The Beneficent Monopolist

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Allen Grunes, Maurice Stucke, Apr 14, 2014

The predictions that this merger will experience relatively smooth sailing, we argue, may be wrong for several reasons:

  1. A merger can violate section 7 of the Clayton Act without the parties competing in the same geographic markets.
  2. The Congressional command for section 7 is to arrest a trend toward concentration in its incipiency before the trend develops to the point that a market is left in the grip of a few powerful companies. One potential consequence of this merger is to accelerate the trend toward concentration among content providers and cable companies or other distributors. Indeed, arguably, Comcast itself set the stage for further consolidation when it entered into the NBCUniversal joint venture.
  3. One reason Congress sought to thwart a market dominated by a few firms is to prevent coordination or collusion. As evidenced by the enforcement action involving the Verizon/Spectrum Co. deals, where DOJ sought to limit what could be regarded as a truce between Comcast and its most significant competitor, Verizon, we are already beyond that point.
  4. Comcast’s “no-competitive-overlap” argument considers only cable and internet subscribers. It ignores how the competition laws were also enacted to protect sellers from powerful buyers. Thus, another concern is how the acquisition would increase Comcast’s power to disadvantage sellers of video content.
  5. In investigating Comcast’s deal with General Electric that ultimately enabled Comcast to control NBCUniversal, the DOJ discussed various ways Comcast could disadvantage its traditional video competitors (direct broadcast satellite and telephone companies) plus the emerging online video programming distributors. In acquiring TWC, Comcast will have even more power to raise the costs of its traditional video competitors and also to thwart emerging OVD rivals by impairing or delaying the delivery of their content.

Our focus is to assess three of the arguments Comcast likely will make to argue that its acquisition of TWC is unlikely to lessen competition: (a) the broadband market is becoming more competitive-Google has introduced Google Fiber in a number of markets, and mobile broadband offered by wireless providers like AT&T and Sprint is competitive with fixed broadband; (b) Netflix and traditional media companies have sufficient clout to negotiate with Comcast and the government should not intervene on their behalf; and (c) the “wide array of FCC and antitrust rules and conditions from the NBCUniversal transaction in place . . . more than adequately address any potential vertical foreclosure concerns in the area of video programming.”


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The Beneficent Monopolist