Mark Cooper

Reforming the nation’s century-old antitrust regulation is critical to ensuring a fair marketplace, and limiting the harm monopolistic practices can have on American consumers. However, the dire need for updated legislation does not mean Congress should pass legislation that is not carefully thought out for the long-term. This report examines the decades around the turn of the 20^th century, when the US adopted the two pillars on which a uniquely American and remarkably successful political economy was built – the Interstate Commerce Act of (ICA) 1887 and the Sherman Act of 1890.

The Consumer Federation of America joined a lawsuit challenging the decision of the Federal Communication Commission to extend the allocation of costs between federal and state jurisdictions that was adopted in 2000 for another six years. The consumer pocketbook impact of the misallocation of costs is huge, totaling $150-$250 billion ($200-$300 per household per year) over the next six years.

[Research] Why the government’s case against the AT&T-Time Warner merger is both warranted and consistent with past enforcement practices. The case is necessary 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.

[Commentary] For the third time in less than a decade, AT&T is merging again. In the wake of the announcement, there is rampant speculation on whether it’s unconscionable or inevitable. However, whether or not the $85 billion merger rises to the level of an outright rejection or just strong conditions, there is still a far more profound problem, which is not the merger, but the market itself. Four massive firms (AT&T, Verizon, Comcast and Charter) now totally dominate the digital communications landscape. Preventing any further consolidation of distribution is a no brainer, but that will still not address the underlying problem. Public policy cannot force firms to compete and the prospects of a new distribution network entering the market are slim to none. Breaking up the dominant firms requires decades of litigation and may not succeed.

Our only option is to ensure these mammoth network operators cannot use their power over the pipes to stymie competition for the content and applications that ride over them. However, the Federal Communications Commission has four active and nearly complete proceedings that will further that goal and the proposed AT&T Time Warner transaction makes completing them all the more critical: Set Top Boxes, Zero rating, Privacy, and Business Data Services.

[Dr. Mark Cooper is the Director of Research at the Consumer Federation of America.]

The Consumer Federation of America released a report, entitled, Buyer and Bottleneck Market Power Make the Comcast-Time Warner Merger “Unapprovable,” that concludes the proposed Comcast-Time Warner merger violates the antitrust laws and the Communications Act by such a wide margin that it cannot be approved.

The report shows that the consent decrees that Comcast entered into with the Department of Justice and the Federal Communications Commission to obtain approval of the Comcast-NBCU transaction are totally inadequate to deal with the immense increase in market power that would result from the proposed Comcast-Time Warner merger.

“Comcast executives have claimed that the proposed merger is ‘approvable’ because the two firms do not compete head-to-head and Comcast agreed to conditions in its acquisition of NBC that address the concerns of federal and state authorities reviewing the merger,” Mark Cooper, CFA’s Director of Research and author of the report, said. “Nothing could be farther from the truth.” Cooper added: “This merger causes such a massive increase in two other forms of market power -- buyer and bottleneck market power -- that it doesn’t just violate the antitrust laws and the Communications Act, it obliterates them.”

The report explains why buyer and bottleneck market power are important in this merger review:

• Comcast would be so large, as a buyer of content, that it would have the power to dictate the prices, terms and conditions, exercising what antitrust calls monopsony power. Because Comcast sells content, it would be more than glad to weaken competition in the market for those products.
• Comcast would have such a huge broadband footprint it would have the ability to undermine online video distribution by raising its rival’s cost, degrading its quality of service, or blocking the delivery of its product altogether, exercising what antitrust calls vertical leverage.
• The weaker horizontal competition is, the more likely it is for the firm with buyer market power to benefit from these abuses.
• By exercising buyer and bottleneck market power Comcast can indirectly enhance its dominance in video distribution.

Buyer market power is judged to be a concern where the market share of the firm is 30% or higher. Mergers are deemed to be “likely to enhance market power” when a substantial increase in market concentration results in a highly concentrated market. The Comcast-Time Warner merger exceeds these thresholds by a wide margin. Cooper concluded: “Competition, consumers and the public interest will be best served if the merger is blocked.”