Vertical limit: AT&T's takeover of Time Warner should be blocked

[Commentary] One of the biggest problems facing America’s economy is waning competition. In the home of free enterprise two-thirds of industries have become more concentrated since the 1990s, partly owing to lots of mergers. Fat, cosy incumbents hoard cash, invest less, smother new firms that create jobs and keep prices high. They are rotten for the economy. Boosting competition should be a priority for whoever occupies the White House in 2017, and for Congress. Now a test case is waiting in the in-tray. AT&T, America’s fifth-biggest firm by profits, wants to buy Time Warner, the second-biggest media firm.

The $109 billion megadeal isn’t a simple antitrust case, because it involves a firm buying a supplier, not a competitor. But there is a strong case that it will limit consumer choice in a part of the economy that is rife with rent-seeking and extend a worrying concentration of corporate power. It should be stopped. Precedent suggests that the trustbusters in the Department of Justice (under the auspices of the president), and not the Federal Trade Commission (a creature of Congress), will have the biggest say on the tie-up. This means the deal is being struck just as there is a change of leadership at the top. Those advising on the merger may be gambling that this makes the authorities unlikely to initiate a strong line on vertical mergers. That is all the more reason to be bold. Politicians and regulators may eventually resolve to open up the industry more, for example through “unbundling”, which lets upstart firms use others’ pipes. Until then they should block the AT&T-Time Warner deal and make clear that competition, not consolidation, is the way to get America’s economy working better.