Even If Trump's Motivations Are As Foul As You Would Expect, Stopping The AT&T/TimeWarner Merger Is Good Policy

We tend to think-- and for good reason-- that anything the Trump regime does, is wrong. And in most cases, that is a good rule of thumb to follow, But not in the case of blocking the AT&T merger. No doubt Trump is meddling in the Justice Department antitrust case because of his petty vindictiveness, but blocking the merger between AT&T and Time Warner is good policy. This merger would have been celebrated by the Obama administration-- the same way the Comcast/NBCUniversal acquisition was. And that doesn't make it right-- it just shows a sickness from which we collectively averted our eyes. What it all amounts to, then and now, is far too much media clout-- sheer power-- being concentrated in far too few hands.

Early yesterday, anti-trust activist Zephyr Teachout tweeted that "The way to deal with White House meddling in antitrust is not to stop enforcing the law (the Clayton Act), especially at a time of increasingly extreme concentration of power." Instead Congress must hold hearings. A little while later, continuing the conversation on twitter, Evan McMullin wrote that "After years of hostility to CNN, the Trump Administration's efforts to block AT&T's acquisition of Time Warner, CNN's parent company, should be investigated by Congress. This is about protecting our free press-- and our freedom-- from a wannabe despot."

So here's the skinny: on Monday the Justice Department sued AT&T to stop the $85.4 billion acquisition of TimeWarner. Almost all of Trump's campaign promises were idiotic and worthless, but when he said "AT&T is buying Time Warner, and thus CNN, a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few," someone had put some smart ideas in his dumb head. And, regardless of his venal motivations, stopping the merger is excellent policy. Makan Delrahim, the head of the Department of Justice's antitrust division, said "This merger would greatly harm American consumers. It would mean higher monthly television bills and fewer of the new, emerging innovative options that consumers are beginning to enjoy."

Friend of this blog, Matt Stoller, an expert on monopolies: "The business model of a combined AT&T Time Warner is rife with conflicts of interest. AT&T’s direct control over essential news and entertainment would give that corporation a permanent pricing advantage over rival cable networks. Similarly, AT&T would have a natural interest in favoring its own channels on its cable, satellite, and mobile video distribution networks, over other networks."

Earlier Tuesday morning Bloomberg's David McLaughlin reported that despite the muttering about Trump's venality, "the move actually follows a mainstream approach to antitrust policy that sees risks to competition even from mergers that don’t combine direct competitors. The difference this time is the hard line drawn by the government on how to fix the resulting harm. Typically these cases are settled with conditions designed to keep a level playing field for rivals. On Monday, the Justice Department shook observers by filing a lawsuit seeking to block the deal... Despite his Republican credentials and his stint as a corporate lobbyist, Delrahim is taking a surprisingly tough stance on a deal that the companies and many investors expected would settle."

Delrahim’s opposition to the AT&T deal follows rising criticism from some quarters, particularly Democrats, that lax antitrust enforcement is to blame for increasing concentration across the economy. These critics have been calling on enforcers to take a tougher stand against mergers to protect consumers.

...Government lawsuits against deals that don’t involve direct competitors are almost unheard of. The last such case litigated to conclusion was a 1979 suit involving truck trailers and wheels, which the government lost.

For years, companies pursuing deals like AT&T’s bid for Time Warner, which unites a supplier with a distributor, have won approval by agreeing to restrictions on how they operate rather than selling assets.

“Those type of fixes aren’t always effective,” said Steven Salop, an economist at Georgetown University Law Center, said about behavioral remedies. “They’re unenforceable, leave loopholes that let companies avoid their restrictions, and cannot cover all the ways a firm can harm competition in the future.”

Delrahim has signaled that merging companies will have a harder time getting deals done by agreeing to those kinds of settlements. In a Nov. 16 speech in Washington before a roomful of the city’s top antitrust lawyers, he sharply criticized the agreements as replacing “competition with regulation.” They require enforcers to police future conduct of the companies to ensure they’re living up to their promises, Delrahim said.

That view fueled Delrahim’s push last week that AT&T sell its DirecTV business or Time Warner’s Turner unit to win approval, according to a person familiar with the matter.

Selling assets to resolve antitrust concerns are common in deals where direct competitors are combining. The idea is that by selling an overlapping business, the enlarged company won’t be able to use market power to raise prices. Those fixes are favored by enforcers because they let the market do the work of protecting competition rather than relying on a company’s promises to behave in a certain way.

The government said in its complaint Monday that the Time Warner takeover would lead to higher bills for consumers and less innovation in the industry. The combined company could use its control over programming like CNN and HBO to harm rivals by forcing them to pay hundreds of millions of dollars more a year for the right to distribute the content, the government said. The deal also would enable AT&T to impede competition from online video distributors, which would reduce choices for consumers, the Justice Department added.

“That potential harm would be reduced if AT&T sells either Turner Broadcasting or DirecTV,” said Salop, who has consulted with a competitor about the AT&T-Time Warner deal.

Anti-trust expert and Iowa congressional candidate Austin Frerick is able to look at what the Justice Department is doing with very clear eyes. "First off, " he told us yesterday, "Americans don’t want antitrust to be a political tool of any president. That said, AT&T has warned that DoJ’s Time Warner lawsuit will chill other deals... Good! This is the point. Anti-competitive mergers are bad. The era of unchecked corporate consolidation needs to end and if the starting point is here, so be it. We can look back at it as one of the few good things of the Trump Presidency."

Now, if Trump could only see how his FCC's anti-Net Neutrailty agenda is even worse than the AT&T acquisition of TimeWarner when it comes to putting too much power in too few hands! Now, watch Elizabeth Warren, giving the an address about America's monopoly problem: