Antitrust/Media Consolidation: A Liberaltarian’s Manifesto

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Mark of New Jersey

Mark is a Founding Editor of The League of Ordinary Gentlemen, the predecessor of Ordinary Times.

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18 Responses

  1. Avatar Larry M says:

    Hoping for someone who can answer the orginal question, as opposed to merely spouting theory (no offense – the theory is interesting in its own way). This strikes me as an area where the empirics matter a LOT.Report

  2. ” because of the FCC’s status as America’s Censor”

    Would you care to expand on what you mean by this?Report

    • Will you be gentle with the corn holing you give me when it turns out my meaning has no connection with reality?Report

      • Avatar Mike Schilling in reply to Mark Thompson says:

        It was clear to me, what with the large fines the FCC has been handing out for various improprieties.Report

        • Avatar Herb in reply to Mike Schilling says:

          It’s a bit of a stretch to call the FCC “America’s censor.” For one, they don’t actively censor anything. Sure, they issued a big fine for Janet Jackson’s Superbowl boob, but it was after the fact and they did nothing to suppress the image. (You can find it in about 2 seconds. I bet it’s even on Youtube.)

          Now I don’t say this to defend the FCC’s policies…they’re quite clearly dumb and so uneven it’s doubtful they are effective. But if we’re going to call them “America’s Censor” we should at least acknowledge that they’re not very good at it.Report

    • Avatar James K in reply to Tony Comstock says:

      The FCC prohibits certain things from being broadcast, and punishes non-compliers. How is that not censorship? In fact the head of the Broadcasting Standards Authority (the New Zealand agency that fulfils the same role) is known as The Chief Censor.Report

  3. I don’t have an answer to what reforms would work or be necessary or how well the four items you propose would work, so I apologize if I am straying a bit into the “theory” (or at least idle speculation) that you asked us not to indulge in. But this is one of the places where it might help to look a little more closely at the history, and specifically at the agitation for antitrust reform in the 1900s and 1910s.

    As I see it (and although I am studying the antitrust movement for my dissertation, I confess to still being confused about the major issues), the agitation for antitrust reform had at least two contradictory tendencies. The first was to make what constituted a violation of the antitrust laws clearer: doing so would make enforcement easier and less discretionary while at the same time make it fairer because the principals would not have to guess whether their actions would violate law. The second was to establish a commission (in this case, the commission came to be the FTC, but there were precedents, such as the ICC, and while I know too little about the FCC, I assume the FCC is an analogous institution) that could especially enforce antitrust laws, but largely in an “advisory” capacity. What constituted “advisory” depended on who was advocating the reform, but usually meant that the commission could inform people when they were in violation of the laws (so as to give them a chance to change before being prosecuted) or to gain prior approval for certain actions (such as mergers or open-price associations).

    I say these tendencies are contradictory because they seem to help the principal targets of antitrust policy while at the same time making it easier for government to enforce this policy, their supporters all the while claiming that the end result would benefit competitors and consumers alike.

    This is all as prelude to suggesting that perhaps your suggested reforms would have contradictory tendencies in practice. Reforms number 2 (restriction of government deal making) and number 3 (more precise definition of a “trust”) seem to be at odds with reform number 1 (am independent commission, whose very independence might, at least in practice, give it wide latitude to make deals with businesses and make decisions about which, if any, alleged violations it might prosecute). I’m not sure how to resolve this apparent contradiction.

    For reform number 4, maybe you might look into the history of Canada’s Restrictive Trades Practices Commission / Combines Registrar, which (at least on paper) gave power power to consumers to contest mergers and other practices they deemed to be non-competitive.Report

  4. How often does the government actually wind up preventing a merger vs. how often does it permit it with restrictions vs. how often does it attempt to intervene but nonetheless permit it without restrictions?

    I don’t have a precise answer, and my ignorance is compounded when it comes to media, although I suggest you read Richard John’s Network Nation which discusses the antitrust and telecommunications in their early years.

