- The rate of new business creation in the US has been declining since the 1970s.
- Corporate consolidation, through mergers and acquisitions, has led to sectors of the economy becoming highly consolidated.
- Examples include the airline industry, rental car business, beer industry, and online search engines.
- Mergers can lead to layoffs and lack of competition, resulting in higher fees and poor customer service.
- United Airlines is an example of a company that doesn't need to care about customer opinion due to lack of competition.
- Consolidation can also harm companies trying to compete or survive in the supply chain.

- The video discusses the negative impacts of industry consolidation on competition and innovation.
- It uses the example of Luxottica, an Italian company that owns multiple eyewear brands and retail stores, to illustrate how smaller competitors can be crushed.
- Oakley, a competitor of Luxottica, experienced a decline in stock price after a dispute over pricing.
- The video also highlights how heavily consolidated industries, like cable companies, lack incentive to improve products, such as cable boxes.
- The importance of antitrust laws and stricter standards to prevent negative effects of consolidation is emphasized.
- The video mentions that industries like banking, health insurance, and the casket industry are also dominated by a few companies.
- The need for politicians to support small businesses and promote competition is emphasized.

Big businesses are getting even bigger thanks to a rise in corporate mergers. John Oliver explains why that could make you want to physically destroy your cable box.

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-♪ ♪ -♪ ♪ I would like to talk to you about business.

The thing that everyone on Shark Tank thinks they have a great idea for, even this guy.

Wait, so I can neither have my cake nor eat it, too?

Small startup businesses like that hold a special place in America's heart, and politicians from across the political spectrum love to talk about how important they are.

Small business is the backbone of the American economy.

Small businesses are the backbone of this nation's economy.

Small businesses are the backbone of our economy.

It's that rare thing that every politician agrees on.

It's that, support the troops, Ted Cruz can go fuck himself, and South Dakota Senator John Thune can get it, he can get it.

Now, look, it can feel like we're in a golden age of small business startups, but that isn't actually the case.

The rate at which new businesses are being created has actually been steadily falling since the 1970s.

And I would argue that 1 of the reasons for that is that big businesses have been getting even bigger, which brings us to our main topic tonight, corporate consolidation.

Recent years have seen record highs for mergers and acquisitions.

As you would know if you've ever watched the thrilled reactions they get on business news.

They call it Merger Monday on Wall Street.

It is shaping up to be another Merger Monday.

They don't call it Merger Monday for nothing.

-♪ Okay, that is obviously a little nauseating, but also, pressing a button on TV is a little bit dangerous, because someone could take that footage and then loop any sound that they want under there.

Now, obviously, I am not immature enough to do that, but if I were, it would look like this.

The point is, the point is, all This merger activity has helped make some sectors of our economy ridiculously consolidated.

The United States has gone from having 10 large airlines back in 2000 to just 4 today.

And those 4 mega airlines now dominate more than 80% of the U.S.

Yeah, we're down to just 4 major airline choices.

And no, that does not include JetBlue, because that is not actually an airline.

It's just a very expensive way to eat those weird blue chips.

Which are, and this is true, just sliced Grover arms.

Look, and airlines here are just the beginning.

The rental car business is now 90% dominated by just 3 companies.

Beer industry is 70% controlled by just 2 companies.

And online search engines are, of course, as we all know, dominated by 1 major player.

That's right, Bing, the best way to Google something.

In fact, look, full disclosure here, even our own parent company, Time Warner, is currently trying to merge with AT&T, which makes this story a little dangerous for us to do.

Although, you know, that is presuming that AT&T executives managed to get their shitty service working long enough to see it.

It's the top telecom company around, alphabetically, and nothing else.

--AUDIENCE LAUGHS AND CLAPS --Look, even some brands that you might think of as indie now have multinational owners.

It's not run by a backwards bee-fucker called Burt.

Tom's of Maine, the deodorant which did so little to deodorize your freshman year roommate.

Now, their ads feature beardy brewers rubbing hops on their faces.

