Typically horizontal mergers, as when one company merges with another that makes similar products, have trouble when it comes to anti-trust, restraint of trade, objections. The go-ahead of the ATT merger with Time Warner in mid-2018 suggests that vertical combinations, such as when distributor buys a content-creator, survive on anti-trust grounds. Even if trade is not restrained, another problem is present—that of conflicts of interest. Anti-trust law is oriented to preventing restraint of trade rather than such conflicts. Accordingly, just because the ATT merger survived on anti-trust grounds does not mean that a regulatory gap did not exist at the time.
In 2016, a U.S. judge had blocked the merger of Staples and Office Depot because it could have left consumers with “only one dominant retailer” focused on office products.[1] In other words, such a retailer could easily have been a monopolistic price-setter rather competitive price-taker (from the market). The market itself should be dominant, anti-trust theory claims.
The case of ATT, which was known still in 2018 as a cellphone provider, would add the owner of programing content, including HBO, Warner Bros, and CNN by buying Time Warner. ATT was not trying to corner the market, in other words, on cellphones. The problem lies elsewhere. In this case, ATT could privilege its own devices over other means of watching the content. Although such a privileging could restrict trade at the distributor level, the underlying problem is that of an institutional conflict of interest: privileging one’s own distribution over other means of seeing the content.
Yet the obligation to maintain other means of distribution may be illusionary. That is to say, ATT may not have any such obligation. If the company’s strategy is to purchase the content (e.g., HBO and CNN) exclusively to be distributed through ATT products, no price differential would exist between ATT’s means and those of other distributors. The ethical problem exists if ATT allows other distributors of the content, for the temptation would then be to charge those others more in order to privilege ATT’s own means of delivering the content. My point is merely that ATT could ethically restrict its own acquired content to its own devices; the ethical problem bumps up against the human nature of business only if ATT adds its own distribution devices to others in providing the acquired content. Anti-Trust law has another orientation, and is thus ill-fitted to this problem. Put another way, unfair pricing (of distribution) is different than, though possibly related to, undue restraint of trade. Both of these market imperfections warrant regulation, so relying solely on anti-trust law is sub-optimal in terms of public policy.
[1] Cecilia Kang, “Why the AT&T-Time Warner Case Was So Closely Watched,” The New York Times, June 12, 2018 .