    I do urge you to consider a third question, and that involves what are known as per se violations of antitrust: practices that are not necessarily mergers but that are deemed, in and of themselves, to be violations of antitrust law. Examples are explicit agreement among competitors to fix prices or limit production with the intent of raising prices and (until recently) resale price maintenance. In those cases, it is possible that the DOJ may choose not to prosecute, but they are (I assume) limited in their deal making authority.Report

  5. Avatar James Hanley says:

    Mark,

    Thanks for treating me nicely!

    I don’t know of any statistical or aggregate measures to directly answer your question. I think this is a case where the field is so broad and diverse that it would be hard to track everything well enough to do that, so we’re probably stuck with case studies rather than statistics. I’m open to correction on that, but I suspect it’s the case. So I couldn’t give a specific answer to that question because I don’t know it, and I don’t know if what you’re looking for is even available. I also couldn’t talk specifically about media mergers because I haven’t looked much at them. For whatever reason, the media just doesn’t stoke my interest.

    I think the big issue in general when we’re talking about mergers is the extent of barriers to entry, and in your point 1 you note that by requiring broadcasting licenses, the government restricts barriers to entry. As long as the government itself is creating barriers to entry, mergers are potentially troublesome, because the “space” that consolidation opens up for a new competitor to try their hand is barred off. That doesn’t mean every media merger would be bad, but that we’d have to consider them on a case-by-case basis, and certainly not assume each merger is ok–that latter merger is an assumption appropriate for a properly functioning market, not a managed market.

    I’m afraid I don’t follow you on point 2. I guess my response would be that if there are low barriers to entry, there’s no need for antitrust laws at all. If an industry has natural high barriers to entry, antitrust law may be an appropriate response to a market failure (but that doesn’t mean we should assume the government regulations will actually create a superior outcome–they may, but it doesn’t necessarily or automatically happen). Of course if businesses engage in activities that are normally illegal as a means of limiting competition, like threatening suppliers/consumers, torching properties, etc., then we already have a solution outside of anti-trust law.

    On point 3, I think you make an error in using the overbroad “increase government’s authority.” The focus needs to be on the specific regulatory bureaucracy and its actors, who probably don’t–at least in a specific case–care about government authority in general. There’s a long literature on what motivates bureaucrats, and the only certain conclusion is that we’re still not sure. But I lean toward the conclusion that it’s autonomy that motivates them, as that fits well with bureaucratic tendency to believe in scientific management–“we’re the experts, so let us do our job.” So I think the issue of what motivates them in supporting/opposing/bargaining about proposed mergers is probably complex and often–again, I’m sorry to say–case-specific. Iron triangles and issue networks surely play into this, too. But I think it’s quite possible that much of the decision-making that goes into deciding whether to allow mergers is simply the bureaucrats’ own sense of their expertise and what that expertise, employed objectively, would mandate. (Assume some degree of quotation marks around the words expertise and objective.) I think, though, that it’s often their sense of what the particular market should look like, rather than a focus on consumer benefits, that drives their decision-making. They often seem to think markets should be designed top-down, rather than evolve bottom-up. That’s the old managed competition/industrial policy type thinking that is mostly discredited today.

    Point 4. Good point. Scary thought, too.

    Point 5. My approach for reform would be a wholesale elimination of antitrust,* and any new antitrust regulations would have to meet the burden of proof of showing that the market had substantial barriers to entry.

    Let’s hope James K weighs in on this. He’s very thoughtful about these types of topics.

    _________________
    *Oh, but that would hardly ruffle any liberal feathers!!!Report

    • Point 5. My approach for reform would be a wholesale elimination of antitrust,* and any new antitrust regulations would have to meet the burden of proof of showing that the market had substantial barriers to entry.

