With the presidential election approaching, many chief executives have been glued to the shot clock counting down to Election Day, wondering which companies and industries the Biden-appointed regulatory apparatus — perhaps the most aggressive in a generation — may try to target before it goes to zero.
Business leaders have been combing through comments and transcripts to try to understand the pending priorities of regulators like Lina Khan, the chair of the Federal Trade Commission, and Assistant Attorney General Jonathan Kanter, the head of the Justice Department’s antitrust division.
They’ve zeroed in on what may sound like a nerdy legal theory, but one that could have huge implications: the tyranny of the intermediary, middleman companies that abuse their role by squeezing out competition or creating artificially expensive moats. The Justice Department has already made one high-profile strike along these lines, suing to break up Ticketmaster and Live Nation.
It is reportedly investigating at least two others. One is RealPage, a property management company that uses artificial intelligence to suggest prices and has already been sued by renters accusing it of facilitating a new type of collusion. The second is UnitedHealth Group, the health care conglomerate that owns a cobweb of businesses that include an insurer and another unit that employs about 10,000 physicians in the United States.
RealPage said in a statement this week it was “proud of the role our customers play in providing safe and affordable housing to millions of people.” It has also launched a website about its software.
Guessing what other names could be on the list has become something of a parlor game for dealmakers. A travel booking service that jacks up fees? A brokerage firm that an apartment building requires its renters to use? Shareholder advisory firms that can determine whether a deal goes through? Marketplaces that take a cut every time an NFT changes hands?
In search of more hints on what cases may be in the pipeline, DealBook’s Lauren Hirsch spoke with Kanter about cracking down on middlemen, the challenges of regulating artificial intelligence and what to do about corporate melting ice cubes.
This interview has been edited and condensed for clarity.
The Times recently investigated pharmacy benefit managers, the middlemen in health care, finding they drive up drug costs. The biggest P.B.M.s are owned by conglomerates: Optum, for example, is owned by UnitedHealth Group. CVS Caremark is owned by CVS Health.
How do you think about middlemen in health care?
Intermediaries are now commonplace in our health care economy, whether it’s an insurance company or a payer, whether it’s a P.B.M. or any other part of the health care stack where there are these often faceless intermediaries who are not only consuming a lot of money — or taking a lot of money out of the system — but making decisions about the course of care.
I’m sure they would argue it’s more efficient if it’s all in-house. P.B.M.s say their size is essential to counteract the companies that make brand-name drugs.
We’ve heard a lot over the last number of decades about what I sometimes call the “benevolent monopolist.” But the fact of the matter is our system is premised on the notion that competition yields better outcomes.
The D.O.J. is reportedly looking into the property management software company RealPage, which uses algorithmic pricing. Do you look at an A.I. tool communicating about pricing the same way you would humans colluding?
The facts matter. But I often say that if your dog bites somebody, you’re responsible for your dog biting somebody. If your A.I. fixes prices, you’re just as responsible.
If anything, the use of A.I. or algorithmic-based technologies should concern us more because it’s much easier to price-fix when you’re outsourcing it to an algorithm versus when you’re sharing manila envelopes in a smoke-filled room.
Is it easier or harder to prove collusion in the A.I. era, when there’s no manila envelope?
We’ve experienced these kinds of evolutions. This is another one, it’s a significant step forward, and it changes the game. I think it’s our job to keep pace with those technological developments.
What about dynamic pricing, which Wendy’s recently said it plans to test. Could that be a point of concern?
Companies are getting better at figuring out how to maximize profits. The more information they have about who you are and what you’re willing to pay, the more they can charge you. I think the ability to do that on a personalized level leads to greater extraction of monopoly power than probably ever seen in history.
Speaking of A.I., the F.T.C. is looking into Microsoft’s investment in OpenAI. Do you think OpenAI’s changing its corporate structure to a for-profit would impact how antitrust enforcers approached it?
Sometimes corporate form matters. But for the most part, the law looks at market realities. So if it looks like a duck and quacks like a duck, it’s not a chicken.
Some advisers say companies are being hurt because aggressive antitrust enforcement has killed their ability to do deals. They’re melting ice cubes, but they don’t quite fit the failing-firm defense.
The failing-firm defense has very strict criteria for a reason. One of the most significant and important of them involves answering the question: Is this the least anticompetitive purchaser? And many deals fail that test. Just because it might be a slow-melting ice cube doesn’t mean you should sell to the largest competitor on the market.
What if the alternate buyer is a private equity firm, which was an issue during the regional bank crisis?
If it’s private equity, it’s relevant to the extent that they have portfolio companies in the industry. It’s certainly relevant whether they will continue to operate the assets and compete in a full-throated way.
We’re in an election year. Should media outlets be able to coordinate on suppressing misinformation? In the past, we saw some platforms like the Apple and Google app stores and Amazon’s web services drop Parler.
