Corporate Political-Campaign Contributions as Decisive in Anti-Trust Enforcement

On August 31, 2011, “the [U.S.] Justice Department sued to block AT&T’s $39 billion takeover of T-Mobile USA, a merger that would create the nation’s largest mobile carrier. 'We believe the combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower-quality products for their mobile wireless services,' said James M. Cole, the deputy attorney general.”[1] The New York Times claimed at the time that it was “arguably the most forceful antitrust move” by the Obama administration.[2] To be sure, there were “few blockbuster mergers with the potential to reshape entire industries and affect large swaths of consumers.”[3] However, one could cite the UAL merger with Continental and Comcast’s acquisition of NBC as accomplished mergers. It is more likely that the housing-induced recession made the administration reluctant to risk a major company looking for buyer going bankrupt. I would not be surprised if the vested interests of major mergers and acquisitions “played the bankruptcy card” as leverage with the Justice Department. Moreover, the political power of mega-corporations in the U.S. can be expected to have come into play.

To be sure, the U.S. Department of Justice was capable of flexing its political muscle. Nasdaq withdrew its $11 billion bid for NYSE Euronext, the parent company of the Big Board after government lawyers warned of legal action. However, conditioning Comcast’s purchase of NBC to the latter giving up control of Hulu, an on-line movie/television conduit, evinced a strange indifference to a much larger distribution company (Comcast) having a vested financial interest in some of the content (i.e., NBC programming).

The Justice Department looked the other way on a rather obvious conflict of interest potentially operating at the expense of the consumer (assuming people want to watch more than NBC programming on cable). Of course, cable is not the only distribution channel for television programming. Customers dissatisfied with Comcast’s vaunting of NBC programming (and even possibly restricting other content) could go to DirecTV, for example. However, conflating distribution and content seems a bit like the repeal of the Glass-Steagall law, which had prohibited the combination of commercial and investment banking (and brokerage) from 1933-1999. The law reflected the belief that institutional conflicts of interest can and should be avoided even though not every instance of a commercial-investment firewall could be expected to succumb to the immediacy of the profit motive.

In short, the Obama administration could have gone further in its antitrust actions. While admittedly not as pro-business as the preceding administration, the Obama administration’s tacit acceptance of mega-corporations may translate into an insufficient defense of competition. It should not be forgotten that Goldman Sachs contributed $1 million to Obama’s election campaign in 2008. For the president to actively promote competitive markets would require him to bite the hands that have been feeding him. In other words, there is a conflict of interest involved in allowing corporations to make political contributions while the government officials are tasked with replacing oligarchies with competitive marketplaces.

1. Ben Protess and Michael J. De La Merced, “The Antitrust Battle Ahead,” New York Times, August 31, 2011. 
2. Ibid.
3. Ibid.

President Trump’s Spending on a Border Wall: Federalism at Risk?

U.S. President Trump announced in February of 2019 that he would fully fund a wall on the U.S.’s southern border. He would first use the $1.375 granted by Congress to be followed by  $600 million from a Treasury Department asset-foreclosure fund for law enforcement, $2.5 billion from a military anti-drug account, and $3.6 billion in military construction funds.[1] The president’s rationale hinged on his declaration of a national emergency due to illegal immigration, drug-traffic, and crime/gangs—all having been coming across the border on a regular basis. In federal court, sixteen of the U.S.’s member-states challenged the president’s declaration and use of funds. The U.S. president’s legal authority to declare national emergencies was pitted against the authority of the U.S. House of Representatives to be the initiator of federal spending legislation. The House therefore had standing to sue. The question of the states’ legal standing is another matter. It is particularly interesting because it involved not only whether a given state would be harmed by the wall or even the president’s use of other funding sources that could otherwise be used for other projects in the states not directly affected by the wall, but also because federalism itself could be negatively affected in a way that harms all of the states.

Prime facie, it seems difficult that California and New Mexico could show injury from a wall that would not be built in either of those states. On this basis, the injury to Hawaii seems far-fetched, as the ocean functions as that republic’s border. Similarly, New York is nowhere near the U.S.’s southern border. Arguing, however, that “the president’s unconstitutional action could cause harms in many parts” of the U.S., California’s attorney general at the time insisted that the member-states had standing apart from where the wall would be built.[2] Given the sources of the funding, all of the states could “lose funding that they paid for with their tax dollars, money that was destined for drug interdiction or for the department of Defense for military men and woman and military installations,” he explained.[3] This point, I admit, is valid but it lacks a larger constitutional view.

In a federal system in which the member-states and federal governmental institutions both have their own basis of governmental sovereignty, a power-grab by one means less power for the other. The judicial trend since the war between the U.S.A. and C.S.A. during the first half of the 1860s has been to validate encroachments by the federal government on those of the states. President Trump’s decision to build a wall in some of the member-states represents a power-grab not only with respect to the Congress, but also the states. In the E.U., by contrast, the states have more say in how the E.U.’s border is protected. The European model of federalism values cooperation at both the policy and implementation stages than does the American model in which ambition is set to counter ambition.

The U.S. Senate was originally intended to be the access point in the federal government in which the state governments could affect or even block proposed federal legislation. When U.S. senators became popularly elected by voters in the respective states rather than appointed by the state governments, the latter lost their direct access in the federal government. Before then, a majority of states could defend not only their own interests, but also the interest of the state “level” in the federal system. It would be more difficult for the state governments to forestall encroachments (i.e., power-grabs) by the federal government. The federal system itself would suffer from a growing imbalance.

With the state governments no longer able to directly express themselves in the U.S. Senate because senators had an obvious incentive to satisfy constituent and especially financial-backer interests, going to the courts became the only route in trying to stop the federal president’s spending-plan for a wall. Yet even that strategy suffered from the institutional conflict of interest implicit in a federal court deciding disputes between the states and the federal government. Perhaps looking narrowly at anticipated injuries to the 16 states would attest to the federal-bias in the federal courts, which nonetheless have a responsibility to consider the standing that the states have in the federal system. After all, they rather than the federal government enjoy residual sovereignty. Is not a federal encroachment itself an injury to the state governments as per their loss of power? By the twenty-first century, the federal government could claim preemption in order to keep the governments of the states from legislating in an area of law even though the federal government does not intend to legislate in it! The danger in such an imbalanced federal system—that is, a lopsided system of governance—is that the encroaching government becomes tyrannical not just toward the states, but the People as well. As the power-checking-power mechanism breaks down, absolute power becomes increasingly likely.

For more comparisons of American and European federalism, see Essays on Two Federal Empires: Comparing the E.U. and U.S., and American and European Federalism: A Critique of Rick Perry's "Fed Up"!  Both are available at Amazon.

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1. Charlie Savage and Robert Pear, “States’ Lawsuit Aims to Thwart Emergency Bid,” The New York Times, February 19, 2019.

2. Ibid.

3. Ibid.