But what they don't mention is that Goose Island is owned by Anheuser-Busch, and that farm that you just saw is located at 822 Budweiser Loop.

It's presumably just past Bud Light's La Marita Boulevard.

Basically, if You see the mass grave of Clydesdale horses, turn left and you're there.

And it says something about the rapid rate of mergers that even Jim Cramer occasionally finds himself in disbelief at 1 happening.

Watch him react to a mega merger in the aluminum can industry.

Ball Corp's acquisition of Rexam is taking the number of competitors in this space down to, get this, from 3 to 2.

It's not great when a business casual Louis C.K.

With a sound effects board is saying, holy shit, this was a really bad idea.

But how did they let that happen is actually a really good question, and the answer is interesting.

Because we have had antitrust laws on the books for more than a century.

And I'm not saying that every single merger is bad.

You know, sometimes businesses getting bigger can lead to greater efficiencies and improvements.

The tension is between allowing that and preventing them from doing real harm.

But since the late 1970s, that balance has tipped decidedly in favor of being merger-friendly, which has led to real problems.

For workers, mergers can often mean big layoffs.

But it's not just employees that can suffer, consumers can too, as Jim Cramer explained in that aluminum can segment in an inexplicably sarcastic tone of voice.

I always say competition, while great for you, a consumer, is an anathema to profits.

Sometimes a business will be a total monopoly with no competition whatsoever.

And while that's the ideal, it's very rare to see a genuine monopoly because, of course, it's against the law.

Which brings us to the next best thing, an oligopoly, where a handful of companies control an entire industry, coexisting peacefully without much in the way of price competition.

That's a weird tone to use to describe something that's clearly awful.

It's rare to see genuine bestiality, because, of course, it's against the law.

Which brings us to the next best thing, having sex with a stuffed animal while looking at pictures of a real horse.

And for a sense of what it can look like when a handful of companies coexist peacefully without much in the way of price competition, just look at airlines.

In 2012, 1 airline executive told an industry conference, consolidation has allowed us to do things like ancillary revenues, which is jargon for all those fees that drive you fucking crazy.

Now, American was the first major airline to charge you for your first checked bag back in 2008.

And back then, people could not believe it.

American Airlines will soon charge $15 for the first checked bag.

That's on top of a fee of $25 for your second 01:15

Although, it does make you wonder whether he fills his bags full of underwear and nothing else.

But Within months, most major airlines had followed Americans' lead, and it was essentially the industry standard.

And it is easy for that to happen when there's only a handful of big players.

In fact, since then, they've added and increased bag fees multiple times, often moving in tandem, which is how those fees have gone from generating around 540 million dollars a year a decade ago to 4.2 billion dollars now.

After all, if I wanted exorbitant fees that keep getting raised all the time, despite shitty service, I'd become a customer of AT&T.

Even if you take over, you'll never be my real dad!

-♪♪ And look, you may well be angry with the service you get from airlines, but thanks to consolidation, they don't really need to give a shit about what you think.

And if you don't believe me, remember that awful video that went around earlier this year.

The shocking images of a passenger caught in a travel nightmare.

A man visibly shaken as he's yanked and then dragged off a United jet by law enforcement, all after refusing to give up his seat.

Yeah, that is the most horrifying thing you can possibly see on an airplane unless your in-flight movie is The Boss Baby.

A movie that combines the unbearable smugness of Alec Baldwin with the unbearable smugness of a baby.

Now, in the wake of that incident, people said it was a PR nightmare and there was talk on Twitter of boycotting United.

The problem is, on certain routes, they're the only option.

So a boycott is gonna be pretty hard to pull off.

And that is arguably why their CEO was later able to open his earnings call for that quarter by describing a period in which, I will remind you, a passenger had his teeth knocked out on 1 of United's planes, like this.

Welcome to a terrific second quarter, strong financial results, and even more incredible operational results.

And as you think about customers, I want to thank them for their continued loyalty and support.

