Ahead of the Curve: Antitrust for the Information Age

A convenient substitute for the brain strain of thinking runs as follows: if the Trump administration is for something, then I’m against it. This almost always works, and saves a great deal of effort. Every now and then, though, it yields an incorrect result.

A notable example is the Justice Department’s suit to block the merger between AT&T and Time Warner, the trial of which is now unfolding in Washington, DC. To be sure, the reasons why this suit were brought smell worse than last week’s fish. Time Warner owns CNN. President Trump hates CNN. Anything CNN wants, Trump doesn’t. If you ask ten Washington pundits why this suit was brought, nine of them will tell you that’s the sole reason, and the other one will waffle.

Whatever the reason for bringing the suit, I’m glad the government did so, and (not that it matters) I’m rooting hard for the government to win.

Traditional antitrust law concerns exclusively dollars and cents. Economists have devoted whole careers to arguing about how much more consumers under arguably monopoly or oligopoly market conditions do or don’t have to pay for goods and services. Most of this analysis involves “horizontal” combinations between competitors in the same industry, e.g. hospitals or oil refiners. Less common are cases against “vertical” combinations between firms at different points in the production process—e.g. raw materials, manufacturing, distribution, and retailing. That’s what the pending case involves—a vertical combination between AT&T, which has the satellite capacity to deliver news and entertainment content, and Time Warner, which has the creative capacity to produce that content.

The policy arguments against vertical mergers are less straightforward than those against horizontal mergers. There’s just not as much wrong with a single firm controlling multiple stages of a process as there is with a firm having a chokehold on nearly all access to a particular good or service. Vertical mergers are subject to attack because they theoretically dissuade powerful firms from creating their own startup units. AT&T, for example, could conceivably go out and hire some creative talent to compete against Time Warner. Allowing them just to buy it up short-circuits that possibility, leading to fewer players in the market and thus higher costs for consumers.

Purely in terms of the dollars and cents effect on information consumers, I think this argument is a stretch. If I were king, though, I wouldn’t reduce the issue to dollars and cents. I would say that the information industry is a special case, and that the diversity of the product offered to information consumers is even more important than its price. That may not be true for steel, or tomatoes, or medical care, where price and its relationship to quality are paramount. But I would say it is definitely true for information, the base building block of our entire social structure. Having more players, more voices in the information sector is per se better for humanity than having fewer players, whether or not there is any measurable effect on price.

Here’s another example: Sinclair Broadcast Group, already the single largest owner of local television stations in the country, is trying to become even bigger by purchasing Tribune Media for nearly four billion dollars. Sinclair owns just under 200 stations now; adding Tribune Media would push the number up to 233. Then there’s the just-completed merger between the Discovery Channel and the Scripps Network channels (HGTV, Food Network, and Travel Channel), and the rumored combination between Disney and Fox.

Are there practical implications to all this consolidation? You bet. Sinclair, for example, recently ordered its affiliates to recite pro-Trump propaganda bashing unspecified “fake news.” The explicit instruction from headquarters was to recite the mantra during news time, not promo time, and to “produce the attached scripts exactly as they are written.” One (anonymous) news anchor complained that  he “felt like a POW recording a message.” Another station in Wisconsin showed some guts: “WMSN/FOX47 Madison did not air the Sinclair promotional announcement during our 9pm news this weekend,” the station said on Twitter. “Rather, we stayed true to our commitment to provide our Madison area viewers local news, weather, and sports of interest to them.” I suspect the manager of this station has another job opportunity lined up.

The Sinclair-Tribune merger is awaiting government approval—the same approval that was denied to AT&T and CNN parent Time Warner. President Trump has been churning out a series of pro-Sinclair tweets, such as Tuesday’s:

The Fake News Networks, those that knowingly have a sick and biased AGENDA, are worried about the competition and quality of Sinclair Broadcast. The “Fakers” at CNN, NBC, ABC & CBS have done so much dishonest reporting that they should only be allowed to get awards for fiction!

If only I could find a sucker big enough to take my bet that the Trump administration will wind up approving the latest Sinclair acquisition, I could become a wealthy man.

If Sinclair Broadcasting wants to broadcast pro-Trump propaganda, that’s fine. If some other outlet wants to broadcast anti-Trump propaganda, or just to play it straight, that’s fine too. They can do what they want. What’s not fine is when the number of voices available for the public to choose from dwindles. The Humanist Manifesto says that humanists “are committed…to making informed choices in a context of freedom.” We can’t do that without broad access to information.

I suspect there is little precedent in traditional antitrust law for treating business combinations in the information industry more strictly than others. That’s unfortunate. For better or worse, we live in the Information Age, and we’d all be better off with greater diversity of information options to choose from, regardless of any economic impact.