🔎 Market Mysteries

Regulators have launched an assault on the biggest tech firms, aiming to break up their dominance over our internet browsing and online advertising. The time may be better spent looking at the mega-corporations that quietly control most of our daily necessities and have been raising prices for years with limited competition. A handful of brands dominate the shelves of every pharmacy and supermarket, concentrating power and leaving consumers with less choice, lower quality, and higher costs.

Regulators have ramped up the fight against excessive concentrations of corporate power this past year, with a particular focus on America's biggest tech companies. They tried and failed to block Microsoft's acquisition of videogame maker Activision Blizzard. They're going after Meta for its deals that combined Instagram and WhatsApp into the Facebook empire. Amazon is under fire for its marketplace policies that potentially increase prices and make e-commerce more difficult and costly for small businesses.

The most significant antitrust case of the millennium is underway for Google. The Justice Department and several states are trying to rein in Google's control over internet search, browsing, and digital advertising. It's a battle that challenges Google's dominance and could have a far-reaching impact on the future of the internet.

Federal antitrust laws are designed to increase economic competition by limiting the market power of any company or small group of companies (aka a trust). The Federal Trade Commission, and sometimes the Justice Department, are tasked with monitoring pricing practices and collusion between significant corporations to break up monopolies and other anti-competitive power structures. Regulators review all corporate mergers and acquisitions to ensure newly-formed companies won't limit competition in a way that harms consumers with less choice or higher prices.

The biggest tech companies are so massive they make other mega corporations look small. The S&P 500 index represents the biggest 500 public companies in the US. Within that index, Microsoft, Apple, Amazon, Nvidia, Alphabet, and Meta comprise 27% of the market value. The other 494 companies make up the other 73%. These six companies decide the fate of the stock market. Their shares drive the market.

Antitrust law is supposed to be about protecting the consumer by making sure market concentration doesn't limit our choice of products and services that lack innovation, quality, or affordability. Companies aren't allowed to eliminate competition and then hike up the price of a stagnant product.

Fighting Big Tech does not seem like the most pressing battle for consumer protection. Shoppers flock to Amazon's site because of its innovation, quality, and affordability despite its concerning seller and employer policies. As much as I'd like to believe the government cares deeply about the quality of our internet browsing experience, the battles against Google and Meta don't seem to address the most pressing challenges for everyday consumers. The services are free. While one could attempt to quantify the negative social or privacy costs of our free usage, no dollars are coming out of consumers' wallets. As for innovation, Amazon, Google, Apple, Meta, and Microsoft accounted for a quarter of America's overall research and development investments last year. They've also been critical backers of sustainability and clean energy technologies. Their product quality and innovation are not pressing problems.

Let's look at companies that affect our everyday spending. The biggest issue facing our economy is the growing gap between income and the rising cost of living. Most Americans are living paycheck to paycheck. The companies producing daily essentials keep raising their prices despite consumer pushback. When does it become clear that those companies have too much power?

This past corporate reporting season has been a shocking reminder of the pricing power of consumer brand companies. Thousands of brands aggregated under a handful of corporate entities give shoppers the illusion of choice and competition. Procter & Gamble has built an empire by owning hundreds of daily necessities, from razors to soap, and relentlessly raising prices. Price hikes have been a significant component of sales growth for 52 straight quarters over 13 years. Executives speak with pride about the breadth of their brand portfolio, from premium to budget, that can accommodate any changes in consumer spending habits. Consumers looking for cheaper alternatives often must select from the same company's other brands.

The only acknowledged competition are private-label store brands - those designed to marginally undercut all other options in quality and price. People are increasingly turning to those last resorts after relentless price increases on everything else.

Consumer brand conglomerates raising prices is not news; however, the mass consolidation of power has given these companies the confidence to raise prices without regard for consumer pushback. Most companies raise prices, sell less stuff, and make less money, so they stop raising prices to avoid losing their customers. Nearly every quarter for the past two years, the biggest packaged food, beverage, and personal care companies have raised their prices, sold less, made more money, and kept raising prices until consumers ran out of room to cut back.

Companies are not required to report on their sales volumes or their pricing. Still, the information they choose to share demonstrates a consistent pattern of immense pricing power that does not benefit the consumer. In a review of every financial report from PepsiCo, Procter & Gamble, Clorox, Kraft Heinz, General Mills, and Kimberly Clark over the past two years, we found that these consumer brand giants raised their prices virtually every quarter despite consistently declining sales volumes. Their pricing power is so strong that they achieved an average 7% revenue growth through 20% price increases despite selling 13% fewer products over the past two years. These companies own hundreds of brands across nearly every personal daily necessity, from toilet paper and diapers to toothpaste, tampons, or lunch meats. They have so much control over these categorically basic products that they can raise prices for years without making less money. Should any companies really have that much pricing power over essential products like soap or cereal?

It's hard to argue these higher prices are functions of higher value, quality, or cost. Their profit margins have increased by an average of 7% in the past year. Procter & Gamble credits their product innovation for building consumer brand "loyalty," but the latest innovation in their Charmin toilet paper - the perforation - is the first in a century. Adding more blades to a Gillette razor can only go so far. It's been decades since PepsiCo's Frito Lay introduced Flamin' Hot Cheetos, and Quaker Oats doesn't seem to be shaking up the world anytime soon. Big Tech is giving us unlimited information, entertainment, and communication for free.

These companies pull it off because it's too hard to track the ownership of various brands, and the information isn't easily accessible. If Google decided to give each of its services a unique brand name, maybe it could fly under the radar as well.

Even though information about corporate financial decisions is technically available to the public, it's often buried in complex legal filings and press releases. We tried to find resources who had already done this analysis but ended up spending hours sifting through nearly 100 different financial reports ourselves. The thing is, reporting styles vary across companies, so they each talk about unregulated concepts like pricing and volume using slightly different terms. Even the best AI tools couldn't quite decipher the language well enough to help us identify the crucial data points.

Embedded in that is an admission that General Mills raised prices by 17% and sold 12% less food in one year. That was a year ago, and the consumer pushback didn't change anything. General Mills then spent the next twelve months increasing prices by another 7%, but volume declines slowed to 2% as consumers ran out of ways to cut back. Meanwhile, General Mills' overall revenue grew 11%, selling less and less stuff at higher and higher prices. For reference, policymakers consider anything above 1-2% annual price inflation alarming.

The media channels reviewing corporate financials only report to investors. Corporate decisions are evaluated exclusively through the perspective of profit maximization for the short-term benefit of the shareholder. More media outlets need to assess companies' actions through a lens wider than whether the information might make its stock price go up or down.

At Share Scoops, we aim to make this information more accessible. It's time we, as consumers, start challenging this market status quo and raise awareness about the true cost of our buying decisions. Call on your elected officials to take a closer look at corporate concentrations of power. We must demand greater transparency and accountability from corporations, championing not just our interests but those of future generations and the planet.

Keep fighting,

The Scoop Team