Today, Explained: "Tater Bot" Episode Summary

Release Date: February 12, 2025
Hosts: Sean Rameswaram and Noel King
Network: Vox Media Podcast Network

Introduction to Frozen Potatoes and Economic Implications

[00:00 - 00:50]
Hosts Sean Rameswaram and Vivian Tu kick off the episode by highlighting an unexpected yet significant topic: frozen potatoes. They suggest that the state of the frozen potato industry mirrors broader economic challenges in the United States, including rising costs, housing shortages, and governmental regulatory issues with big tech.

Sean Rameswaram ([00:23]): "Frozen potatoes can tell us a lot about why things cost what they cost... about how our government has failed to do much to regulate big tech and why it's high time we hash it all out."

The Frozen Potato Price Fixing Scandal

The Emergence of Price Fixing

[02:11 - 06:28]
Sean Ramis introduces Katya Schwenk, a reporter investigating the frozen potato industry. Vivian Tu explains that four dominant companies—Lamb Weston Holdings, Cavendish Farms, and others—control 97% of the market, leading to allegations of price fixing.

Vivian Tu ([02:25]): "There are only four companies that control 97% of this market and what people say that has led to is price fixing, including to keep the prices of your french fries very high."

Case Study: Josh Saltzman and Ivy and Coney Bar

[02:25 - 05:21]
The story centers on Josh Saltzman, owner of Ivy and Coney, a sports bar in Washington, D.C. Two years prior, Josh noticed that all his potato suppliers increased their prices simultaneously by the same amount—a clear sign of price collusion. His viral tweets brought attention to the issue, leading to private lawsuits from various stakeholders affected by the price hikes.

Vivian Tu ([03:38]): "Amazing how all of the major suppliers for french fries and the like are all raising their prices at the same time and by the same amount. Totally not collusion or anything. Right?"

Mechanism of Price Fixing: The Role of "Potato Track"

[05:21 - 07:33]
Vivian Tu delves into how these companies allegedly used a data-sharing platform named "Potato Track" to synchronize their pricing strategies without direct collusion. This tool allowed competitors to access each other's confidential pricing information, effectively reducing competition and enabling price fixing.

Vivian Tu ([06:28]): "These are not big brand name companies because they're not usually selling their Products to consumers... but the lawsuits allege that... Potato Track... has done a lot to reduce competition in this market."

Economic Impact and Legal Actions

[07:33 - 10:42]
Sean Ramis and Vivian Tu discuss the significant price increases—up to 50% from July 2022 to July 2024—justified initially by operational costs but sustained even after costs decreased. Class action lawsuits have been filed against the controlling companies, accusing them of forming a "potato cartel."

Vivian Tu ([07:44]): "Prices have gone up really significantly. They actually increased by almost 50%... but those costs have since gone down and the prices have stayed high."

Broader Implications: Algorithms and Modern Price Fixing

Introduction to Algorithmic Price Fixing

[13:56 - 18:25]
Bill Baer, a fellow at the Brookings Institution and former head of antitrust enforcement at the FTC, joins the discussion. He expands the conversation beyond potatoes, explaining how pricing algorithms are facilitating price fixing across various industries, including poultry and real estate.

Bill Baer ([14:25]): "The government enforcement agencies, the antitrust enforcers are very worried that this use of pricing algorithms is growing."

Historical Context and Comparison

[16:40 - 18:08]
Baer provides historical examples of price fixing before the digital age, such as Toys R Us colluding with retailers and airlines manipulating fares through third-party platforms. These cases illustrate that while the methods have evolved, the essence of anti-competitive behavior remains unchanged.

Bill Baer ([17:24]): "The government was able to stop the behavior, and private plaintiffs acting on behalf of injured consumers were able to secure monetary relief."

Challenges with Current Antitrust Laws

[19:39 - 22:54]
The hosts and Baer discuss the inadequacy of existing antitrust laws in addressing sophisticated algorithm-driven price fixing. Senator Amy Klobuchar introduces legislative efforts aimed at updating these laws to account for modern technological advancements.

Bill Baer ([19:39]): "Joe Biden once famously said, capitalism without competition is not capitalism, it's exploitation."

Legislative Responses: Senator Amy Klobuchar's Bill

Overview of the Proposed Legislation

[20:07 - 24:56]
Senator Amy Klobuchar outlines her bill targeting algorithmic price fixing. The legislation seeks to prohibit landlords and other competitors from sharing data through centralized platforms that facilitate coordinated pricing strategies. Klobuchar emphasizes that while algorithms can enhance efficiency, their misuse poses significant threats to market competition and consumer welfare.

Amy Klobuchar ([20:25]): "It's against the antitrust laws. But what do we have now? We have high price, sophisticated price fixing."

Rationale and Enforcement

Klobuchar argues that updating antitrust laws is essential to keep pace with technological innovations. She highlights the importance of not stifling beneficial technologies while preventing their misuse in anti-competitive practices.

Amy Klobuchar ([22:54]): "Our laws are just not as sophisticated as those marketplaces. So you should make adjustments."

Comparative Success and Future Outlook

Drawing parallels with past successes in antitrust enforcement, Klobuchar is optimistic that her bill will effectively curb algorithm-driven price fixing and restore competitive practices in various industries.

Amy Klobuchar ([24:28]): "It's not just passing bills, Sean. We can do that, but it's also ours. Is the law being enforced? Are they actually bringing actions?"

Conclusion: The Path Forward

[24:56 - End]
The episode wraps up by emphasizing the need for updated legislative frameworks to address the complexities introduced by modern algorithms in price setting. The hosts encourage listeners to stay informed and engaged with ongoing antitrust discussions to ensure fair market practices and protect consumer interests.

Sean Rameswaram ([25:04]): "Today, explained Bill Baer from Brookings. Peter Balinon Rosen made our show today. We miss him already."

Key Takeaways

• Market Consolidation and Price Fixing: A handful of companies control the majority of the frozen potato market, leading to coordinated price increases through platforms like "Potato Track."

• Algorithmic Influence: Modern algorithms facilitate intricate price fixing across various industries, making traditional antitrust laws insufficient.

• Legislative Action: Proposed bills, notably by Senator Amy Klobuchar, aim to update antitrust regulations to address the challenges posed by algorithm-driven price strategies.

• Consumer Impact: Price fixing, whether through direct collusion or algorithmic coordination, ultimately harms consumers by keeping prices artificially high and stifling competition.

Notable Quotes

• Sean Rameswaram ([00:23]): "Frozen potatoes can tell us a lot about why things cost what they cost... about how our government has failed to do much to regulate big tech and why it's high time we hash it all out."

• Vivian Tu ([03:38]): "Amazing how all of the major suppliers for french fries and the like are all raising their prices at the same time and by the same amount. Totally not collusion or anything. Right?"

• Bill Baer ([19:39]): "Joe Biden once famously said, capitalism without competition is not capitalism, it's exploitation."

• Amy Klobuchar ([20:25]): "It's against the antitrust laws. But what do we have now? We have high price, sophisticated price fixing."

This episode of "Today, Explained" sheds light on the often-overlooked issue of price fixing in the frozen potato industry and its broader implications in today's algorithm-driven economy. By examining specific cases and legislative responses, the podcast underscores the pressing need for updated antitrust laws to safeguard competitive markets and consumer interests.