July 2025 Archives

21st Century Robber Barons

It’s a case of life imitating art imitating life. The announcement that Union Pacific is seeking to acquire Norfolk Southern to create the first coast-to-coast rail network sounds very much like the deal that the character George Russell is depicted as seeking to accomplish in the HBO television series The Gilded Age. Russell is said to be based on the real-life 19^th Century robber baron Jay Gould, who controlled UP in the 1880s before moving on to manipulate numerous other rail lines.

The $71 billion deal being pursued by UP is a throwback to the bad old days of unrestrained corporate concentration. It would reduce the number of Class 1 carriers from six to five and give a single operator control of some 50,000 miles of track across 43 states. It will certainly create upward pressure on freight prices.

It would also bring together two companies with checkered records. Norfolk Southern is notorious for the 2023 derailment in Ohio that spilled a large quantity of toxic chemicals in the town of East Palestine. Many of the 150 railcars—which included tankers filled with hazardous materials such as vinyl chloride—caught fire and were allowed to burn for days.

Jennifer Homendy, chair of the National Transportation Safety Board, would later allege that NS “delayed or failed to provide critical investigative information to our team,” forcing her to have to threaten to issue subpoenas to compel disclosure. She described the company’s actions as “unconscionable” and “reprehensible.”

NS ended up paying $310 million to resolve a case brought against it by the U.S. Justice Department and the Environmental Protection Agency, while also settling a class action lawsuit brought by community residents for $600 million.

Over the years, the company has also paid millions of dollars in fines to the Federal Railroad Administration (FRA) for safety violations and $2.5 million to the Equal Employment Opportunity Commission to settle allegations it engaged in systemic disability discrimination. In 2020 NS was ordered to pay $85,000 and reinstate an employee who was fired for reporting an on-the-job injury.

UP has also paid out millions for safety infractions and has been fined five times for retaliating against whistleblowers. Its environmental record includes a $31 million penalty imposed by the EPA for water pollution and a $2.3 million settlement with four California counties concerning the mishandling of hazardous wastes.

There is no reason to believe that the company emerging out of this merger would be any more compliant with workplace, environmental, and other types of regulations. On the contrary, its size would enable it exercise even greater sway over an agency such as the FRA.

Regulatory weakness is also likely to be exhibited by the Surface Transportation Board, the federal agency with oversight over the proposed merger. It is being run by Patrick Fuchs, a former Senate staffer who worked for Republican Senator John Thune. Fuchs is reported to be open to further consolidation of the industry. We are thus likely to see a repeat of 2023, when the Board green-lighted Canadian Pacific’s purchase of Kansas City Southern.

This could pave the way for the other rail behemoth, Warren Buffett’s BNSF, to make a move on CSX. Soon, nearly all of U.S. freight traffic could be under the control of two or three mega-carriers. Jay Gould would be impressed.

The Attack on Independent Business Regulation

Donald Trump has a great fondness for the policies of the late 19^th Century, praising that period’s focus on tariffs and its lack of a federal income tax. Yet there is another practice from that time that Trump abhors: independent regulatory agencies.

In 1887 Congress created the Interstate Commerce Commission to oversee the railroad industry, which then played a commanding role in the economy and was not known for having high ethical standards. The ICC was not completely autonomous—the president appointed its members—and it had some significant flaws, but the agency was the beginning of a system in which federal oversight of business would take place outside the direct control of the White House.

Part of the Trump Administration’s campaign to remake the federal government is the elimination of independent regulation. In February, Trump signed an executive order taking a significant step in that direction by giving the Office of Management and Budget extensive powers to oversee the agencies. He has gone on to fire their Democratic commissioners, brazenly violating the legal requirement of bipartisanship in the running of those entities and a 90-year-old Supreme Court ruling that presidents cannot fire board members without just cause.

Unfortunately, the current Supreme Court has shown no inclination to block Trump’s power grab. It has just allowed him to proceed with the dismissal of three commissioners at the Consumer Product Safety Commission. This ruling, issued as part of the Court’s ever-expanding shadow docket, followed a similar decision allowing Trump to remove a Democrat from the National Labor Relations Board. Trump has also fired commissioners at agencies such as the Federal Trade Commission and the Nuclear Regulatory Commission. And, of course, he is openly weighing whether to illegally fire Federal Reserve chair Jerome Powell; the Fed is a banking regulator as well as being in charge of monetary policy.

Aside from the general issue of undue consolidation of presidential power, Trump’s moves at the independent agencies are likely to be detrimental to the oversight process itself.

