welfare” as SS and one part of Medicare are paid by a specific tax, assessed on the people who eventually receive benefits from the programs.”

per a quick google search, there are 8.2 million Americans on SS Disability. They most
likely did not have 30+ years of paying into the SS Fund. This is a form of welfare.

There are children that receive SS benefits, they have no work history. This is a form
of welfare.

There are spouses with no work history that receive SS benefits even though they never paid
into the SS fund. This is a form of welfare.

I’m not saying I’m against any of this, my point is that the vast majority of Americans
are receiving some form of government assistance, but some Americans just don’t want to
believe it or admit to it. I know a person who has been on SS Disability
for near 20 years. He was one of the protestors that went to the Lansing Capitol in a show
of force. He wanted to overthrow the government, and the government is the only reason
he is able to eat and have a roof over his head. This type of dichotomy is a big problem.

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per a quick google search, there are 8.2 million Americans on SS Disability. They most
likely did not have 30+ years of paying into the SS Fund. This is a form of welfare.

There are children that receive SS benefits, they have no work history. This is a form
of welfare.

There are spouses with no work history that receive SS benefits even though they never paid
into the SS fund. This is a form of welfare.

Those benefits are all available from an annuity bought from a private insurance company. You can buy term life insurance for yourself that pays benefits to spouse or spawn, die a year later, and the insurance pays off, even though the benefits they will pay are far more than the premium paid in. The few people left who work for a defined benefit pension have the option at retirement, of taking a pension for their own life only, or for the life of whoever lives longer, them or their spouse, even though the spouse never worked for the company.

Have you noticed this year’s entry in the low level drumbeat to restore the mandatory, unlimited. lifetime, unregulated cost, medical on car insurance, that helped make Michigan car insurance the most expensive in the country? The local news ran a piece last week: quadriplegic, from a car accident, was bragging about how he could live in his house, and the insurance paid for aides in the house all day and he could travel places and do things that, he admits, a lot of working people can’t afford. But now that the “reform” cut his gold plated services, that the rest of us were forced to pay for by law, down to the rate workman’s comp pays, he can’t do all that anymore. He had to move into an assisted living facility.

As stated, the only “problem” with SS and Medicare is that the private insurance industry can’t skim off every dollar dispersed by the programs.

Steve

Visa:2 trillion in volume
Master Card:700 billion in volume
AXP:650 billion in volume
Discover:100 billion in volume

Those numbers do nothing to counter the fact that there are “more” choices today than in the decades prior.

Mike

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Per a quick google search, there are 8.2 million Americans on SS Disability. They most likely did not have 30+ years of paying into the SS Fund. This is a form of welfare. There are children that receive SS benefits, they have no work history. This is a form of welfare.

I have a daughter who receives a Social Security disability payment every month. She never had a job, but the amount she gets depends upon what her parents earned and paid into Social Security (who knew?).

DB2

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