From hearing aids to lost luggage: How Biden’s new executive order could save you money

As the US economy springs back to life in the wake of the worst of the Covid-19 pandemic, Joe Biden is signing an executive order aimed at promoting one crucial aspect of a free market economy — competition.

The White House says that the new measures aim to “lower prices for families, increase wages for workers, and promote innovation and even faster economic growth”.

Many economists agree that a lack of competition is hurting the US economy as fewer, larger companies can better dictate terms to consumers who have few or no other options. It also stifles new business formation and innovation.

Lawmakers on both sides of the aisle are concerned about the power of big business. The Biden plan is sweeping but targeted at specific sectors, aiming to bring about rapid change in parts of the economy most consolidated into a small number of large companies.

Specifically, the executive order goes for quick wins by attempting to boost competition for many everyday items and services bought by Americans. It also wants to make it easier for employees to change jobs.

Here are some of the highlights from the order which includes 72 initiatives involving more than a dozen federal agencies.

Jobs

First off, the order bans or limits non-compete agreements allowing Americans more freedom to switch jobs. This could also help raise wages by encouraging employers to retain talented workers.

Since the turn of the century economic mobility of Americans has declined as fewer people change jobs and move, which also has a detrimental effect on the creation of new businesses.

 

The government also intends to strengthen antitrust guidance to prevent employers from collaborating to keep wages low or reduce benefits by sharing information with each other.

Health

In healthcare, the administration wants to lower prescription drug prices by supporting state and tribal programmes that allow for cheaper medication to be imported from Canada.

The Department of Health and Human Services (HHS) will increase support for generic drugs and come up with a plan to stop price gouging in the next 45 days. The mechanism whereby brand-name drug companies pay generic manufacturers to stay out of the market may also be banned.

Americans currently pay approximately two and half times as much for prescription drugs as other countries.

Consumers could also save thousands of dollars through an initiative to allow hearing aids to be sold over the counter at drug stores, rather than just by prescription — thought to be an unnecessary barrier to access. This builds on a 2017 law that had little to no impact as it was not implemented by the Food & Drug Administration.

Shockingly, the White House says that only 14 per cent of the 48 million Americans with hearing loss use hearing aids as they cost on average $5,000 and are often not covered by health insurance. As much as 84 per cent of the market is controlled by just four manufacturers.

Rules regarding mergers of hospital systems will be reviewed to include the impact on patient access and pricing. HHS will also better enforce existing hospital price transparency rules and implement bipartisan federal legislation to tackle surprise hospital billing.

Plan options in the national health insurance marketplace will also be standardised to make it easier to comparison shop.

Air travel

The Biden administration is directing airlines to make it easier for people to get refunds and to comparison shop for flights by requiring clear upfront disclosure of all add-on fees.

With the four major airlines controlling two-thirds of air travel, they often raise prices for “extras” such as baggage check and cancellation fees in unison. These are often hidden from the consumer.

It will also be simpler for travellers to get a refund if the plane’s WiFi or inflight entertainment is unavailable, or if bags are delayed or do not show up.

Banking

Since the turn of the century, the US has lost 70 per cent of the banks it once had, and a merger between two institutions has not been denied in 15 years. This has led to higher costs for customers.

In addition to reviewing rules for mergers, the order aims to make it easiest for consumers to switch banks at a greatly reduced cost by being allowed to take all of their financial transaction data with them to a competitor institution.

Internet access

For access to the internet, competitiveness in some parts of the country is limited to just two providers meaning that prices can be five times higher than areas with more options, the White House says.

Through one initiative, Americans will be able to save money on their internet bills, as early termination fees will be limited — a major deterrent to stop consumers from switching providers — potentially boosting competition on pricing between providers.

Companies will also have to provide clear plan costs to make comparison shopping easier as currently, actual prices can be as much as 40 per cent higher than advertised once additional fees are included.

Landlords will also no longer be able to enter into an exclusivity arrangement with a provider leaving tenants with no choice as to who supplies their internet.

The president is also encouraging the Federal Communications Commission to restore net neutrality that was terminated under the Trump administration.

Tech

Less of a day-to-day consumer impact here, but certainly an area of life we use daily — the administration wants to address the rules regarding how big tech firms are able to buy up nascent competitors, undertake serial mergers, and drive competition out with “free” products.

These acquisitions also lead to a huge accumulation of user data and so the Federal Trade Commission (FTC) is being encouraged to establish with appropriate regulations.

The FTC will also be asked to stop cell phone manufacturers and other equipment makers from blocking out independent repair shops or DIY repairs on the equipment that you own.

Food and farming

The industry is currently accused of being structured to the detriment of both the consumer and the farmer, with those in the middle reaping greater profits.

Family farmers, who often struggle in the face of industrialised and foreign competitors, will get a boost through greater powers by the Department of Agriculture to stop abusive practices by big conglomerates who provide agri-inputs such as seeds and fertilisers, and then process meat and crops.

Equipment manufacturers will also be stopped from limiting who can repair their products, which could prove especially useful for farm machinery.

What else?

There are separate initiatives planned for shipping and rail to increase competition and reduce costs in those sectors, which should also have a knock-on effect for prices to end-consumers of products.

Federal agencies will also be directed to promote greater competition and increase opportunities for small businesses through their procurement and spending decisions.

In addition to government departments, many of the executive order aims fall under the remit of independent government agencies such as the FTC, FCC, and others, and so the president can only encourage them to pursue these goals.

However, with Biden appointees leading those agencies, these goals will likely take priority. For example, in June, Lina Khan, President Biden’s nominee to lead the FTC, was confirmed by a bipartisan 69-28 vote in the Senate. She is known as a staunch antitrust advocate likely to pursue a hard line on regulation in many areas, including tech.

The order also establishes a White House Competition Council, led by Brian Deese, the director of the National Economic Council, which will monitor progress on finalising and implementing the initiatives.