It is true that the agencies have a mixed record when it comes to enforcement. Entities such as the Nuclear Regulatory Commission have traditionally been too close to the industries they were supposed to oversee. On the other hand, independent agencies have brought major actions against major companies for various kinds of violations. The FTC, for example, has imposed multi-billion-dollar penalties on Meta Platforms and Volkswagen.

Trump, of course, is exerting more power over the agencies not to make them more aggressive but rather to weaken their oversight, especially when it comes to companies favored by the Administration. Or else he is seeking to turn the agencies into weapons against those he disfavors. This is seen most clearly at the FCC, whose Trump-appointed head Brendan Carr, is an eager MAGA partisan.

Overall, Trump’s campaign against independent regulation is an enormous gift to Big Business and a serious setback for consumers, workers, and communities depending on those agencies for some measure of protection against corporate misconduct.

The Real Healthcare Fraud

If you had to choose a single phrase to describe the Trump Administration’s policy positions, you might very well go with “false claims.” That includes false claims about the degree of criminality among immigrants, false claims about the way tariffs work, false claims about voter fraud, and much more. Congressional Republicans play the game too, defending their assault on Medicaid with false claims about fraud and abuse among recipients.

None of this is new, but what is surprising is the Administration stance toward another type of false claims—fraud committed by government contractors, especially those working in the healthcare sector.

The False Claims Act (FCA), which dates back to 1860s, is the primary tool used to prosecute companies that cheat Uncle Sam. Technically, they aren’t prosecuted, since the law does not provide for criminal charges. Instead, they typically face civil monetary penalties that can go as high as eight or nine figures.

Many observers assumed that the second Trump Administration would downplay FCA enforcement as part of its overall deregulatory campaign. Instead, it has been using the law in unusual ways. Earlier this year, the Justice Department began targeting grant recipients that were not adhering to Trump’s edicts on social issues such as DEI and transgender rights. DOJ also pressured universities that were supposedly failing to protect Jewish students from antisemitism. This turned the FCA into a weapon in the culture wars.

Now it appears that the Administration is focusing more on conventional FCA cases. Recently, the DOJ and the Department of Health and Human Services announced the creation of a working group to pursue more enforcement actions against healthcare providers. Among the priority areas are: Medicare Advantage, kickbacks related to pharmaceuticals and medical devices, and defective medical equipment.

This initiative is consistent with the activity of federal prosecutors in the past few months. In collecting data for Violation Tracker, my colleagues and I have found that FCA actions account for more than three-quarters of the 147 resolved actions against corporations and non-profits announced by the DOJ since Inauguration Day.

Some of these, especially those against large corporations, are cases that were initiated under the Biden Administration. That’s true, for example, of a $59 million kickback penalty against Pfizer announced in late January.

Yet, during a period in which enforcement actions across the federal government have fallen off significantly, there has been a steady stream of FCA case announcements. Many of them involve smaller entities, but the penalties have not been insignificant. For instance, in June, the DOJ announced that NUWAY Alliance, a provider of substance abuse services, would pay over $18 million to resolve allegations it submitted fraudulent Medicaid claims.

It remains to be seen whether the Trump Administration will pursue legitimate FCA actions in a serious way. For now, it would be helpful if those politicians making baseless claims about Medicaid recipient abuse paid more attention to these cases of real healthcare fraud committed by providers. That is how taxpayer dollars are really being wasted.

The FCC Betrays Its Diversity Legacy

The Federal Communications Commission has scored another victory in the campaign to use its regulatory powers to promote the MAGA goal of stamping out all vestiges of diversity, equity, and inclusion in the private sector. T-Mobile, which is seeking FCC approval of two fiber and wireless deals, has announced it will shut down all its DEI programs.

The company announced the move in an obsequious letter to FCC Chairman Brendan Carr, a contributor to Project 2025 and an unabashed Trump loyalist. It wrote: “We remain fully committed to ensuring that T-Mobile does not have any policies or practices that enable invidious discrimination, whether in fulfillment of DEI or any other purpose,” adding that the company is ending its DEI-related policies “not just in name, but in substance.”

T-Mobile’s move comes about two months after Verizon, also seeking regulatory approvals, issued a similar renunciation of DEI. That, in turn, came after the FCC announced it would investigate DEI at major media companies.

While anti-DEI pressures can be found throughout the Trump Administration, it is particularly troubling to see them at the FCC. That is because the agency has a long history of policies to combat discrimination and promote diversity in the communications industry.

