ICYMI: Antitrust Exemptions Aren’t The Way To Go
Ahead of the House Judiciary hearing today, “Online Platforms and Market Power, Part 1: The Free and Diverse Press,” competition expert Matthew Lane wrote for the Disruptive Competition Project on experts’ criticism of antitrust immunities for the news industry. His takeaways:
1. Antitrust exemptions don’t benefit consumers or the small businesses they’re intended to save, as past attempts like the News Preservation Act of 1970 (NPA) make clear.
2. The rapidly changing nature of the news industry today makes antitrust exemptions a slippery slope.
3. There are better options than creating a cartel.
Antitrust exemptions don’t benefit consumers or the small businesses they’re intended to save.
—In 2011, then-head of the Antitrust Division Christine Varney warned that immunities should be rare “because they tend to benefit a small minority of economic actors at the expense of consumers.” “Varney stated ‘[t]hese well-intentioned, but ultimately misguided, attempts to permit otherwise illegal behavior correctly have not been adopted’ and stressed that vigorous competition on the merits ‘best serves the interests of consumers.’ Varney went on to agree with the Antitrust Modernization Commission’s ‘conclusion that departures from this maxim of our free enterprise system should be rare because they tend to benefit a small minority of economic actors at the expense of consumers in the form of higher prices, reduced output, lower quality, and reduced innovation.'”
—Lane points to an essay by antitrust scholars Maurice Stucke and Allen Grunes that criticized antitrust immunity for the media and noted that the misguided NPA benefited large papers, not the intended smaller papers. “The essay singles the NPA out specifically as being a good example of why antitrust immunity for the media is a bad idea. The essay argues that the NPA largely originated from a lobbying effort by major newspaper owner the Hearst Corporation. The NPA was heavily opposed by the DOJ and Richard McLaren, the then-head of the Antitrust Division. The essay notes several failings of the NPA: it mainly benefited large newspapers rather than the smaller papers intended, JOAs incentivized some smaller papers to shut down in exchange for a share of the surviving papers’ profits, and it has not seemed to improve editorial quality (some beneficiaries were actually criticized for their poor quality after NPA passed).”
—”Essentially, the NPA has not appeared to help much and may actually have condoned bad behavior.”
The rapidly changing nature of the news industry today makes antitrust exemptions a slippery slope.
—Technology disrupting the news industry isn’t anything new. “It’s easy to forget that technology has regularly disrupted the news industry. Video may have killed the radio star, but radio was the first disruptor. During the ’20s and ’30s radio came into its own as a national competitor to the printed news. Newspapers were forced to adjust, and revamped their formats, added more in-depth reporting, and started offering things radio couldn’t like comics and weekend magazines. Competition from televised news in the ’50s again forced newspapers to adapt. Some, like USA Today, adopted color newsprint and short, to the point stories. Others focused on feature stories and detailed analysis pieces. Newspapers also focused on bringing their costs down. Competition from televised news may have led to the death of afternoon papers, but newspapers adapted to remain strong competitors.”
—Lane: “The continued and rapid evolution of the journalism industry,” which has led to more competition from smaller news sources, “is itself a good reason why trying to draft additional antitrust exemptions is a bad idea.” “In the past few decades we’ve seen tremendous changes in how Americans get their news. The sources are changing. We’ve gone from a largely journalist-driven news market to one where it is common to mix reporters and pundits. At one point 12% of online Americans cited Jon Stewart’s The Daily Show as where they got their news, and it was more trusted than MSNBC. Today there is a comedy news program on Netflix called Patriot Act. News aggregators are also playing an increasing role in how Americans find news. These include social aggregators like Twitter, Facebook, and Reddit. It also includes news-focused aggregators like Google News. There is more competition from smaller news sources, including online-only publications that cater to specific interests. It would be extremely difficult to capture this rapidly changing environment in legislative text.”
There are better options than creating a cartel.
—Creating a monopoly to balance alleged monopolies elsewhere “only multiplies your monopoly problems.” “Another major problem is that antitrust immunities often rely on the idea of countervailing power, balancing one party’s negotiating leverage by increasing another’s. But this idea is widely criticized when raised as a defense in merger challenges under the Clayton Act. This is because creating monopoly power to balance alleged monopoly power somewhere else in the supply chain only multiplies your monopoly problems.”
—Per Christine Varney: Rather than creating cartels, if companies fear financial failure, mergers and business review letters are legitimate actions that have pro-competitive benefits. “At the same time, antitrust laws have evolved to permit legitimate behavior that was once condemned. The NPA was partially created to allow new JOAs when a company is ‘in probable danger of financial failure.’ But as Varney notes, the failing firm defense has been available to justify mergers of competitors for some time now. Varney also pointed to several business review letters that ‘illustrate the Division’s agile approach to newspaper collaborations.’ The business review letter is a way for any company to request a review of proposed conduct and the Antitrust Division will state its enforcement intentions with respect to that proposed conduct. The Antitrust Division has issued several letters on media proposals stating no present intention to challenge the conduct and noting potential procompetitive benefits.”