      I’m not sure exactly where I stand on whether antitrust is good or bad, although I’m leaning toward thinking it’s bad. However, if I were to come down on the side of eliminating antitrust, I would want the elimination to be graduated and not “wholesale,” if only because antitrust has been around for so long and I fear what might happen if we got rid of it altogether and right away.Report

      • Avatar James Hanley in reply to Pierre Corneille says:

        Pierre,

        I’m normally more in favor of gradual changes, too, being a rather Burkean libertarian. But in this case I fear that the path would be too sticky, so that it must be all or nothing. That’s an empirical claim, of course, for which I have no actual evidence. And your concerns are quite valid, in my view.Report

    • Avatar James K in reply to James Hanley says:

      Competition policy isn’t my speciality, but since you asked so nicely 😉

      For me the be all and end all of antitrust is barriers to entry. Even a monopolist is harmless if another firm can easily enter. So for me, the thing that antitrust should focus on should be how the behaviour of firms can limit the ability of entrants. We have a case in New Zealand at the moment about the rates our mobile phone networks charge each there to connect calls from one network to another. The Commerce Commission just ruled that the rates Telecom and Vodafone charge are unreasonably high and they are making it very expensive for new companies to enter the market. So there’s one arguably legitimate role for government intervention.

      The trick with designing an antitrust regime is to account for the limitations of the government’s ability to identify which cases are legitimately unfair competition, since any company would like to have the government squash it’s competitors. To try and squash some of the worst abuses, I would impose three new restrictions on antitrust enforcement:
      1) Get rid of predatory pricing / dumping as a cause for intervention. I’m sure there are theoretical cases where these could be a problem, but I’ve never heard of a case where an alleged case of predatory pricing was anything more than sour grapes from an incumbent firm that was being out-competed.
      2) For the government to get involved in M&A there needs to be evidence that there are significant barriers to entry. If there aren’t then firm concentration doesn’t matter.
      3) Regulators need to be flexible in defining the boundaries of a market. In the real world what counts as being the one market isn’t a black and white issue. Regulators should examine the substitutes available and also how close a substitute they are for the goods produced by the merging firms. Hopefully that will get around some of the “Microsoft is a monopoly” BS.

      Beyond antitrust policy, governments should examine how their other policies can harm competition. State-granted monopolies and occupational licensure are only the most obvious examples of policy that lessens competition. Tariffs and import restrictions block (or at least hinder) foreign competition, as do “need-based” restrictions on getting licenses to start specific businesses. For that matter compliance costs of any sort tend not to scale linearly with firm size (i.e a firm of size x typically pays more than half the compliance costs of a firm of size 2x), and therefore tends to increase the optimum size of a firm.Report

  6. I don’t know if this begins to answer your original question, but have you tried looking at Richard Posner, “A Statistical Study of Antitrust Enforcemen” JOURNAL OF LAW AND ECONOMICS (1970)? I have only skimmed the article, but it might at least give a vision of the prosecution side of things.Report

  7. Avatar DensityDuck says:

    A professional writer should NOT have trouble with “its/it’s”.Report

    • Avatar Jaybird in reply to DensityDuck says:

      I used to think that but discovered that that is the job of editors.

      The journalist/writer creates content… it is the job of the editor to know what a semi-colon is for, the difference between its and it’s, and whether it’s indispensible or indispensable.

      In the absence of editors, it becomes *OUR* job to point such things out.Report

    • 1. Who here is aprofessional writer?
      2. I see one misuse of its/it’s here and it’s in a blockquote taken from a comment thread. I was unaware that we’re supposed to insist that comments be carefully proofread for common typos and grammatical mistakes.
      3. If you are pointing out a pattern of confusing its and it’s, then fine. If you’re complaining about one mistake, you’re just being pedantic.Report

      • Avatar James Hanley in reply to Mark Thompson says:

        Heh, I’ll take my lumps. I have no problem making the distinction between its/it’s, but for some reason have a tendency to throw in the apostrophe when I shouldn’t, as my brain rushes ahead of what my fingers are doing (or maybe it’s my brain lagging, I’m really not sure). It does bug me when I catch myself doing it.

        Unfortunately, I can’t afford an editor, but perhaps Density Duck would like to volunteer? On second thought, perhaps not, since he seems to have overlooked my missing apostrophe on a possessive in the sentence preceding the one with the its/it’s problem, so…. 😉Report

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