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Monopolies Make Their Own Rules

Zephyr Teachout’s new book lays bare the private legal system that shores up their immense power—and hides it from public view.


When Mitchell and Karen Crutchfield got into chicken farming, they were told that it wasn’t for everyone; it would take about 10 years for their investment to pay off.* If they could wait that long, they might profit. So they borrowed money and built six massive chicken houses. They had little choice but to sign a contract with a major poultry processor in the area because, as is true in almost all of the United States, chicken processing for the region is monopolized by one of three companies, either Tyson, Perdue, or Pilgrim’s Pride. What they didn’t realize was, as Karen tells in the documentary Under Contract, “they’re not going to let you pay it off in 10 years.”

Break ’Em Up: Recovering Our Freedom From Big Ag, Big Tech, and Big Money
by Zephyr Teachout
All Points Books, 320 pp., $28.99

The contract the Crutchfields signed allowed the processor to do any number of things, including requiring upgrades, and near the end of their first 10 years, they were told three of their older chicken houses needed improvements. This meant they would have to take out another $250,000 to $300,000 loan, shoving them back in a debt cycle for at least another 10 years. At the time, they were 60 years old, likely more ready to retire than commit to more. When they told the processor they couldn’t make the upgrades, their contract was canceled, and—because they had lost their connection to their processor—they were forced into bankruptcy. In the documentary, their processor isn’t identified, but Tyson is the major chicken processor for Arkansas and that part of the country.

The contracts that chicken farmers sign with processors are crammed with other devastating stipulations. While the farmer has a fixed cost to raise the chickens, processors are allowed to pay the farmers a variable rate come time for harvest. Not only are farmers not guaranteed a price, but they can’t bargain. (The processors also own the feed and chick-raising companies, so they are the ones setting most of these fixed costs.) And the farmers are contractually barred from discussing their price with fellow farmers, further suppressing their bargaining power; they are also forbidden to talk about any other aspect of their farming. Not that it would matter, as the farmers have almost no say in how they raise their chickens. The processors determine everything: what type of feed the farmers buy, what type of chicks they get, the bedding they use, lighting and watering schedules, whether they keep their curtains up or down, and of course, the structure and design of the chicken houses. The processors can experiment on the farmers, by, say, introducing a new feed or new type of chick, which allows the processors to collect mountains of data about chicken farming (which they don’t share with the farmer). As one farmer told PBS, his only real job is to remove sickly or dead chickens from the barns. Hopelessness abounds in chicken farming, so much so that when distributors send out twice-monthly checks and price listings, they also include a pamphlet of mental health resources for suicidal farmers.

What’s strange is that people in the U.S. are eating more food than ever, especially chicken. In an alternate reality, this might mean that chicken farmers would be wealthier than ever. But of course, they’re not. Chicken is a $90 billion industry, but 70 percent of chicken farmers are making poverty wages. “In 1985,” writes Zephyr Teachout in Break ’Em Up, her new book about monopoly power, “farmers were paid 40 cents for every dollar we spent on food.” After 40 years of market concentration, today it is closer to 15 cents. But you don’t hear much about the plight of chicken farmers. That’s because, along with every other agency-ablating aspect of their contracts, the farmers sign arbitration agreements. This ensures any problem that the farmer has with the processor stays secret. For Teachout, chicken farming shows “a transformation of citizens into subjects of experimentation and arbitrary power.” Farmers are rendered politically impotent by a monopolized market and system of contracts.

The business model of chicken farming, where the processor controls the market (sometimes called “chickenization”), is notable because it has been replicated and spread widely across the business world: a Macarena for ruthless corporate types. For example, “one way to understand the Amazon marketplace,” Teachout says, “is as a big chicken processor, where all the sellers are chicken farmers. But the scope of Amazon’s chickenization regime is at another level of magnitude.” Amazon not only has its sellers sign arbitration agreements but its customers, too, who are barred from bringing class action lawsuits. And it profits on data collected from both.

Teachout’s thesis is provocative and simple: that monopolistic corporations operate a despotic parallel governmental system, or as she writes in her refreshingly brusque style, “monopoly is tyranny.” It is a system of coercive, private power that rivals, and often surpasses, the power of the state. (And they know it: “In a lot of ways, Facebook is more like a government than a traditional company,” Mark Zuckerberg once chirped to Ezra Klein.) You might think that a monopoly is strictly defined as one firm totally dominating a single market, but this isn’t true. Teachout observes that when Standard Oil (considered one of the biggest monopolies ever) was broken up in 1911, it controlled only 65 percent of the oil market. And antitrust action has been brought against firms controlling just over 5 percent of their market. A monopoly, Teachout proposes, is simply “any company that has so much power that it sets the terms of an interaction.”

