With the presidential election approaching, many CEOs are glued to the countdown to Election Day and considering which companies and industries Biden's appointed regulatory machine — arguably the most aggressive in a generation — will try to target before the clock hits zero.
Business leaders are scouring the comments and meeting transcripts to understand the immediate priorities of regulators, including Federal Trade Commission Chairwoman Lina Khan and Assistant Attorney General Jonathan Cantor, who is heading the Justice Department's antitrust division.
They're focusing on something that may sound like a nerdy legal theory, but could have big implications: the tyranny of middlemen who abuse their role to shut out competitors or create artificially expensive moats. The Department of Justice has already launched high-profile attacks in this direction, suing to break up Ticketmaster and Live Nation.
The agency is reportedly also investigating at least two other companies: Realpage, a property management company that uses artificial intelligence to suggest prices and has already been sued by renters for facilitating a new type of conspiracy, and UnitedHealth Group, a health care conglomerate that owns a variety of businesses including insurance companies and a separate division that employs about 10,000 doctors in the U.S.
“We are proud of the role our clients play in helping provide safe, affordable housing to millions of people,” RealPage said in a statement this week. The company also launched a website about its software.
Guessing what other names are on the list has become a kind of social game for traders: A travel booking service that jacks up commissions? A brokerage that apartment tenants are required to use? A shareholder advisory firm that can decide whether a deal will go through? A marketplace that takes a fee every time an NFT is bought or sold?
Looking for more hints at what litigation may be coming, DealBook's Lauren Hirsch spoke with Kanter about cracking down on middlemen, the challenges of regulating artificial intelligence, and how companies can tackle melting ice.
This interview has been edited and condensed for clarity.
Times Recently investigated Pharmacy benefit managers (PBMs), the middlemen in health care, are finding that they are driving up drug costs. The largest PBMs are owned by conglomerates. Optum, for example, is owned by UnitedHealth Group. CVS Caremark, for example, is owned by CVS Health.
What do you think about middlemen in healthcare?
Intermediaries, whether they be insurers, payers, PBMs, or other parts of the healthcare stack, are now commonplace in our healthcare economy. Not only do these intermediaries consume a lot of money, taking a lot of money out of the system, but they are often the faceless middlemen who make decisions about treatment.
They will no doubt argue that it would be more efficient to do it all in-house, and PBMs will argue that their scale is essential to compete with companies that make brand-name drugs.
Over the past few decades, we've heard a lot about what I call “benevolent monopolies.” But the truth is, our system is based on the idea that competition produces better outcomes.
The Department of Justice is reportedly investigating RealPage, a property management software company that uses algorithmic pricing. Do we view AI tools communicating about pricing as the same as collusion between humans?
Facts matter. But I often say that if your dog bites somebody, you are responsible for your dog biting somebody. If an AI fixes the price, you are equally responsible.
If anything, it's the use of AI and algorithm-based technology that should concern us more, because it's much easier to lock in a price when you're outsourcing to an algorithm than it is when you're sharing a manila envelope in a smoke-filled room.
In an AI era where manila envelopes no longer exist, would it be easier or harder to prove collusion?
We've seen these advancements before, and this one is another big step forward and game-changing, so we see it as our job to keep up with these technological developments.
What about Wendy's recent introduction of dynamic pricing? He said he plans to testIs that something to be concerned about?
Companies are getting better at figuring out how to maximize their profits. The more information they have about who their customers are and how much they're willing to pay, the more they can charge. The ability to do this at an individual level will likely lead to more monopoly power than ever before in history.
Speaking of AI, the FTC Investigating Microsoft's investment in OpenAIOpenAI Change of corporate structure to a for-profit company How will this impact antitrust enforcement efforts?
There are times when legal form matters. But in most cases, the law takes into account market realities. So if something looks like a duck and quacks like a duck, it's not a hen.
Some advisers say companies are hurting because aggressive antitrust enforcement is eroding their ability to trade. They're melting the ice, but that doesn't entirely cover defenses against failed companies.
There's a reason that bankruptcy defense has very strict standards. One of the most important and meaningful is answering the question, “Is this the least anti-competitive buyer?” And many deals don't pass this test. Just because you're a slow-melting block of ice doesn't mean you should sell to your biggest competitor in the market.
If the alternative buyer is a private equity firm, Issues facing regional banks during the crisis?
For private equity, it matters if you have portfolio companies in the industry, it matters if you continue to deploy assets and continue to compete at full force.
This is an election year. Should the media help curb misinformation? In the past, platforms like Apple and Google’s app stores and Amazon’s web services have Drop Parlour.
This is a difficult question. We support the argument that competition is good for democracy and the free flow of information. In the right cases, under the right circumstances, there is no law that prohibits efforts that improve safety. But it does not have to come at the expense of competition.