We continue to find new and better ways to service them and make them more comfortable on our airline.

Is it really any wonder that their earnings stayed solid?

United is sometimes the only way to get to where you are going, which actually explains their new slogan, you want to fucking rollerblade to Houston?

-♪ ♪ -♪ ♪ And when an industry gets too consolidated, any company trying to compete with them or survive in their supply chain can get crushed.

Now, we all know about Amazon, Walmart, or Google, but there are less obvious examples of this too.

Now, if you go into a lens crafters, you will see frames by brands like, Prada, Dolce & Gabbana, Burberry, and Ralph Lauren.

All of which, it turns out, are made by an Italian company called Luxottica, which, incidentally, also owns LensCrafters, and Sunglass Hut, and Pearl Vision, and runs Target Optical, and Sears Optical.

So, what can happen when a smaller company goes up against them?

Oakley was a big competitor, and they had a fight with Luxottica, and Luxottica basically said, we're dropping you from our stores.

was a dispute about pricing, and they dropped Oakley from the stores, and Oakley's stock price collapsed.

There were some issues between the 2 companies in the beginning of the 2000s, but both of them understood that it was better to go along.

They tried to compete and they lost, and then you bought them.

I understand your theory, but they understood that life was better together.

That is the menacing tone of a Bond villain.

They understood life was better together.

That is the first time that I have ever felt sorry for Oakley, the official sunglasses of guys who unironically use the term finger blasting.

And there is 1 more victim of consolidation that you may not think about, and that is the products themselves.

Because heavily consolidated industries can lose the incentive to innovate, and the best example of this may be the cable box beneath your TV.

If you have 1 of those, you probably hate it because it's huge, it's glitchy, and it may be 1 of the largest energy consuming items in your house, even when it's turned off.

But if you think about it, Cable companies have no real incentive to improve them.

And again, they know that you basically have nowhere else to go.

And you can't even smash your cable box out of frustration because you are renting it, and they'll then charge you hundreds of dollars if you don't give it back.

Which is why we went to the trouble of blowing this 1 up for you.

Feel free to watch it again in slow motion.

-♪ ♪ -♪♪ -♪♪ -♪♪ -♪ ♪ -♪ BOOM!

-♪♪ -♪♪ I want you to know, that box suffered.

-♪♪ The point here is, we seem to have forgotten how important antitrust is.

And now all being forced to live with the consequences.

Because this issue affects almost everything you do.

Well, the industry is dominated by just these 4.

Frustrated with your health insurance provider?

And if this whole story is infuriating you so much that you are yearning for the sweet escape of death, well, bad luck, because the casket industry is controlled by these 3 companies.

The afterlife is actually controlled by 1 religion.

I'm not saying which 1, but when you find out, you're gonna be so mad.

The point is, we have laws to prevent the worst effects of consolidation, and it may well be time to more aggressively use them to impose stricter standards and to empower the FTC and the DOJ's antitrust divisions.

And that is something that most people would really get behind, and nearly every politician should.

After all, there is 1 thing they cannot stop saying.

Well, if they really believe that, it may be time for them to stop talking about backbones and actually fucking grow 1.

And now, all of Jim Cramer's sound buttons replaced with fart noises.

Hedge funds that are in trouble start selling, not because they want to, but because they have to raise money to pay back their unhappy clients things keep working out is it any wonder that Norfolk Southern Union Pacific keep running?

Because the whole idea of saving for retirement puts you to sleep.


Speaker 0: -♪ ♪ -♪ ♪ I would like to talk to you about business. The thing that everyone on Shark Tank thinks they have a great idea for, even this guy.

Speaker 1: Our cakes are made of foam. And they're rentals.

Speaker 0: Wait, so I can neither have my cake nor eat it, too? I am in. Here is a million dollars. -$1,000,000. -$1,000,000.

Small startup businesses like that hold a special place in America's heart, and politicians from across the political spectrum love to talk about how important they are.

Speaker 2: Small business is the backbone of the American economy.

