Corporate concentration threatens the rise of small businesses in the United States

The United States is experiencing a generational boom in small business creation. The White House Announced In January, during the first three years of the Biden administration, Americans filed 16 million new business applications. The three highest years on record for new business application rates came under President Biden.

The strong fiscal stimulus and strong labor market that followed the pandemic sparked a resurgence in entrepreneurship, reversing a decades-long decline. As the ranking Democrat on the House Small Business Committee for more than two decades, this is particularly exciting. We know the many benefits this generates.

Communities with more small and locally owned businesses have higher revenue growth and lower poverty ratesand local companies return more of your income to the local economy (58 percent) than national chains (33 percent). Not only are there positive economic returns, but individuals benefit from the freedom to create their own income and generate their own wealth.

But while our strong fiscal response to the pandemic may have given people the means to take the leap into entrepreneurship, we must now take steps to sustain this boom and ensure these startups can thrive for years to come.

In December, my committee published a report detailing the impact of an economy increasingly concentrated on small business owners. The findings confirm what many Americans already intuitively understand: A handful of corporations have come to dominate many aspects of American life, from the food we eat and the places we shop to the people who treat us when we are sick.

Dominant companies, in turn, have used their market power to crush smaller companies and discourage new entrants. As a result, our economy has grown more consolidatedour supply chains less resistant and our communities are more dependent on large corporations that often serve to extract more than they contribute to local economies.

The rise of small businesses can potentially reshape our economic reality and create more equitable growth in the future. But to achieve this, we must recognize the structural barriers to growth that small businesses face in a consolidated economy and continue to take steps to address them. While 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 businesses at risk.

Take, for example, retail, where entrepreneurship saw its biggest increase in the last three years. Many small startups rely on access to Amazon’s platform as an online marketplace, where they are forced to use Amazon’s fulfillment services to better access customers. Amazon then has the power to take advantage of these small businesses, often taking up to 50 cents of every dollar in sales made by small businesses selling on their platform.

But big tech is just the tip of the iceberg. A study of our economy reveals monopolistic power in almost every sector. Over the past three years, the largest companies in those industries have used their pricing power to pad profit margins As costs rose, they kept prices high even as costs fell.

This dynamic is prominent in our food system, which was once largely populated by small operators working in open, competitive markets. Now farmers are under pressure from all sides, as inputs such as seeds, fertilizers, pesticides and machinery are all controlled by a handful of companies what did you see record profits in 2021 and 2022. Once the crop is harvested, it is sold to one of a few processing middlemen, who often dictate the prices offered to farmers and ranchers.

On its way to the consumer, the food makes a brief stop at a supermarket, an industry largely controlled by companies like Walmart, Kroger and Albertsons; the latter two are now trying to merge to compete with the former. As a result, farmers receive Consumers pay fewer and fewer cents, while independent grocers cannot compete with the bargaining power of large supermarket chains.

These are just some examples. You can study almost any industry and find that corporate concentration is making it difficult for small businesses to do business. This widespread consolidation puts new entrants to the small business boom at risk. The actions of the Federal Trade Commission and the Department of Justice in recent years have been laudable and have directly benefited both consumers and small businesses, but there is still work to be done.

In addition to blocking mergers that could hurt smaller companies, the Federal Trade Commission should work to revive 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 banned this practice with the Robinson-Patman Lawand the Federal Trade Commission should take steps to reinvigorate enforcement to protect small retailers from the purchasing power of big chains.

Congress can and should advance these goals more broadly, recognizing the important role of tax policy in working to create and protect these businesses through progressive taxes and industrial policies undertaken during the first two years of the Biden administration.

The rise of small businesses has presented us with a once-in-a-generation opportunity to reorient our economy around local businesses and community development. To achieve this, the federal government must fully use public power to ensure that small businesses can compete against their large corporate peers.

Nydia M. Velázquez represents New York’s 7th congressional district in the United States House of Representatives.