John Oliver on corporate consolidation

Corporate consolidation affects practically everything in your life. The latest Last Week Tonight shows you how this all happened.

If you’re at all like me, then a phrase like “corporate consolidation” brings you back to a high school economics class where you are desperately trying to stay awake despite the nigh-gravitational force of boredom.

Yet, we are all adults here (more or less). Perhaps, like me, you need to get over your childhood fear and delve into this concept. After all, corporate consolidation controls some of the most vital things in your life.

This is all a little strange when you consider that politicians of any stripe go absolutely gaga for small businesses. In fact, it sometimes gets a little strange. At least, it felt that way when Oliver played a series of clips in which politicians repeated the phrase, “small businesses are the backbone of our economy.”

Despite the adherence to a single line, it’s hard to argue against small businesses. Indeed, it’s one of the rare things politicians tend to agree on, besides support for military members and, according to Oliver, a widespread distaste for Texas Senator Ted Cruz.

Here’s the clip, and be warned for some NSFW language and metaphors:

Still, mergers are everywhere. “All this merger activity has made some sectors of our economy ridiculously consolidated,” argued Oliver. For example, as Oliver pointed out, look at the airline industry. Four airlines — United, Delta, Southwest, and American Airlines — make up roughly 80% of your flight choices.

It gets sneakier when you realize that seemingly small brands are controlled by positively humongous companies, as Oliver continued. Burt’s Bees, for example, is owned by Clorox. Tom’s of Maine, that favorite of the “natural” lifestyle, is in fact controlled by Colgate-Palmolive. The prevalence of the mergers and acquisitions is enough to make even Mad Money‘s intense host, Jim Cramer, pause for a second.

How did this all happen?

Oliver didn’t argue that mergers are inherently bad, however. There is, at heart, a “balance” between a need for companies to merge when it’s efficient, and using antitrust laws to keep them from totally dominating a market. The problem really began in the late 1970s, when officials began to slack on their enforcement of those antitrust laws.

This has resulted in an oligopoly, where just a few companies dominate a market, rather than a monopoly of one. However, even when this situation avoids the appearance of a monopoly, it sure feels like one.

Look at the airline industry, for example. Scott Kirby, now president of United, was quoted in a ProPublica report saying outright that consolidation has allowed airlines to do previously difficult things with ease. For instance, those four major airlines are now free to bump up “ancillary revenues” –- those extra fees that drive up the price of your ticket, such as charging for checked baggage.

It’s not the only way airlines have taken advantage of those sweet, sweet ancillary revenues. In late 2016, United announced that it would begin charging for the use of overhead bins for its lowest-cost fares. American Airlines quickly followed suit.

Consolidation also allowed airlines to steadily raise these fees for what has become a hefty payoff. In 2007, those baggage fees generated $543 million in revenue, per Oliver’s chart. Last year, baggage fees allowed the airlines to rake in $4.2 billion.

Plus, consolidation means that companies don’t have to care. Yes, United got bad PR for dragging Dr. David Dao off an April 2017 flight. Images of the bloody Dr. Dao enraged people and engendered calls for boycotts.

Yet Dr. Dao has quietly settled with United, while the airline itself is still doing just fine. After all, it’s hard to boycott an airline when it’s the only option available to you. That’s the glory – or shame – of consolidation.

Fighting back is tough

Presenting a new option to these mega companies is more difficult than you might think. “When an industry gets too consolidated,” said Oliver, “any company trying to compete with them or survive in their supply chain can get crushed.”

Okay, everyone loves to complain about airlines. But consolidation affects far more than that. Luxottica, an Italian company, makes pretty much all of your glasses frames and conveniently runs many of the places where you can buy them.

When Oakley, the well-known sunglasses manufacturer, pushed back against the much larger Luxottica, it faced dire consequences. As a result of the tensions, Luxottica refused to sell Oakley frames in their stores. Oakley’s stocks subsequently plummeted.

The company survived, only in order to become a subsidiary of Luxottica. “They understood life was better together,” said Luxottica’s CEO. Oliver claimed that this could also have been said by a Bond villain stroking a cat.

By the way, what happens to the actual products when companies consolidate? Heavily consolidated industries “can lose the incentive to innovate,” said Oliver. Need an example? If you happen to have cable, the innocuous little cable box sitting in your home is a prime example.

Cable boxes are notoriously glitchy energy hogs. But cable companies don’t really care -– there’s no competition and, since you’re renting it from the company, you can’t even destroy it in a moment of frustration. At least John Oliver and the crew at Last Week Tonight provided you with a video of a cable box exploding in luxuriant slow motion.

“I want you to know,” said Oliver. “That box suffered.”

Other oligopolies

In case this isn’t enough, consider that oligopolies affect some major avenues in your life. Think about your options for banking or healthcare, for instance. It doesn’t end there, however: even the casket industry is controlled by a paltry three companies.

Losing hope? Take heart and remember that there are still laws that combat consolidation. Now, says Oliver, is the time for our representatives to start putting those laws into action.

Next: John Oliver discusses Joe Arpaio, racism, and presidential pardons

Still feeling down? After all, it’s understandable. The prospect of asking your representative to act in your interest, as Oliver suggests, can be daunting. If you need a moment of levity, stay on for a segment entitled, “All of Jim Cramer’s sound buttons, replaced with fart noises”.

Hey, no one said it was going to be high-brow entertainment at HBO all the time. And, of all the weird and sometimes terrible things going on in the world, an extended fart joke is more fun than harm.