Yesterday in Econ 202, we discussed US antitrust laws and the ways that the government tries to - on the surface - promote competition. Holman Jenkins had a nice editorial in yesterday's Wall Street Journal ($$$) on some of the practical problems associated with antitrust enforcement. A key issue in many cases is the definition of the market. Holman is right to sneer at some of the definitions officially put forth. Another issue is the motivation of those brining antitrust lawsuits and the motivation of those working in the antitrust agencies. The online content is not free, but students can still pick up copies of yesterday's Journal in Morris Hall through today. Here's some stuff from the column:
Federal agencies have two choices when presented with a merger. They can find a "problem" -- in which case their budgets are justified and their walls fill up with scalps. Or they can find no problem. Guess which they do?
Take the Federal Trade Commission lawsuit to block a proposed merger of Office Depot and Staples, a close parallel to Sirius-XM. The two would have accounted for just 4% of the office-supply market, but 100% of the market for office supplies purchased from . . . Office Depot or Staples!
Take FTC's failed attempt to block a deal bringing Häagen-Dazs and Dreyer's under the same roof, which in a better world would forever have deprived its promoters of the respect of their peers. The agency's case was built on the premise that "superpremium" ice cream doesn't compete with, er, ice cream.
And so on, with Oracle-PeopleSoft, EchoStar-DirecTV, Blockbuster-Hollywood Video, WorldCom-Sprint, etc.
...Never mind that 15 years ago the satellite radio industry didn't exist, whereas conventional radio, sprawling across the AM and FM dials, has been around for a century and more. Motorists can listen to their iPods, CDs, cassettes and DVDs too. And don't forget the mobile broadband revolution and high-def radio revolution just around the corner. In the home, to treat XM and Sirius as an entertainment "monopolist" would make a mockery of the concept. To fuss about the distribution technology at all -- the use of satellites as opposed to terrestrial transmitters -- is utterly beside the point. The business model for both is pay radio in a universe of free radio. Neither has made a profit.
Naturally, leading the opposition is the National Association of Broadcasters. That competitors would lobby against a merger as "anticompetitive" is now accepted without a guffaw. Even one or two normally sentient commentators have fretted that if the Justice Department and Federal Communications Commission (which have joint custody) fail to challenge the merger, the nation's inventory of antitrust "principles" and "precedents" might be rendered null. But those principles and precedents are mostly bunk, the fruit of the self-interested exertions of the antitrust professionals themselves. Such whimsies and brainstorms make a poor excuse for brushing aside the rights of companies and their owners (rights that are rarely acknowledged in antitrust discussions anymore).