Crossed Lines: Why the AT&T-Time Warner Merger Demands a New Approach to Antitrust

Marshall Steinbaum
Andrew Hwang

As federal agencies examine the potential consequences if the AT&T - Time Warner merger is allowed to proceed, how we analyze antitrust also needs to be reevaluated. 

A new report from the Roosevelt Institute takes a closer look at how antitrust enforcement philosophy has changed, how that change has enabled our current state telecommunications in which a few large anticompetitive players control the market. The authors offer recommendations and cautionary predictions that may arise if we continue without reassessing how we scrutinize these large scale mergers.

Authors Marshall Steinbaum and Andrew Hwang complement each other with economic and legal approaches. Steinbaum is Senior Economist and Fellow at the Roosevelt Institute and has also written for Democracy, Boston Review, The American Prospect, and The New Republic. He earned his Ph.D. from the University of Chicago Economics Department in 2014. Hwang is a legal fellow at the Roosevelt Institute and has also been an associate at Simpson Thacher & Bartlett LLP, working on transactions involving securities issuance, mergers and acquisitions, and corporate lending. He received his J.D. from the Duke University School of Law in 2014 and B.A. in economics and political science from the University of Chicago in 2011.

The report notes how scrutiny of mergers has come to depend on the perceived harm the results will have on consumers, but such a narrow focus results in harming competition.

Instead, regulators should adopt a more holistic view of market power, specifically incorporating analysis of upstream impact of anticompetitive behaviors, especially those enabled by mergers. This would entail closer scrutiny of vertical mergers, positive price discrimination, and non-price-based schemes to profit excessively by withholding access to consumers.

Several specific recommendations caught our attention as particularly relevant approaches, including:

Regulators should utilize Section 2 of the Sherman Act to a greater degree by taking enforcement actions against antitrust violators, up to and including undoing previous mergers that have proven anti-competitive after the fact.

After all, we’ve learned that the Comcast NBCUniversal Merger completed in 2013 has resulted in anticompetitive behavior by Comcast, regardless of its promises to treat content providers other than its own NBCUniversal on equal footing. 

The authors also emphasize the role of municipal Internet networks as a way to help the country meet its goal of creating more competition. Section 706(a) of the 1996 Telecommunications Act grant the FCC and local state commissions authority to promote publicly owned networks. Even though a federal appellate court reversed the FCC’s reversal of state barriers in Tennessee and North Carolina, federal agencies can still extol the benefits from the many communities that have made the investment.

Another concern relating to the potential merger relates to how the resulting entity might use consumer data. The report acknowledged that AT&T had been called out before for it’s collection of consumer data. From page 12 of the report:

In October 2016, media reports made public the scope and mission of Project Hemisphere, a “[surveillance] product AT&T developed, marketed and sold at a cost of millions of dollars per year to [U.S.] taxpayers” (Lipp 2016). As AT&T owns “more than three-quarters of U.S. landline switches and the second largest share of the nation’s wireless infrastructure and cellphone towers,” it is in a unique position to capture and store metadata, which it does for periods significantly longer than its competitors (Lipp 2016). AT&T then analyzes the retained metadata and offers tracking services to state and federal law enforcement agencies (Lipp 2016).

Check out the other recommendations and read the entire report at the Roosevelt Institute website.