Thursday, January 20, 2011

A Tradition I Miss

That would be the strong anti-trust arm of the government in the olden days. The antitrust division still exists, of course, but the current fashion is not to break up monopolies or near-monopolies. Instead, we ask them to use their powers gently.

Thus, we are going to get a media goliath to match the other goliaths in markets such as energy and automobiles:
The world has never seen a media goliath the likes of the entity that was born Tuesday after the Federal Communications Commission approved the merger of Comcast, the nation’s largest cable company, and NBC Universal, the legendary entertainment giant. The Justice Department also announced its approval on Tuesday.


Comcast’s acquisition of NBC Universal is a transaction like no other that has come before this Commission—ever,” Copps said in a statement. “It reaches into virtually every corner of our media and digital landscapes and will affect every citizen in the land. It is new media as well as old; it is news and information as well as sports and entertainment; it is distribution as well as content. And it confers too much power in one company’s hands.”
Comcast, the nation’s largest cable television company and internet provider, has 23 million cable subscribers and 17 million broadband customers. NBC Universal, of course, owns the “Peacock Network.” It also owns 10 FCC-licensed NBC stations in major cities including New York, Chicago and Los Angeles, as well as the popular Spanish-language Telemundo network. And of course, there are the cable networks: USA, CNBC, MSNBC and Bravo. Throw in Universal Pictures and various theme parks, and you’re talking about some serious entertainment assets.
The basic idea behind antitrust legislation is a simple one: The benefits of competition only accrue when there IS competition. If one firm becomes so large that it covers most of the marketplace where do the consumers go who are disgruntled with its prices or the quality it provides?

You might argue that potential competition always sits excitedly at the very border of such a market, ready to jump in and offer alternative product packages and competitive prices. That potential competition could make a near-monopoly behave, right?

Except that in markets such as the media those potential entrants need humongous amounts of money to enter. It is that initial capital requirement which will mostly keep them from entering, not to mention the fact that with the initial market concentration comes the ability to set rules to suppliers and/or customers which make entry more and more difficult. As an example of the latter, prices could be set so that anyone who buys or sells partly elsewhere will have to pay a much higher price.

Such maneuvers used to be illegal. I have no idea if they still are, but the enforcement of the traditional rules seems to have weakened during the recent history.