Teachout looks at the problem of monopoly through the lens of law, instead of say, business or economics. She is a law professor at Fordham University, who specializes in, among other things, campaign finance reform. Her previous book, Corruption in America, was an examination of the history of corruption and also the impacts of Citizens United, the Supreme Court case that granted large corporate monopolies distinct political influence. Break ’Em Up goes beyond that to suggest that while monopoly perverts the political process, it more insidiously runs its own system of government. And all of this is kept under wraps and adjudicated by its own legal system: forced private arbitration.

As Teachout notes, for the last 800 years, open courts, public trials, and independent judges have been the basis of our relatively functional and just legal system. For the most part, anyone can watch the proceedings of a trial, the results become public information, and the judges are paid by the state. Arbitration is, of course, the opposite of this process. It is a private trial where the terms are set by a privately negotiated contract, results are secret, and someone privately pays the judge. When coupled with confidentiality agreements, as they often are, the proceedings are permanently secret. This is problematic for many reasons. One is that, researchers find, when an arbitrator (judge) works repeatedly for the same employer, the employer tends to win the arbitration.

Prior to the 1970s, arbitration didn’t have a long legal history and wasn’t often used except in the enforcement of labor union contracts. In 1974, the Supreme Court heard the case Alexander v. Gardner-Denver Co., in which Harrell Alexander, a black man, was suing his former employer Gardner-Denver, claiming he had been fired on the basis of race. The problem was that Alexander had already gone through union arbitration, and a lower court found that he could not claim his civil rights had been violated in federal court because of this. But the Supreme Court found that when it comes to civil rights, the fact-finding capacity of the federal courts is far superior and can’t be left to private, contractual agreements.

In 1979, a young lawyer named Jay Waks discovered Alexander and, as Teachout describes, saw an opportunity to make his name in corporate law, by overturning it. The restrictions on arbitration that Alexander set forth, if weakened, could transfer enormous power to businesses. He reframed the discussion over arbitration as one of lowering the cost of litigation. It was in line with other similar neoliberal legal arguments of the time that prioritized “efficiency” in business matters. In 1991, another case about arbitration was brought to the Supreme Court. It concerned a man, Robert Gilmer, who signed an arbitration agreement when he started working for an investment firm. He claimed that his firing constituted age discrimination and thus, as a civil rights matter, should be resolved in court. This time, the court saw things differently: It felt he knowingly entered into the contract, and thus rejected his argument. Antonin Scalia, writing for the majority, said that Alexander wasn’t applicable when dealing with private contracts.

The problem Teachout sees with this decision is that, “at the heart of the Scalia logic in the Gilmer case, and the entire series of cases involving arbitration agreements, is a fantasy of choice.” Scalia’s decision rested on the assumption that if someone signs a contract, that is, categorically, an act of freedom. (This is more or less a fiction: Anyone who has actually entered into a contract for say, cable internet or a job with Uber knows that there is no opportunity to negotiate most agreements.) The Gilmer decision green-lighted Waks and other corporate lawyers to expand the use of arbitration agreements, effectively stripping huge numbers of workers of their rights. When the case was decided, Teachout notes, only 2 percent of employment contracts had mandatory arbitration clauses. Today, over half of private sector, nonunion contracts have them, as well as two-thirds of all big companies. An entire private legal system now exists, completely controlled by large monopolistic corporations.

Arbitration agreements have only gotten more coercive and similar as corporations increasingly merge and monopolize markets. One example is the new “loser-pays” stipulations, in which the party that loses is forced to pay for the arbitrator and other attorney fees for the winner, even if the case is a serious civil rights violation or the loser is poor. This, of course, discourages employees and consumers from ever raising a complaint in the first place. Once one company thinks of a new, abusive clause, all the others jump on board. “Uber, Seamless, and other tech companies,” Teachout writes, “have been outdoing each other in writing the most draconian arbitration clauses.”

In the last 40 years, lax antitrust enforcement encouraged market concentration in almost every thinkable market, from credit cards to banking, candy, retail, cell phones, pharmaceuticals, book publishing, defense contracting, hospital providers, voting machines, office supplies, and more. The use of arbitration is directly related to the growing power of monopolies. If a monopoly business conspires against its customers or discriminates against its workers—in a way that might, say, encourage citizens and lawmakers to dismantle its monopoly power—the effect of arbitration is that we never hear of it. The silence allows the monopolies to continue, largely free from criticism and scrutiny.

For Teachout, the opacity that arbitration engenders partially explains why there is no mass political movement to break up major corporations, as there was, by contrast, 120 years ago, when local towns had antitrust leagues that pushed politicians to take action; why monopoly and corporate concentration, especially in the big tech firms like Facebook, Amazon, and Google, does not feature prominently in presidential debates; and why no politician has lost their job for their silence on the merger wave.

The other problem, she thinks, is that along with the merger wave, the political left has over-embraced ethical consumerism, to the exclusion of almost all other political action. Ethical consumerism argues that the choices we make as consumers, like a decision to buy from Amazon or not, are important political actions. It’s the logic behind the phrase “Vote with your feet,” which suggests that democracy is enacted when you choose what to buy. While Teachout recognizes the power of a “well-organized boycott,” she finds the extent to which the left has relied on such tactics “frankly dangerous.” In her view, it expresses an “anti-political” philosophy, one that assumes the best (and possibly only) agent for change is the consumer. “Guilt gets in the way of protest, and complicated chains of self-justification take the place of simple chains of democratic demands,” she says.

Heavily monopolized markets also make a joke of consumer choice, because they leave you with very few choices to begin with. If you want to use a bank, you don’t choose from 20 or 30 local institutions, you choose from three or four national chains that all use similar contracts. Ethical consumerism is particularly useless “for disciplining companies that play a quasi-governmental role.” When a private company like Amazon runs a critical logistical network, it can use this power to unilaterally set the terms of the interaction, making the consumers’ choices significantly less meaningful. The magnitude of its power means its ability to discipline us far outpaces our ability to discipline it by withholding purchases. This has never been clearer than during the pandemic, when the options for affordable shopping are Amazon, Walmart, and Target. For families struggling to make ends meet, with almost no other choices, ethical consumerism fails to provide any answers.

Why should we boycott the services we get from Amazon, when we could simply demand that Amazon be broken up into, say, 60 or more different companies? In Teachout’s treatment, reviving antitrust activism feels not only possible but potentially effective. But it also brings into sharp relief how strange it was that a certain segment of the professional commentariat was crowing about the possible authoritarian tendencies of the Trump administration when monopolistic corporations had been sadistically infringing on our liberties by driving down wages, spying on us, and publicly ignoring the rule of law for decades under the watch of both political parties. Other theorists besides Teachout have made this argument—it was the subject of Elizabeth Anderson’s Private Government
in 2017—but unfortunately, the idea has not been taken up widely.

What’s the best way out of a decades-long process of concentration? Should we nationalize companies that have become so large they function more like public utilities? Or should we break them up, so that lots of smaller companies can compete in the same space? Teachout argues that we need to do both. A mix of approaches would work best, for example, in the health care system. It would be best, she proposes, to nationalize health insurance, so that a handful of gigantic insurers are no longer the ones deciding who is and is not covered; in their place, we could instead create a single-payer system. But if we don’t decentralize the ownership of pharmaceutical companies, we will be stuck buying from companies that can raise the price of the Epipen by another 400 percent whenever they feel like it.

Teachout already sees increased attention being paid to antitrust by its main enforcer, the Department of Justice, especially when it comes to tech companies. But to really give teeth to the antitrust law, that portion of the department needs to be better funded and do away with the “consumer welfare” standard that, since the 1980s, has limited monopoly busting only to instances in which consumers are being overcharged. We need to turn our focus back to the welfare of workers, suppliers, the environment, and potentially even the state of our democracy. And looking beyond the DOJ, we need to overturn Citizens United and start a mass movement that demands antitrust action across the board. A movement that elects and pushes lawmakers to create and enforce policies that, among other things, give labor unions, small businesses, and consumers the bargaining power and ability to demand the world they want.

Recent events have demonstrated the dangers of the monopoly power of chicken processors like Tyson. Scores of employees at their plants came down with Covid-19 after working in close proximity with little protection. Their jobs were already dangerous, with one worker losing a finger or limb each month, on average. Oxfam found that bathroom breaks were so short that workers either wore diapers or dangerously restricted their intake of fluids. The processing plants were initially deemed nonessential and forced to close during the pandemic, which threatened to eat into Tyson’s profits. Tyson flexed its monopoly power and placed a full-page ad in The New York Times, after which Trump issued an order to reopen it for business, putting scores of workers back at risk.

“We need a ‘fuck-off’ economy,” Teachout says, “an economy where everyone always knows that they can say ‘fuck off’ to their boss, and still survive.” For the Crutchfields, this would mean they wouldn’t have to choose between crushing debt and bankruptcy. For workers in general, this decentralized economy would provide freedom by increasing their power to tell bosses that their arbitration clauses are ridiculous. For consumers, it would mean being able to say no to companies that want to mine every ounce of your soul for data. The book even makes you think we need not settle for just a fuck-off economy: We could have a whole fuck-off world.

* A previous version of this article misspelled the Crutchfields’s surname.