If You Can't Beat 'Em, Regulate the Hell Out of 'Em
Radley Balko | March 25, 2008, 1:52pm
Now that the Justice Department has handed defeat to the National Association of Broadcaster's high-profile (but laughable) campaign against the XM-Sirius satellite radio merger, they're taking a new tack: regulate away satellite's advantages.
Clear Channel is asking the FCC to slap a series of regulations on satellite radio before approving the merger, including requiring XM-Sirius to abide by FCC decency regulations, banning any local broadcasting or advertising (both companies currently offer traffic and weather for large metropolitan areas), minimum public interest programming requirements, and—somewhat surprisingly—licensure for a competing satellite provider.
I actually agree with the last one. I've never understood why the federal government only allowed for two satellite radio providers in the first place.
The other requirements are ridiculous. Whatever you think of FCC decency regulations, satellite radio is a subscription service. Customers pay for what they're getting. You can also easily block objectionable material. As for barring local programming, I'm intrigued to see how Clear Channel plans to argue that limiting competition to terrestrial radio's local coverage would in any way benefit consumers.
tarran | March 25, 2008, 3:39pm | #
Anti-trust is actually a pretty interesting and generally aims towards making sure prices are determined by how much people are willing to pay for a product, not how much they will pay if they don't have any other option.
Toxic, this is a commonly held fallacy. However, in reality the operation of anti-trust is to force consumers to do business with people they otherwise would not do business with.
The first push for anti-trust came from regional businesses that found themselves being put out of business by the increased competition inherent to the growth of the railroads. The lobby that really popularized anti-trust theory in the late 19th century was a political action group on behalf of slaughterhouses being put out of business by the Chicago meatpacking industry.
Note that the anti-trust law always kicks in when one guy is dominating the market because they are actually charging far lower prices than any competitor can charge.
This was the case for Standard Oil, Alcoa, IBM and Microsoft.
If one looks at the "predatory" monopolies one finds only monopolies like A.T&T which were granted a monopoly by government fiat. In the case of A.T. & T., the federal Government seized the facilities of literally hundreds of phone companies and gave them to A T & T to operate on behalf of the U.S. government for the duration of World War I. This monopoly was not rescinded at the end of the war. When it eventually was formally rescinded, the FCC made it prohibitively expensive for new competitors to enter the field).
In the end, the traditional bogeyman of some businessman cornering some market and then chargin massively expensive prices has never been realized. It has been tried, but generally the results are disastrous for the would be monopolist. A classic case is that of Pierre DuPont who faced just that problem with a cartel from Europe for some chemical critical to gunpowder manufacture.
When DuPont started competing with them, the cartel members decided to drive him out of business through predatory pricing. They slashed prices below DuPont's production costs. Du Pont laid off all his workers, mothballed his plants and bought every shipment he could as soon as it came into port. His competitors lost money with every shipment that they made. When they started raising their prices, Du Pont sold off his stocks at below their production costs. In the end, the cartel was bankrupt. Their attempt at predatory pricing had subsidized their destruction.
When one really digs into anti-trust law, comparing the way economies really work to the theory behind the law, it is clear that the legal theory is about as inaccurate as the legal doctrine underpinning the Salem witchcraft trials. The people who lobbied hardest for anti-trust law, and its chief beneficiaries, have universally been politically connected people who have found their businesses struggling in the face of leaner and more efficient competitors who are better able to serve the public.
The purpose of anti-trust law is, based on how it operates and how it benefitted its early proponents, to prevent consumers from doing business with the most capable providers of a service. We can say this with the same confidence as we can say that the purpose of the anti-witchcraft laws were purposed to transfer land and property away politically unconnected women who had the means to live independently to their politically more connected neighbors.
tarran | March 25, 2008, 7:36pm | #
That's not exactly true. For example, Linux is free, yet Microsoft was hit with anti-trust charges due to their operating system anyways.
Uhmm, in 1996-1998, the amount of business Sun Microsystems, Apple, Compaq and Netscape were losing to Linux was non-existant, and no wonder, Windows had so many more of the applications with large consumer demand written for it than linux did. At the time of the lawsuit Microsoft Windows was attracting the vast majority of consumer purchases. The "bundling" was not a crime; it was merely a case where Microsoft was trying to satisfy consumer demand. IBM, Netscape, Apple, Sun all could have written operating systems and applications that would compete with Microsoft's offerings. some of the companies tried, and even wrote some nice OS's (truth be told I preferred IBM's OS/2 Warp to any to the Windows 9x operating systems). In the end though Microsoft was much more adept at satisfying consumer demand than they were, and unable to compete in the market place, all those companies went crying to the government to force Microsoft to stop satisfying customers so effectively.
Incidentally, bundling is not a problem. Can you imagine suing Walmart because they provide free parking in their stores, thereby competing with independent for profit parking lots? Should car manufacturers be prevented from installing radios and air conditioners in their cars? Should manufacturers of televisions and audio receivers be punished for bundling A/V cables and remote controls thereby competing "unfairly" with Radio Shack? Should cell-phone providers be prevented from bundling ring-tones or XM radio with their service?
Bundling is merely the act of a company trying to better satisfy their customers and again is no way a crime.
This works best when there are seperate markets that the big firm plays in; that is, it lowers prices in areas with competitors and raises them in areas without competitors until it no longer has any competitors, then it raises prices everywhere to a level much higher than what the price would be if there was a lot of competitors.
this has been tried. Invariably the company or cartel that tries it either
a) goes bankrupt
b) has to abandon the attempt when competitors start undercutting their high-priced offering and taking advantage of their below market pricing.
See what is happening to Microsoft now. As the price of the O/S rose to be a larger and larger percentage of the total cost of a new computer, the benefit of writing open source alternatives increased. The dramatic increase in the usability of Linux is a direct result of the dissatisfaction of a segment of consumers with Microsoft's offering. And now, as a result, Microsoft must now either slash their prices, or improve their offering to make their software attractive in the face of Open office, GNU/Linux and Eclipse.
According to anti-trust theory, this should not be happening. But it is.
