The Federal Trade Commission went crying to a federal court today because Blockbuster, Inc., did an inadequate job of groveling when Commission lawyers violated the company’s Fourth Amendment rights. In a filing today with the district court in Washington, DC, the FTC demanded an injunction to prevent Blockbuster from pursuing its unsolicited bid for Hollywood Entertainment Corp.Under the Hart-Scott-Rodino Act (HSR), a company that seeks to acquire another firm must give the government 30 days notice to review the proposed transaction before the deal can be consummated. HSR forces firms to turn over virtually any business information demanded by antitrust regulators—a clear violation of the Fourth Amendment’s probable cause and judicial review requirements. In this case, the FTC is unhappy with Blockbuster’s disclosure of information about the company’s video rental pricing. Presumably, FTC staff lawyers are busy manufacturing an argument that a Blockbuster-Hollywood merger would illegally reduce competition in the video rental market (although the FTC has already cleared a rival bid for Hollywood made by Movie Gallery Inc.)
Blockbuster, according to the FTC, provided erroneous pricing data because of a computer error. Although Blockbuster said the FTC has since received the correct information, the FTC wants to reset the 30 day clock, otherwise Blockbuster could proceed with its takeover bid as early as this Monday.
The FTC is clearly stalling for time, hoping the longer it stretches out the review, the more likely Blockbuster will drop its bid and let the Movie Gallery bid—already approved by Hollywood’s board—proceed. The FTC, rather than shareholders, will thus decide Hollywood’s fate. Yet another day in George Bush’s “ownership society.”
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Holy smoke. That’s low.
I wonder what friends Movie Gallery has within the government.
See, I actually work part time with Hollywood.
The fact is, there’s also a private invesetment group (the original owner of Hollywood, before the company went public) that is also trying to purchase it. His bid has been significantly higher so far, then both Movie Gallery and Blockbuster. I really don’t understand why the press has completely ignored this. It’s still possible, at this momment, that neither will get Hollywood.
Anyway, It doesn’t really matter to me who wins, although, I’m also very opposed to the Fed rackateering.
In my experience, Hollywood is simply too big. It has a lot of bureaucratic inefficiencies. From it taking several months to get employies paychecks right, to not sending us things we need that the manager has ordered. To not giving us enough security clips for our movies. The list goes on and on.
But it seems to me, from my perspective, that the reason the company has been able to get so big and bloated with-out free market competition knocking it down — or at least forcing it to become more efficient, is precisely because the movie rental industry is not a free market to begin with.
The Copyright laws, the licensing, etc., all make it extremely prohibitive for a new entrance into the market. Rothbard said that Monopolies can’t last long for the same reason that socialism doesn’t work. Too many costs get internalized that the company is simply unable to to perform accurate economic calculation anymore. But because it isn’t a free market, more efficient smaller companies are not nearly as able to exert competitive forces to help crub this problem.
If Movie Gallory, Hollywood, and Blockbuster are huge “evil” corporations (they’re not) it’s only because the current legal climate practically makes competition in the industries impossible.
2ndly, I’ve been reading Bill Bonner’s “Final Reckoning Day” and I agree with him about some of these merger issues. The majority of these acquisitions are not capitalistic. Not really. They’re ploys to push the stock price higher, but they’re not really going to make any actuall real money for the investors. They aren’t going to increase profits for either Blockbuster or Movie Gallery. It’ll put them into a lot of debt is what it’s going to do. Which is something else encouraged — if not outrightly caused — by our easy money FED.
So it seems to me that government interference has caused these “problems” (And there are some problems) so it needs to “Fix” them, by even more thugery. State interference begets more state interference.
The thing that’s shocking to me here though, isn’t so much the internet rental sources (they really aren’t that great either.) But the fact that the Fed doesn’t even think about substitutes. I mean, you can typically BUY a movie, for less then the price of renting it twice for all three of these places. Wall~Mart typically sells movies for around $9 the first couple weeks they’re out. Many times you can purchase it 2nd hand for the price of renting it once. My father bought X-men at half.com for only 75 cents (!) plus shipping — so like $3 bucks. But that shipping cost was actuall spread out over several other purchases as well, so it was actually cheeper.
This is the real competition the movie rental business faces. Overstock, half.com, 2nd hand, and movie and video game stores all over the place. . . Yet the fed completely ignores this type of competition.
Anyway, those are some of my thoughts.
Tracy
One of our clients is Blockbuster, and I wish them the best of luck in acquiring Hollywood. They are both facing lots of competition from outside their typical “walk-down-the-street-and-rent-a-movie” industry, and if they think this will help, then great.
They have been EXTREMELY motivated to stave off obsolesence at the hands of Wal-Mart and netflix, which has resulted in some very cool things for the consumer.
I think Tracy is right in pointing out that the metrics used to determine “market share” in such industries is flawed. It would be easy to define down such categories to make any company monopolistic.
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