Merger Scrutiny, Open Banking Included in Biden's Executive Order

President Joe Biden signed an executive order on July 9 targeting what he labeled anticompetitive practices in banking and other parts of the economy, declaring it would fortify an American ideal “that true capitalism depends on fair and open competition.”

The sweeping order includes 72 actions and recommendations that Biden said would lower prices for families, increase wages for workers and promote innovation and faster economic growth. However, new regulations that agencies may write to translate his policy into rules could trigger major legal battles.

The order includes calls for banning or limiting noncompete agreements to help boost wages, providing greater scrutiny of bank mergers and making it easier for consumers to switch banks.

At a White House signing ceremony, Biden said of some in big business: “Rather than competing for consumers they are consuming their competitors; rather than competing for workers they are finding ways to gain the upper hand on labor.”

“Let me be clear: Capitalism without competition isn’t capitalism. It’s exploitation,” he said.

Blueprint for Biden’s Agenda

The White House said Biden’s order follows in the tradition of past presidents who took action to slow corporate power. Theodore Roosevelt’s administration broke up powerful trusts that had a grip on huge swaths of the economy, including Standard Oil and J.P. Morgan’s railroads. Franklin D. Roosevelt’s administration stepped up antitrust enforcement in the 1930s.

But experts noted that Biden’s sprawling presidential initiative is hardly a mandate on competition.

“This is really more of a blueprint or agenda than a traditional executive order,” said Daniel Crane, a law professor at the University of Michigan who focuses on antitrust. “This is a very broad and ambitious policy agenda for the Biden administration that offers lots of insights on the administration’s direction and priorities, but there could be many a slip between the cup and the lip.”

Biden’s order includes a flurry of consumer-pointed initiatives that could potentially lead to new federal regulations, but it also includes plenty of aspirational language that simply encourages agencies to take action meant to bolster worker and consumer protections.

Business and trade groups quickly expressed opposition, arguing that the order would stifle economic growth just as the U.S. economy is recovering from the coronavirus pandemic.

“Some of the actions announced today are solutions in search of a problem,” said Jay Timmons, president and CEO of the National Association of Manufacturers. “They threaten to undo our progress by undermining free markets and are premised on the false notion that our workers are not positioned for success.”

Banks, Tech, Noncompetes Named

The order seeks to address noncompete clauses – an issue affecting some 36 million to 60 million Americans, according to the White House – by encouraging the Federal Trade Commission to ban or limit such agreements, ban unnecessary occupational licensing restrictions and strengthen antitrust guidance to prevent employers from collaborating to suppress wages or reduce benefits by sharing wage and benefit information with one another.

Noncompete agreements often stop workers in a variety of industries from going to other employers for higher pay. Biden noted that in some states even fast food franchises include such clauses for low-wage workers.

“Come on, are there trade secrets about what’s inside the patty?” Biden said.

The order also takes aim at tech giants Facebook, Google, Apple and Amazon by calling for greater scrutiny of mergers, “especially by dominant internet platforms, with particular attention to the acquisition of nascent competitors, serial mergers, the accumulation of data, competition by ‘free’ products, and the effect on user privacy.”

The order also notes that over the past two decades the U.S. has lost 70 percent of the banks it once had, with around 10,000 bank closures. Communities of color and rural areas have been disproportionately affected.

To begin addressing the trend, the order encourages the Justice Department as well as the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency to update guidelines to provide greater scrutiny of mergers. It also encourages the Consumer Financial Protection Bureau to issue rules allowing customers to download their banking data and take it with them when they switch.

ABA Disputes Merger Criticisms

In a statement responding to the executive order, American Bankers Association President and CEO Rob Nichols refuted the notion that competition was an issue in the banking industry.

“The U.S. has the deepest and most diverse banking system in the world, with nearly 5,000 banks of all sizes, charters and business models who compete for business every day,” Nichols said. “The depth and resiliency of today’s banking industry was on full display during the pandemic, as banks of all sizes provided unprecedented support to their customers, communities, and the broader economy, while also meeting their rigorous regulatory obligations.”

The ABA does want to see merger guidelines updated to consider credit unions and financial technology firms, which Nichols said represent “a growing share of the financial services marketplace, yet don’t have to meet bank requirements for compliance and community investment, and in some cases don’t even have to pay federal taxes.”

He added that the administration should review the barriers to the creation of de novo banks, adding that the ABA “would welcome the opportunity to work together on commonsense policies to increase the number of banks in the country and further expand access to financial services.”

Nichols also addressed the call to allow consumers to download and share data when switching banks, a process known as open banking. He said the ABA supports letting customers access and share their financial data in a secure and transparent manner.

“We have been working with the CFPB since 2017 on how to ensure consumers remain protected when they share their financial data outside of the secure banking ecosystem,” Nichols said. “The Bureau’s early decision to establish guiding principles has allowed banks and technology companies to collaborate on tools that are already facilitating access to financial data in a way that protects and empowers consumers.”

Banker & Tradesman staff writer Diane McLaughlin contributed to this report.

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