The most interesting story to emerge from the ongoing political panic over the XM-Sirius merger is former attorney general John Ashcroft’s attempt to represent both the merging companies and their opponents at the National Association of Broadcasters. The NAB ultimately hired Ashcroft’s lobbying firm to oppose the merger after XM Satellite Radio rejected an offer to lobby for the deal. Playing both sides of a political debate is hardly unusual for a lobbyist, but when a man who once oversaw federal antitrust regulation effectively declares that a merger review is merely another political decision—like an appropriations bill—it helps undermine the arguments of those who insist antitrust is a “different†type of regulation based on sound economics.A couple weeks ago, I got into a debate with two of the contributors at Technology Liberation Front, Adam Thierer and James Gattuso. Thierer works for the Progress and Freedom Foundation, which describes itself as a “market-oriented think tank†that advocates, among other things, “antitrust over regulation.†Our debate was over which agency was worse, the Federal Communications Commission or the Federal Trade Commission. I said the FTC; Thierer and Gattuso said the FCC.
It wasn’t enough for Thierer and Gattuso to emphasize what they perceived as the unique harms of the FCC; they also felt the need to rationalize antitrust on some level. This led to some rather comical arguments, first from Thierer:
[T]he FTC is willing to examine problems after the fact and not engage in preemptive regulation of industry behavior of market structures. The FCC is a “regulate first, ask questions later” agency. At least the FTC waits until someone suggests a problem has developed before regulating.
This is categorically false. Antitrust regulators often “engage in preemptive regulation of industry behavior of market structures.†Health care is a prime example. The FTC and DOJ have spent years telling physicians and hospitals how they can and cannot organize their business models.
Merger review is another example of preemptive regulation. The XM-Sirius deal may be the subject of political opposition, but in most cases, the DOJ and FTC challenge deals without any outside lobbying. Staff attorneys simply invent conflicts out of thin air. In some cases, other firms in the market and customers have opposed regulatory intervention.
When I made this point to Thierer, Gattuso replied,
Antitrust law, for all its flaws, has been surprisingly focused on actual economics. Just compare the FCC’s public interest standard to the concept of consumer welfare in antitrust.
I don’t see the difference. For one thing, antitrust regulators often invoke the “public interest†standard. Secondly, how does “actual economics†determine “consumer welfare†in a regulatory context? The only way for consumers to assert and defend their interests is through the marketplace where their preferences can be revealed and accounted for. When the state acts as a monopoly regulator, “consumer welfare†becomes whatever the regulator says it is, whether it’s true or not. Consumers can’t tell the FTC to stop an antitrust enforcement action when it’s not in their interests. And the regulators assert their own infallibility when it comes to knowing what “maximizes†consumer welfare—a practice we’d normally call paternalism, not “actual economics.â€
In merger review, antitrust regulation is concerned with only one thing—price. If a merger may lead to short-term price increases, regardless of the hypothetical reason, it is “anti-consumer.†XM and Sirius officials know as much; they’ve offered to accept DOJ-imposed price controls on their combined services. Do price controls sound like the product of good economics? They do according to Thierer and Gattuso, two men who claim to be defenders of free markets. In reality, they’re doing far more damage to economics and free markets than amoral lobbyists like John Ashcroft.
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XM and Sirius have lopsided balance sheets, expenses are growing faster than revenues, and this, coupled with China’s test of satellite-killing technology has placed the future of subscriber-paid satellite radio in doubt. The merger, far from resulting in monopoly power, offers the only hope of preserving competitive alternatives to the frankly monopolist terrestrial broadcast conglomerates.
XM and Sirius have lopsided balance sheets, expenses are growing faster than revenues, and this, coupled with China’s test of satellite-killing technology has placed the future of subscriber-paid satellite radio in doubt. The merger, far from resulting in monopoly power, offers the only hope of preserving competitive alternatives to the frankly monopolist terrestrial broadcast conglomerates.
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