In Wealth of Nations,
Adam Smith foresees that capitalist industrialists could collude with
government at the expense of labor. In On the Genealogy of Morals,
Friedrich Nietzsche argues that keeping laborers to a subsistence wage is
necessary for capitalists to have enough wealth accumulated to invest in
culture. Rather than being immoral, exploitation is simply part of life and
thus the resulting economic inequality cannot be removed at its source. Low
wages may simply be a feature of how labor supply typically relates to business
demand for workers, whereas highly educated professionals are not so numerous and
can demand higher compensation. Meanwhile, what about consumers as capitalist
industrialists continue to accumulate capital in part by being able to pay
large workforces subsistence wages and engage in mergers and acquisitions, such
that competitive markets are turned into oligopolies and even, as in the case
of Rockefeller’s Standard Oil in the 1870s, monopolies capable of extracting “monopoly
rents”? In the U.S., the Sherman and Clayton Acts in the early 1900s were
oriented to safeguarding competitive markets from being undermined by business
titans, but enforcing those federal laws would seem to fly in the face of
collusion between capitalists and their respective governments. As a case in
point, the U.S. Justice Department gave the green light to Paramount’s
take-over of Warner Brothers/Discovery even as President Trump had a financial
interest in the deal going through. In the American federal system, the state
governments could act as a check, and on July 13, 2026, the announcement came
that California plus eleven other states, led by their respective attorneys
general, filed a lawsuit challenging the merger on the basis that it would
violate Section 7 of the Clayton Act. American consumers had reason to be
thankful that they were still in a federal republic of republics, even though
the growth of power at the federal level had nearly eclipsed the federalism, at
least as it was originally intended—as enabling checks by the feds on the
states and vice versa.
The Clayton Act “holds that mergers that may substantially lessen competition or tend to create a monopoly are illegal.”[1] In seeking to acquire Warner Bros. Discovery for $111 billion, Paramount’s mega-merger was raising concerns before closure that “combining two major Hollywood studios would hurt the industry while giving too much power” to Paramount’s CEO, David Ellison, in the film and television industries.[2] Hence California Attorney General Rob Bonta “led a group of 12 attorneys general in filing a lawsuit challenging the merger, claiming it would ‘lead to higher prices, lower quality, and less content for film and television, harming movie theaters, basic cable distributors, and ultimately audiences on every sofa and movie theater seat in the U.S.’”[3] In other words, all that typically goes with a competitive market becoming first an oligopoly, with just a few suppliers each with substantial market-share and thus market-power with which to become price-setters rather than takers, and then possibly even a monopoly in which consumers have only one choice of supplier and thus must pay whatever that supply decides. Because Paramount had completed an $8 billion merger with Skydance Media in 2025, the addition of Warner Bros. Discovery would give rise to tremendous market-power, hence occasioning an oligopolistic industry-structure.
It is because the U.S. Justice Department
announced on July 10, 2026 that even incorporating Warner Bros. Discovery would
not harm competition and could even “strengthen competition across the media
and entertainment industry, including in streaming video, traditional
television and theatrical film distribution” that California and eleven other
states jumped into action on the following Monday.[4]
That a supplier with such massive market-power would actually make the industry
more competitive is hard to believe, for, as Adam Smith lays out in his
classic text on competitive markets, each supplier must be small enough
relative to the entire market that no one supplier could set prices, but
instead would have to take whatever prices are set by supply and demand,
mechanistically in the market rather than by the intention of a dominant CEO.
Fortunately, under the U.S. federal system, “state attorneys general retain independent authority under antitrust laws, and the DOJ’s decision [would] not prevent additional legal challenges” to the proposed merger.[5] The personal financial interests of high officials in the U.S. Government, whether in the White House or Congress, could be checked, in effect, by the governmental sovereignty retained by the states, for in U.S. federalism, like E.U. federalism, governmental sovereignty has been divided between the federal and state levels, such that each would have an autonomous basis upon which to challenge over-reaches by governmental institutions on the other level. Put crassly, wealthy capitalists seeking a mega-merger would be best advised in both the E.U. and U.S. to pay off enough key federal and state officials so no one on either level would be motivated to institute a judicial contest. Other things equal, a federal system means that corruption by business of government costs more.
Federalism itself can thus be seen as serving a public purpose for the good of the whole. Were governmental sovereignty to reside exclusively only at one level—federal or state—as in a consolidated government and a confederation, respectively, it would be easier for powerful CEOs of large corporations to be able to engineer mega-mergers at the expense of market competition. In 2026, it was thus in the interest of American and European consumers to balance their respective federal systems, with more governmental autonomy going to the American states at the expense of the federal government, and more governmental authority going to the E.U. at the expense of the member-states. Perhaps as a result, more industries could be remade into competitive markets from being too oligopolistic and even de facto monopolies.
To be effective, anti-trust laws must be enforced even if business executives
and boards don’t exactly like the idea and would rather buy off governments at
the expense of labor, consumers, and even the economic systems themselves, for
there is a certain beauty to forces of supply and demand finding equilibria
without any one participant (or few participants) being a price-setter as well
as a policy-setter for an industry as a whole. The sheer frustration that
typically goes with calling a company’s customer “service” phone-bank cries out
for the existence of competition, and thus consumer choice. When that choice
has to do with entertainment, and thus with which stories get told and with how
much creativity and variety is possible, having a number of struggling suppliers
(i.e., different gate-keepers) rather than just a few centralized powers is
arguably crucial.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.