Speaker 3: Small businesses are the backbone of this nation's economy.

Speaker 4: Small businesses are the backbone of our economy. Small businesses are the backbone of

Speaker 0: our economy. It's true. Small businesses are the backbone of our economy. It's that rare thing that every politician agrees on. It's that, support the troops, Ted Cruz can go fuck himself, and South Dakota Senator John Thune can get it, he can get it.

Now, look, it can feel like we're in a golden age of small business startups, but that isn't actually the case. The rate at which new businesses are being created has actually been steadily falling since the 1970s. And I would argue that 1 of the reasons for that is that big businesses have been getting even bigger, which brings us to our main topic tonight, corporate consolidation. Recent years have seen record highs for mergers and acquisitions. As you would know if you've ever watched the thrilled reactions they get on business news.

Speaker 2: M&A has been hot, continues to be hot.

Speaker 0: An exciting year for M&A.

Speaker 2: A few blockbuster deals being announced. They call it Merger Monday on Wall Street. It is shaping up to be another Merger Monday. They don't call it Merger Monday for nothing. Media mega merger Monday...

Speaker 1: Merger Monday? At last we have 1, and I say... -♪ Merger Monday!

Speaker 0: -♪ Okay, that is obviously a little nauseating, but also, pressing a button on TV is a little bit dangerous, because someone could take that footage and then loop any sound that they want under there. Now, obviously, I am not immature enough to do that, but if I were, it would look like this.

Speaker 1: Merger Monday? At last, we have 1, and I say... Buzzer.

Speaker 0: The point is, the point is, all This merger activity has helped make some sectors of our economy ridiculously consolidated.

Speaker 5: The United States has gone from having 10 large airlines back in 2000 to just 4 today. And those 4 mega airlines now dominate more than 80% of the U.S. Market.

Speaker 0: Yeah, we're down to just 4 major airline choices. And no, that does not include JetBlue, because that is not actually an airline. It's just a very expensive way to eat those weird blue chips. Which are, and this is true, just sliced Grover arms. Look, and airlines here are just the beginning.

The rental car business is now 90% dominated by just 3 companies. The U.S. Beer industry is 70% controlled by just 2 companies. And online search engines are, of course, as we all know, dominated by 1 major player. That's right, say it with me, Bing.

That's right, Bing, the best way to Google something. In fact, look, full disclosure here, even our own parent company, Time Warner, is currently trying to merge with AT&T, which makes this story a little dangerous for us to do. Although, you know, that is presuming that AT&T executives managed to get their shitty service working long enough to see it. --AUDIENCE GROANS AND CLAPS --AT&T! It's the top telecom company around, alphabetically, and nothing else.

--AUDIENCE LAUGHS AND CLAPS --Look, even some brands that you might think of as indie now have multinational owners. Burt's Bees? It's not run by a backwards bee-fucker called Burt. It's run by Clorox. Tom's of Maine, the deodorant which did so little to deodorize your freshman year roommate.

That's now owned by Colgate Palmolive. And then, there is Goose Island. Now, their ads feature beardy brewers rubbing hops on their faces. But what they don't mention is that Goose Island is owned by Anheuser-Busch, and that farm that you just saw is located at 822 Budweiser Loop. It's presumably just past Bud Light's La Marita Boulevard.

Basically, if You see the mass grave of Clydesdale horses, turn left and you're there. And it says something about the rapid rate of mergers that even Jim Cramer occasionally finds himself in disbelief at 1 happening. Watch him react to a mega merger in the aluminum can industry.

Speaker 1: Ball Corp's acquisition of Rexam is taking the number of competitors in this space down to, get this, from 3 to 2. How did they let that happen?

Speaker 0: Yeah. It's not great when a business casual Louis C.K. With a sound effects board is saying, holy shit, this was a really bad idea. But how did they let that happen is actually a really good question, and the answer is interesting. Because we have had antitrust laws on the books for more than a century.

