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Today, Consumer Federation of America, in collaboration with Public Knowledge, published a paper explaining why the government’s case against the AT&T-Time Warner merger is both warranted and consistent with past enforcement practices. The paper also demonstrates the necessity of the case to prevent possible coordination among dominant firms that would likely thwart the development and expansion of innovative online video platforms as well as cheaper alternatives to traditional cable and satellite services.
Entitled “Antitrust Practice, Economic Evidence and Market Reality Compel the Department of Justice to Oppose the AT&T-Time Warner Merger,” the paper argues that AT&T sits in the center of a tight oligopoly of a few dominant transmission and content companies that require substantial public oversight to prevent extending past abuses of both consumers and competition in the digital marketplace.
The paper reaches this conclusion through an extensive analysis of decades of market and regulatory developments, both involving antitrust enforcement and regulatory policy, across all the markets involved in both AT&T and Time Warner’s various businesses.
Key findings include:
- The application of the merger framework under the conditions in the communications sector shows that the AT&T-Time Warner merger poses a severe threat to competition.
- Policies to prevent discrimination against independent service providers in access to critical bottleneck facilities deliver significant benefits in terms of the quality of content and consumer choice.
- Historical antitrust interventions such as the Microsoft case delivered substantial pro-innovation and pro-consumer benefits, and the Microsoft case in particular is analogous to the AT&T-Time Warner suit due to the presence in both of real or likely vertical leveraging.
- Given the growing importance of a small number of platforms in the digital communications space, which is described in the paper as a “tight oligopoly on steroids,” the Department of Justice’s decision to oppose is not only correct on the facts, it is squarely within the mainstream of antitrust law and practice because the merger would harm competition, slow innovation, stifle the growth of online video distribution and raise consumer prices.
- In abandoning the 2015 Open Internet Order, the FCC has turned a blind eye to anti-consumer, anticompetitive practices that afflict all digital communications markets -- increasing the need for the Department of Justice to act.
- Assistant Attorney General Delrahim should welcome the opportunity to lay out the broad basis for the decision to oppose the merger in a rich qualitative narrative during the AT&T-Time Warner trial.
The following can be attributed to Dr. Mark Cooper, Director of Research at Consumer Federation of America:
“Economic theory, empirical evidence and antitrust practice have all been moving toward a greater recognition of and concern about the market power that results from the control of chokepoints through which digital communications flow. ‘Over-the-Top’ competition is the best hope consumers have, but network operators will kill that competition if they are not stopped. The most effective way for antitrust authorities to protect competition is to reject vertical mergers that threaten to dramatically increase the market power of network operators like AT&T.”
The following can be attributed to Gene Kimmelman, President and CEO of Public Knowledge:
“If AT&T and Time Warner are allowed to merge, consumers will likely face ongoing price increases and lose new online options for smaller bundles of video channels and services at lower prices.”
You may read the full paper here. Dr. Mark Cooper is also available for interview.