In case you missed it
Apple will not release its artificial intelligence technology in the European Union due to regulatory concerns. The company said it would not introduce Apple Intelligence or other features to the European Union this year because it believes the bloc's digital market law would weaken the security of its products. The European Commission said it welcomes Europe's tech giants as long as the companies abide by the rules.
The Washington Post's new editor withdrew his application. Will Lewis, CEO and publisher of the Washington Post, has told staff that Robert Winnett will not take on the role he was expected to take after the November election. Both Lewis and Winnett have been under intense scrutiny over their journalistic careers in their native Britain, including accusations that they used unethical methods to obtain stories.
President Donald Trump has closed the fundraising gap with President Biden. Biden, a convicted Republican, has been building up his coffers through donations since he was convicted last month in New York of 34 felony counts. Biden has held a large lead for months and is raising money with a big donation from Michael Bloomberg and an endorsement from Melinda French Gates, who is publicly endorsing a presidential candidate for the first time.
Tip tax in numbers
Donald Trump's proposal to repeal the tip tax is intended to appeal to the nation's vast service-sector workforce as he and President Biden appeal to working-class and young voters in key battleground states. But the plan would add $250 billion to the federal deficit over 10 years, according to a report released this week by the nonpartisan Committee for a Responsible Federal Budget. Here are the numbers.
22 percent: The percentage of workers employed in the hospitality industry in Nevada, the election battleground state where President Trump first pushed the policy.
At least two: Several bills to repeal the tip tax were introduced in Congress this month. Some Republicans have praised the tax cut, but others have questioned why only tipped workers qualify for the tax cut, while low-wage workers who don't get tips don't. Others have criticized the potential costs of the policy.
$225 billion to $375 billion over 10 years: How much would this policy cost the federal government if it allowed employers and workers to change their behavior and reclassify more than 50 percent of their income as tips to avoid taxes, according to a report from the Committee for a Responsible Federal Budget.
$23 billion: According to National Tax Agency estimates cited in a 2018 report by the Treasury Department's Inspector General for Tax Administration, approximately how much tip income went unreported to the National Tax Agency in 2006?
91 percent: Increase in tips reported to the IRS from 2008 to 2018. One reason for the surge in tipping is tablet payment systems that encourage customers to tip more frequently and at a higher percentage.
Forty percent: Percentage of Americans who oppose companies' suggestions about tip amounts, according to a 2023 Pew Research Center survey.
Heated office debate: shorts at work
Record-breaking heatwaves across the Midwest and New England this week have sent nearly 100 million people under heat advisories, and in many offices, the hot start to summer has reignited a long-standing debate about whether it's OK to wear shorts to work.
The argument against has long been conventional wisdom: “Shorts tend to give off a sporty, youthful vibe,” says Ellie Jean Royden, author of the upcoming book “How to Dress Your Best,” and for that reason alone, she suggests, shorts are a no-go.
But office fashion has evolved since the pandemic, with many who previously wore suits finding the comfort of working from home in sweatpants, and some stylists even arguing that shorts are now acceptable.
“People are becoming more open-minded about incorporating styles like shorts that were previously off-limits in the office,” said Jessica Sockel, who dresses clients at personal styling service Stitch Fix.
All of the personal styling experts polled by DealBook agreed that if you're brave enough to wear shorts to the office, there are a few rules to follow.
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Choose the right shorts. “Longer, loose-fitting shorts that mimic the look and feel of trousers create a more professional impression,” says Shelby Goldfaden, merchandising director at women's clothing brand MMLaFleur. “They're usually pleated for added volume and flattery.” Bermuda shorts, linen shorts, and chino shorts are all good choices.
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Let's dress it up. For women, Sockel suggests pairing shorts with a classic long-sleeve button-down, blazer, or top in a matching color and fabric. For men, she recommends a crisp button-down, sport coat, or knitted polo. “A leather belt makes any bottom look sharp,” Goldfaden points out.
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Read the atmosphere in the room. “If you're on the fence, the safest way to determine if shorts are acceptable is to evaluate how your coworkers dress in the office,” Sockerl says.
Is it worth exposing your knees? Dawn Cullen, an assistant professor at the Fashion Institute of Technology and a self-described “fashion psychologist,” told DealBook that if you're the only person in your office wearing shorts, you might be viewed as less competent by others. But if you can still produce quality work, “it can really shatter people's perceptions and stereotypes,” she said.
And if that happens, “everyone will probably start wearing shorts in the office,” she added.
DealBook wants to hear your opinion: Are shorts acceptable office wear? Let us know here.
Thanks for reading! See you on Monday.
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