And I'm not saying that every single merger is bad. You know, sometimes businesses getting bigger can lead to greater efficiencies and improvements. The tension is between allowing that and preventing them from doing real harm. So It's a balance. But since the late 1970s, that balance has tipped decidedly in favor of being merger-friendly, which has led to real problems.

And let's start with the obvious. For workers, mergers can often mean big layoffs. But it's not just employees that can suffer, consumers can too, as Jim Cramer explained in that aluminum can segment in an inexplicably sarcastic tone of voice.

Speaker 1: I always say competition, while great for you, a consumer, is an anathema to profits. Sometimes a business will be a total monopoly with no competition whatsoever. And while that's the ideal, it's very rare to see a genuine monopoly because, of course, it's against the law. Which brings us to the next best thing, an oligopoly, where a handful of companies control an entire industry, coexisting peacefully without much in the way of price competition.

Speaker 0: That's a weird tone to use to describe something that's clearly awful. It's rare to see genuine bestiality, because, of course, it's against the law. Which brings us to the next best thing, having sex with a stuffed animal while looking at pictures of a real horse. And for a sense of what it can look like when a handful of companies coexist peacefully without much in the way of price competition, just look at airlines. In 2012, 1 airline executive told an industry conference, consolidation has allowed us to do things like ancillary revenues, which is jargon for all those fees that drive you fucking crazy.

Now, American was the first major airline to charge you for your first checked bag back in 2008. And back then, people could not believe it.

Speaker 3: American Airlines will soon charge $15 for the first checked bag. That's on top of a fee of $25 for your second 01:15

Speaker 4: dollars? Holy cow. I'll have to put my underwear

Speaker 0: in my

Speaker 4: pockets. -♪ Ha, ha,

Speaker 0: ha, ha, ha, ha, ha... -♪ BANG! BANG! BANG! BANG!

BANG! Yes. First, that is clearly a delightful man. Although, it does make you wonder whether he fills his bags full of underwear and nothing else. But Within months, most major airlines had followed Americans' lead, and it was essentially the industry standard.

And it is easy for that to happen when there's only a handful of big players. In fact, since then, they've added and increased bag fees multiple times, often moving in tandem, which is how those fees have gone from generating around 540 million dollars a year a decade ago to 4.2 billion dollars now. And that is infuriating. After all, if I wanted exorbitant fees that keep getting raised all the time, despite shitty service, I'd become a customer of AT&T. Yeah.

Fuck you, AT&T! Even if you take over, you'll never be my real dad! -♪♪ And look, you may well be angry with the service you get from airlines, but thanks to consolidation, they don't really need to give a shit about what you think. And if you don't believe me, remember that awful video that went around earlier this year.

Speaker 6: The shocking images of a passenger caught in a travel nightmare. A man visibly shaken as he's yanked and then dragged off a United jet by law enforcement, all after refusing to give up his seat.

Speaker 0: Yeah, that is the most horrifying thing you can possibly see on an airplane unless your in-flight movie is The Boss Baby. A movie that combines the unbearable smugness of Alec Baldwin with the unbearable smugness of a baby. Now, in the wake of that incident, people said it was a PR nightmare and there was talk on Twitter of boycotting United. The problem is, on certain routes, they're the only option. So a boycott is gonna be pretty hard to pull off.

And that is arguably why their CEO was later able to open his earnings call for that quarter by describing a period in which, I will remind you, a passenger had his teeth knocked out on 1 of United's planes, like this.

Speaker 7: Welcome to a terrific second quarter, strong financial results, and even more incredible operational results. And as you think about customers, I want to thank them for their continued loyalty and support. We continue to find new and better ways to service them and make them more comfortable on our airline.

Speaker 0: And you know what? Is it really any wonder that their earnings stayed solid? United is sometimes the only way to get to where you are going, which actually explains their new slogan, you want to fucking rollerblade to Houston? Shut up and get in! -♪ ♪ -♪ ♪ And when an industry gets too consolidated, any company trying to compete with them or survive in their supply chain can get crushed.