This is a thorny issue. We stand for the proposition that competition is good for our democracy and the free flow of information. There are no legal prohibitions, under the right instances, under the right circumstances, of efforts to improve safety. But it doesn’t need to come at the expense of competition.
IN CASE YOU MISSED IT
Apple won’t release its artificial intelligence tech in the European Union over regulatory worries. The company said it would not introduce Apple Intelligence and other features in the bloc this year, saying the bloc’s Digital Markets Act would weaken the security of its products. The European Commission said it welcomed Big Tech in Europe, provided that the companies comply with the rules.
The Washington Post’s new editor withdraws his application. Will Lewis, the embattled chief executive and publisher of The Post, told staff that Robert Winnett would no longer take up the role that he was expected to assume after the November election. Lewis and Winnett have come under scrutiny for their journalistic record in their native Britain, including accusations that they employed unethical practices to obtain stories.
Donald Trump closed the fund-raising gap with President Biden. Donors have filled the war chest of the presumptive Republican nominee since he was convicted of 34 felony counts in New York last month. Biden has had a huge lead for months and is still raising, getting a big donation from Michael Bloomberg as well as an endorsement from Melinda French Gates — the first time she has publicly backed a presidential candidate.
Taxes on tips, by the numbers
Donald Trump’s proposal to eliminate taxes on tips is meant to appeal to the country’s massive service sector work force, as he and President Biden pitch for working-class and younger voters in crucial swing states. But the plan would add up to $250 billion to the federal deficit over 10 years, according to a report that the nonpartisan Committee for a Responsible Federal Budget released this week. Here’s the story by the numbers.
22 percent: The portion of the work force employed in the hospitality industry in Nevada, the election battleground state where Trump first promoted the policy.
At least two: How many bills that would eliminate taxes on tips and have been introduced in Congress this month. While some Republicans have applauded the policy for reducing taxes, others have questioned why tipped workers but not low-wage workers, who don’t get tips, should be singled out for a tax break. Some have also criticized the potential cost of the policy.
$225 billion to $375 billion over 10 years: How much the policy could cost the federal government if employers and workers change their behavior so they can reclassify 50 percent more of their income as tips to avoid taxes, according to the Committee for a Responsible Federal Budget report.
$23 billion: About how much tip income went unreported to the Internal Revenue Service in 2006, according to an estimate by the agency cited in a 2018 report by the Treasury Inspector General for Tax Administration.
91 percent: Growth in tips reported to the I.R.S. between 2008 to 2018. One reason for the explosion of gratuity? Tablet payment systems that prompt customers to tip more often and at higher percentages.
40 percent: Portion of Americans who oppose suggestions from businesses about how much to tip, according to a 2023 Pew Research Center survey.
A hot office debate: Shorts at work
Nearly 100 million people spent part of this week under a heat advisory as sweltering temperatures shattered records from the Midwest to New England. In many offices, the hot start to summer reignited a perennial debate: Is it OK to wear shorts to work?
The case against has long been the conventional wisdom: “Shorts tend to have a sporty, youthful feel to them,” said Ellie-Jean Royden, the author of an upcoming book, “How to Dress Your Best.” For that reason alone, she suggested, they are a no-no.
But office fashion has evolved since the pandemic, which introduced many former suit wearers to the comfort of working from home in sweatpants, and some stylists are making the case that shorts are now acceptable.
Jessica Sockel, who dresses clients at the personal styling service Stitch Fix, said she had noticed “more flexibility when it comes to incorporating styles — like shorts — that may have previously been considered off limits for the office.”
All of the personal styling experts polled by DealBook agreed that if you’re going to brave shorts at the office, there are some rules:
Pick the right shorts. “Longer, loose shorts that mimic the look and feel of trousers will read as more professional,” said Shelby Goldfaden, the director of merchandising at the women’s clothing brand M.M.LaFleur. “Typically, they will have a pleat for volume and added interest.” Bermuda shorts, linen shorts and chino shorts are all good bets.
Dress them up. For women, Sockel suggests pairing shorts with a classic long-sleeve button-down, a blazer or a top that matches their color and fabric. For men, she recommends a crisp button-down, sport coat or knit polo. “A leather belt makes any bottom look sharper,” Goldfaden noted.
Read the room. “If you’re on the fence, the safest way to gauge whether or not shorts feel acceptable is to assess how your peers are dressed in the office,” Sockel said.
Is baring your knees worth it? Dawnn Karen, an assistant professor at the Fashion Institute of Technology and a self-described “fashion psychologist,” told DealBook that being the only person in the office wearing shorts could lead others to see you as less competent. But if you can still produce high-quality work, she said, “you actually can break people’s perceptions and stereotypes.”
And in that case, she added, “maybe everyone will start wearing shorts in the office.”
DealBook wants to hear from you: Are shorts acceptable office-wear? Let us know here.
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