Those policies came about primarily through the efforts of non-profit groups with close ties to the civil rights movement. Chief among these was the Office of Communications of the United Church of Christ, now known as the UCC Media Justice Ministry. In the 1960s, the UCC effort, led by Dr. Everett C. Parker, began to research the way in which television and radio stations in the South covered the campaigns for racial justice.

The UCC found that stations such as WLBT-TV in Jackson, Mississippi mostly ignored the protests while frequently airing pejorative comments about African-Americans. The UCC petitioned the FCC to deny the station a license renewal because it was not serving the public interest, as broadcasters were required to do under federal law. After a lengthy legal battle, the UCC won a landmark court ruling.

Around the same time, the UCC successfully pressured the FCC to adopt equal employment regulations for license holders. Those rules were modified by a 1998 court ruling, but the agency continued not only to prohibit discrimination but also require broadcasters to take positive steps to promote the hiring and promotion of minorities and women. Operations with larger staffs were expected to engage in more initiatives than smaller ones.

The current FCC’s policies turn this tradition on its head. By embracing the wrong-headed idea that efforts to address discrimination are themselves discriminatory, the agency is starting to turn back the clock to a time when people of color were largely absent from the staffs of media companies.

It is also concerning to see a regulatory agency distort its mission by using its power for ideological purposes. We can only wonder how much the FCC’s anti-DEI efforts are taking resources away from its legitimate enforcement practices.

T-Mobile, for instance, certainly deserves plenty of scrutiny. Last year, it paid over $4 million to state attorneys general to resolve allegations of misleading advertising practices. The year before, it paid $350 million to settle a class action lawsuit over its failure to prevent a massive customer data breach. The Biden FCC fined the company another $80 million in the data case.

Pursuing matters such as these as well as conducting honest evaluations of proposed mergers should be the focus on the FCC–not engaging in culture war attacks.

Delivering Corporate Misconduct

When we go online to order dinner, we are getting a lot more delivered than a bowl of Pad Thai. As they bring in billions of dollars in revenue, leading app-based services such as DoorDash and Grubhub are being compelled to pay out millions in fines and settlements to resolve wide-ranging allegations of misconduct.

As shown in Violation Tracker, U.S. market leader DoorDash has accumulated more than $43 million in penalties. Most of that has come in the past year. In February, the company paid over $16 million to settle allegations by the New York State Attorney General that it misled both consumers and delivery workers by using tips intended for workers to subsidize their guaranteed pay. A few months earlier, DoorDash agreed to pay over $11 million to resolve a similar case brought by the Illinois AG.

Around the same time, the Illinois AG and the Federal Trade Commission got Grubhub to pay over $25 million over its alleged deceptive business practices that harmed customers, delivery drivers, and restaurants. Grubhub, now owned by Wonder Group, allegedly misled consumers about the cost of delivery and the benefits of a Grubhub Plus subscription; misled drivers about the amount of money they could make; and listed restaurants on Grubhub’s app without their knowledge or consent, and in some instances, over their explicit objections.

The other giant of the U.S. market, Uber Eats, accounts for a portion of the $917 million in penalties paid by its parent Uber Technologies. For example, in 2022 the City of Chicago got the company to pay over $6 million to restaurants for overcharging commissions and for listing some establishments without their permission.

Delivery service misconduct is not limited to the United States. Recently, the European Commission fined the German company Delivery Hero, which operates in about 60 countries, the equivalent of $253 million for engaging in anti-competitive practices. As shown in Violation Tracker Global, that brought the penalty total for Delivery Hero and its subsidiaries to nearly $600 million. That includes fines for labor standards violations in Spain, privacy violations in Italy, consumer protection violations in Hungary, and antitrust violations in Chile.

DoorDash has faced legal challenges in its foreign operations as well. Recently, the company was fined the equivalent of about $1.3 million by the Australian government for sending over one million texts and emails which breached spam rules. It is being sued by the Canadian government for allegedly advertising misleading prices and discounts. DoorDash is in the process of acquiring its rival Deliveroo, which was fined by the French government in 2022 for abusing the freelance status of delivery workers.

Similar allegations have dogged other services such as Colombia-based Rappi, which has been fined in its home country as well as in places such as Argentina, Brazil, and Peru. Singapore-based Grab Holdings has paid several consumer protection fines in the Philippines. Last year, the government of India ordered Zomato to pay the equivalent of $90 million in taxes and fines for non-payment of certain taxes.

Food delivery is one of the world’s youngest industries, yet it already has one of the worst records for regulatory compliance. It remains to be seen whether governments can rein it in.