Now, we all know about Amazon, Walmart, or Google, but there are less obvious examples of this too. Take eyewear. Now, if you go into a lens crafters, you will see frames by brands like, Prada, Dolce & Gabbana, Burberry, and Ralph Lauren. All of which, it turns out, are made by an Italian company called Luxottica, which, incidentally, also owns LensCrafters, and Sunglass Hut, and Pearl Vision, and runs Target Optical, and Sears Optical. So, what can happen when a smaller company goes up against them?

Well, just ask Oakley.

Speaker 8: Oakley was a big competitor, and they had a fight with Luxottica, and Luxottica basically said, we're dropping you from our stores.

Speaker 3: And Oakley... They refused to sell their glasses

Speaker 0: and their...

Speaker 3: Yeah, It

Speaker 8: was a dispute about pricing, and they dropped Oakley from the stores, and Oakley's stock price collapsed.

Speaker 9: There were some issues between the 2 companies in the beginning of the 2000s, but both of them understood that it was better to go along. We merged with Oakley in 2007.

Speaker 3: You bought Oakley. They tried to compete and they lost, and then you bought them.

Speaker 9: I understand your theory, but they understood that life was better together.

Speaker 0: Ooh! That is the menacing tone of a Bond villain. They understood life was better together. Mr. Bond, you know?

That is the first time that I have ever felt sorry for Oakley, the official sunglasses of guys who unironically use the term finger blasting. And I think it's a sponsorship deal. And there is 1 more victim of consolidation that you may not think about, and that is the products themselves. Because heavily consolidated industries can lose the incentive to innovate, and the best example of this may be the cable box beneath your TV. If you have 1 of those, you probably hate it because it's huge, it's glitchy, and it may be 1 of the largest energy consuming items in your house, even when it's turned off.

But if you think about it, Cable companies have no real incentive to improve them. They're essentially regional monopolies. And again, they know that you basically have nowhere else to go. And you can't even smash your cable box out of frustration because you are renting it, and they'll then charge you hundreds of dollars if you don't give it back. Which is why we went to the trouble of blowing this 1 up for you.

Please take a look. There you go. Pretty cathartic to watch, right? I hope that helps. Feel free to watch it again in slow motion.

-♪ ♪ -♪♪ -♪♪ -♪♪ -♪ ♪ -♪ BOOM! -♪♪ -♪♪ I want you to know, that box suffered. -♪♪ The point here is, we seem to have forgotten how important antitrust is. And now all being forced to live with the consequences. Because this issue affects almost everything you do.

Angry at banks? Well, the industry is dominated by just these 4. Frustrated with your health insurance provider? Odds are, it's 1 of these. And if this whole story is infuriating you so much that you are yearning for the sweet escape of death, well, bad luck, because the casket industry is controlled by these 3 companies.

Oh, and it gets even worse. The afterlife is actually controlled by 1 religion. I'm not saying which 1, but when you find out, you're gonna be so mad. The point... The point is...

The point is, we have laws to prevent the worst effects of consolidation, and it may well be time to more aggressively use them to impose stricter standards and to empower the FTC and the DOJ's antitrust divisions. And that is something that most people would really get behind, and nearly every politician should. After all, there is 1 thing they cannot stop saying.

Speaker 4: Small business is the backbone

Speaker 0: of our economy. Well, if they really believe that, it may be time for them to stop talking about backbones and actually fucking grow 1. And now, this. And now, all of Jim Cramer's sound buttons replaced with fart noises.

Speaker 1: Hedge funds that are in trouble start selling, not because they want to, but because they have to raise money to pay back their unhappy clients things keep working out is it any wonder that Norfolk Southern Union Pacific keep running? Buy high and then sell low! A time-honored way to lose money. Sell it tomorrow! Because the whole idea of saving for retirement puts you to sleep.

But I want you to feel emboldened. Not as we tell

Speaker 0: you

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Corporate Consolidation: Last Week Tonight with John Oliver (HBO)