Can We Trust Antitrust?
WHY YOU SHOULD CARE
Because two big decisions by the FCC could change how we work, play and veg out.
Pooja Bhatia is an OZY editor and writer. She has written for The Wall Street Journal, The New York Times and the Economist, and was once the mango-eating champion of Port-au-Prince.
By Pooja Bhatia
Our antitrust regime is more than a century old — and it’s having a serious bout of future shock.
The media-market landscape is undergoing a slow-motion earthquake. Among the temblors: The Federal Communication Commission is mulling a fast lane on the information superhighway. Comcast wants to marry Time Warner. Amazon is trying to bury the Hachette (and, perhaps, other publishers), using its market power to force concessions. With the FCC on the cusp of major decisions that could affect everything from how we work to what we read, the body politic is torn over whether the set of laws and policies that govern fair competition are up to the challenge.
In other words: Can we trust antitrust?
Net neutrality proponents say efficiency and low customer prices are not the only values at stake.
Those on the left tend to say no. Antitrust is too narrow, backward-looking and doddering to keep up with the political questions of the Internet age. We need agency oversight to safeguard our open society.
Free marketers say what they usually do: The market will allocate the most efficient distribution. Though weak, antitrust law is sufficient.
These debates were once the province of coders, legal wonks and policy nerds. Now they’re in our living rooms and on our laptops. Last month, fans of John Oliver crashed the FCC website after he encouraged them to write in about “cable company fuckery.” The law professor who coined “net neutrality” back in 2003, Tim Wu, is making a run for New York lieutenant governor. Celebrities like Eddie Vedder and Mark Ruffalo have gotten into the game, too: A bunch of them wrote to the FCC in May, urging it to “scrap” the tiered system and “restore the principle of online nondiscrimination.”
For this shift, we could credit a trio of players: the FCC, Verizon and the D.C. Circuit Court of Appeals. Verizon had sued the FCC, demanding it allow Internet service providers to offer faster speeds to content providers who pay more. In January, the D.C. Circuit sided with Verizon, ruling that the FCC could not prevent companies from instituting tiered pricing schemes — unless it were willing to classify the Internet as a “common carrier,” putting it under a different regulatory regime. Instead, FCC Chairman Tom Wheeler has drawn up new rules enabling cable companies to charge tiered prices.
Or perhaps credit is due to Comcast and Time Warner, which announced plans to merge earlier this year. Their merger would give the company control over about two-thirds of the American broadband cable market. Some fret that the big new company “could extract unconstrained fees for access to its subscribers or for entry to its network,” in the words of Susan Crawford, a professor at Cardozo Law School.
Those who study this stuff generally agree that tiered pricing and mergers result in greater efficiency. Even proponents of net neutrality, for instance, concede that it’s not particularly efficient. If everyone pays the same price no matter what they use, you’ll get bandwidth hogs and free riders. And the Comcast-Time Warner merger would allow economies of scale, synergies and perhaps lower customer prices.
But net neutrality proponents say efficiency and low customer prices are not the only values at stake, or even the main ones. They argue that the FCC decisions will implicate free speech, the political process and our democracy.
Antitrust law used to protect us as citizens. Now it just seeks to protect us as consumers.
“I have the highest admiration for the antitrust laws and the agencies that enforce the antitrust laws,” Wu testified at a House Judiciary hearing last month. “But I simply don’t think they’re equipped to handle the broad range of values and policies that are implicated by net neutrality and by the open Internet.”
Wu has argued that the Internet raises more profound questions than the economists at the Federal Trade Commission, who oversee antitrust, can answer. Others take the argument further, claiming the way antitrust analyzes economics is too narrow — focused only on consumers, and not on producers, the overall health of the economy, or any other interest.
“Judges and legislators have reinterpreted antitrust law to emphasize above all the promotion of low prices for consumers, which Amazon delivers, rather than the interests of producers — whether these are authors, book publishers, or mom-and-pop grocery stores — that are threatened by giants,” wrote Steve Coll in a recent article that examined Amazon. As now applied, antitrust has allowed Amazon to concentrate with relative impunity, Coll argued.
Barry Lynn, an expert on monopolies at the New America Foundation, has a more political version of Coll’s argument. Antitrust law used to protect us as citizens. Now it just seeks to protect us as consumers. And it defines consumer gain almost solely in the form of quantity, not quality.
Lynn and others argue that antitrust law is not suited to the innovation age. The Sherman Antitrust Act was born in 1890, when the telephone was barely a teenager. But recently, the pace of innovation has accelerated. Industry concentration has accelerated, too — not just because of mergers of similar companies (think Sprint and T-Mobile), but also through “vertical integration,” as when a content distributor buys up a content producer.
Law hasn’t much kept up, especially not antitrust law. Antitrust is a fact-intensive, backward-looking endeavor, heavy with litigation. It can take years for courts, the Department of Justice, or the FTC to figure out whether an action constitutes “unreasonable” restraints on trade. By then, the world has probably moved on, and the tech question at issue is moot.
If only our jurisprudence evolved as quickly as our technology. There should be an app for that.