Monday, November 7, 2016

The Sound of Silence: A lack of regulation in 21st century media mergers

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&region=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

2 comments:

  1. 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.

    We 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.

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  2. 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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