Trump’s Dubious Trust-Busting

The assault on AT&T-Time Warner seems to be more about politics than antitrust law.

WSJ editorial. 

"Justice last sued to block a vertical merger under Section 7 of the Clayton Act in 1977 in United States v. Hammermill Paper Co. It lost. Unlike horizontal mergers of businesses that directly compete, the government in vertical deals must marshal evidence to prove that vertically integrated companies would reduce competition and harm consumers.

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In many of the two dozen or so vertical mergers since 1977 in which the government has raised antitrust concerns, Justice negotiated a settlement imposing behavioral remedies to blunt speculative anti-competitive effects. That includes its 2011 approval of NBCU’s merger with Comcast in which it barred the cable giant from withholding its content from competitors. Justice hasn’t said that the Comcast restrictions were insufficient to curb antitrust abuses, but it won’t entertain such limits for AT&T and Time Warner."

"Supposedly AT&T would threaten to withhold Time Warner content from its diverse competitors to force them to pay more."

"Time Warner accounts for less than 10% of broadcast and cable viewership while DirectTV makes up just 20% of the national multi-channel video programming market. CNN and HBO hardly provide invaluable or indispensable programming, and in any case Time Warner would be giving up hundreds of millions of dollars in revenue if it withheld its content from other distributors. As for raising prices, Time Warner can do that now if it can get away with it. Merging with AT&T hardly gives it more ability to do so.

Justice’s even stranger claim is that the merger would “impede disruptive competition” from “emerging online competition.” Emerging? That adjective will surprise Netflix , with its 110 million subscribers and more than two dozen original shows; or Amazon, with its original TV series and movies and its 90 million Prime members."

"The reality is that competition in media content and distribution has intensified, and traditional pay-for-TV distributors including cable companies and DirectTV are losing customers. AT&T has 25 million video subscribers, down half a million this year. The largest cable companies boast fewer than 50 million customers. Acceleration in cord-cutting is harming content producers like Time Warner that charge cable companies per subscription and sell ads based on viewership.

Increased competition is forcing innovation and consolidation in business models."

"AT&T like Comcast wants to purchase content and use its ability to mine user data to better target ads at viewers. This could help the combined company better compete with Google and Facebook , which already draw 60% of digital ad revenues in the U.S."