What does it mean when the most
pro-business candidate in the past 50 years slanders the most recent billion
dollar merger? There isn’t a clear answer. In the wake of billion dollar
mergers in the past decade, the recent $85.4 billion Time Warner-AT&T
merger has set a new standard for business consolidation. But the very fact
Donald Trump has voiced concern raises more than one red flag.
Donald
J. Trump has already condemned the deal. Campaigning in Gettysburg, Pa., on
Saturday, Mr. Trump said he would block it if he were president, “because it’s
too much concentration of power in the hands of too few.”
In some ways this sort of media
conglomeration has been seen before, take Comcast’s $30 billion takeover of
NBCUniversal or Verizon’s acquisitions of Yahoo and Huffington Post. But in
spite of this growing trend in media company deals, this is one we haven’t seen
before. The scope at which Time Warner-AT&T will operate exceeds the
current regulatory functionality of our government.
Some have cited the $800,000
fine that Comcast received in 2012 as a harbinger of a monopolization in the
cable market. Skeptics claimed it would be the first of many lawsuits launched
towards the perennially disliked cable company (just look at their annual approval ratings, only Time Warner lies lower). But instead the FCC and FTC
have remained remarkably silent over the past four years.
The fright of the merger is not
the trail of scandals Time Warner and AT&T have behind them, but the
disturbing lack of our regulatory agencies in enforcing the very policies. To
many economists, the announcement of the merger came as a left field shock,
mostly because the deal resembles that of classical vertical integration
pioneered by Rockefeller in the late 19th century. And it was
Rockefeller and Carnegie’s vast fortunes that prompted the regulation overhaul
of the early 20th century. Yet we seem to be careening back on that
path, even with the power of hindsight.
While the distinction of
vertical integration isn’t as clear as Rockefeller’s deliberate monopoly over
every step of oil refinement, with the Time Warner-AT&T merger, it is very
plain to see that the wireless market of AT&T doesn’t overlap with the cable
platform of Time Warner. But combined, the new conglomerate can essentially
control – top to bottom – all of the media services the average American
requires. This is what distinguishes this merger from other mergers.
Unlike the Comcast-NBC merger which
by dollars is the closest comparison, Comcast didn’t seize control of another
media platform, but rather one entertainment company, and one television
station (and its sister companies). But this deal consolidates a different sort
of power, and looms to dominate our telecommunications market.
Most startling is the lack of
teeth from the DoJ and our regulatory commissions. These sorts of mergers are
never made public without vetting from the Judicial and Executive branches.
Months, if not years, were spent analyzing this deal, and yet our laws and our
regulators found no major issues.
In the wake of the worst
financial meltdown since the Great-Depression, and with the consternation of
even Trump, we should seriously reconsider our country’s regulatory policy as
big business gets bigger and bigger, with fewer and fewer competitors.
Sources:
http://www.nytimes.com/2016/11/07/business/media/media-merger-success-comcast-and-nbcuniversal-say-yes.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region®ion=top-news&WT.nav=top-news&_r=0
http://www.nytimes.com/2016/10/23/business/dealbook/regulatory-microscope-lies-ahead-for-att-and-time-warner.html
http://www.nytimes.com/2016/10/23/business/dealbook/att-agrees-to-buy-time-warner-for-more-than-80-billion.html
http://www.theacsi.org/index.php?option=com_content&view=article&id=149&catid=&Itemid=214&c=all&sort=Y2014
I think the monopolization of media is a very ominous development. I do not like the idea of one Board of Directors controlling the dissemination of news. That kind of organization is very conducive to bias and yellow journalism. We cannot have a small group of people controlling the information the masses receive.
ReplyDeleteWe need better regulatory policy and better anti-trust laws. Monopolization undermines democracy and limits free speech.
If capitalism is about the free market and competition, we need a myriad of voices, all offering different perspectives.
I agree with many points you raised in your post, especially that the business style is reverting the monopoly era we had in the past. I do think in general the US has been reverting to older practices and ideologies so the fact that business praxis are reverting to Rockefeller era style does not come as that big of a surprise to me; however unfortunate it is. Regarding the news, I find myself more worried about the fact that there is no source of unbiased news and with the growth of monopolies there is going to be less of an opportunity for such an entity to survive.
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