Corporate concentration threatens America's small business boom

The United States has experienced a generational small business startup boom. The White House announced in January that Americans filed 16 million new business applications during the first three years of the Biden administration. The top three years with record high new business application rates all occurred under President Biden.

Strong post-pandemic fiscal stimulus and a strong labor market have spurred a resurgence in entrepreneurship, reversing decades of stagnation. As the top Democrat on the House Small Business Committee for more than 20 years, this is especially gratifying. We know that this brings many benefits.

Communities with more small, locally-owned businesses have higher income growth, lower poverty rates, and local businesses return more revenue to the local economy (58%) than national chains (33%) . Not only are there positive financial benefits, individuals benefit from the freedom to generate their own income and create their own wealth.

But while our strong fiscal response to the pandemic may have given individuals the means to jump into entrepreneurship, we now need to sustain this boom and ensure that these new businesses continue to grow for years to come. We must take steps to enable them to thrive across the world.

In December, my committee released a report detailing the impact of economic concentration on small business owners. The findings confirm what many Americans already intuitively understand. A small number of corporations have come to control many aspects of American life, from the food we eat to the places we shop and the people who treat us when we are sick.

Meanwhile, powerful companies are using their market power to crush small and medium-sized businesses and prevent new entrants. As a result, our economies have become more integrated, our supply chains have become less resilient, and our communities have become more dependent on large corporations that often play a role in profiting more than contributing to local economies. I am.

The small business boom could reshape our economic reality and lead to more equitable growth in the future. But to achieve this, we must continue to recognize the structural barriers to growth that small businesses face in integrated economies and take steps to address them. Although the Federal Trade Commission and the Department of Justice have made considerable progress in shifting the paradigm of antitrust enforcement, economic concentration continues to increase, putting new business at risk.

Take, for example, retail, which has seen the highest rise in entrepreneurship over the past three years. Many emerging small and medium-sized businesses rely on access to the Amazon platform as an online marketplace and are forced to use Amazon's logistics services to improve access to customers. Amazon has the power to take advantage of these small businesses, often taking up to 50 cents from every dollar sold by small businesses selling on its platform.

But Big Tech is just the tip of the iceberg. An examination of our economy reveals the presence of monopoly power in almost every sector. Over the past three years, the largest companies in these industries have used their pricing power to inflate profit margins as costs rise and maintain high prices even as costs fall.

This dynamic is evident in our nation's food system, which was once dominated by small businesses working in open and competitive markets. Now, inputs such as seeds, fertilizers, pesticides, and machinery are all controlled by a small number of companies that made record profits in 2021 and 2022, putting farmers under pressure on all fronts. Once the crops are harvested, they are sold to some company. There are few processing intermediaries, and they often determine the prices offered to farmers and ranchers.

On the way to consumers, food stops at supermarkets. Supermarkets are an industry largely dominated by companies such as Walmart, Kroger, and Albertsons. The latter he two are currently trying to merge to compete with the former. As a result, farmers receive less and less for every dollar spent by consumers, while independent grocers are unable to match the bargaining power of large supermarket chains.

These are just some examples. If you look at almost any industry, you'll find that corporate concentration makes it difficult for small businesses to do business. This widespread consolidation puts at risk new entrants from the small business boom. While the actions of the Federal Trade Commission and the Department of Justice over the past several years are commendable and have directly benefited both consumers and small businesses, there is more work to be done.

In addition to blocking mergers that could harm small businesses, the Federal Trade Commission should seek to restore existing authorities to ensure a level playing field. For example, many large stores use their power as buyers to demand lower prices from suppliers than their smaller competitors, giving them an unfair advantage. Congress long ago prohibited this practice with the Robinson-Patman Act, and the Federal Trade Commission should move to reinvigorate enforcement to protect small retailers from the buying power of big chains.

Congress recognizes the important role of fiscal policy in efforts to create and protect these businesses through progressive taxation and the industrial policies implemented during the first two years of the Biden Administration, and to advance these goals more broadly. can and should be done.

The small business boom presents us with a once-in-a-generation opportunity to redirect our economy around local businesses and community development. To accomplish that, the federal government must use its public powers to the fullest to help small businesses compete with their larger peers.

Nydia M. Velasquez represents New York's 7th District in the U.S. House of Representatives.