Mega-mergers like AT amp;T and Time Warner crush American democracy
On Tuesday, a District Judge in DC approved the $85bn dollar merger between AT amp;T and Time Warner, without any conditions. On Monday, the FCC repealed its network neutrality laws. With a double punch, the telecom industry got a lot more concentrated and license to discriminate.
The AT amp;T merger is especially disturbing in light of the network neutrality decision, because it involves a producer of content (Time Warner) merging with the distributor of that content. It is a data/media deal (like Verizon buying AOL). With the repeal of network neutrality, AT amp;T can throttle the content of competitors.
If we step back, we see these two moves are part of a larger trend: America is getting crushed by big, unresponsive, powerful corporate monopolies, the modern version of the trusts of the gilded age. This isn’t happening organically, but through mergers. We should take this setback to recommit to a new anti-monopoly movement, where we use all the laws available – at the federal and state level – to stop these modern Goliaths from crushing our democracy.
There were nearly 50,000 mergers in 2017. It was a banner year, except for the two years before: in 2016 and 2015, there were also 50,000 mergers. Companies have spent over $2tn dollars on mergers in 2018 so far, a record pace that is set to pass the all-time annual record.
These mergers are not small combinations, but giants merging with giants. Microsoft bought LinkedIn, Amazon merged with Whole Foods, and Monsanto was merged with Bayer. In cynical fashion, the name “Monsanto” is being dropped in the new company, because it had become so toxic to activists.
You may think of Google as a single organic entity, but in 2011 it bought a different company every week. Facebook, whose questionable practices are on full display with the scandal of Russian interference, doesn’t have a lot of competition because it bought the competition: it owns Instagram and WhatsApp.
These mergers hurt everyone except for the CEOs and the investors who make money off of monopolistic prices. Workers get less pay and stripped benefits, and unions are stuck with little bargaining power. Consumers, meanwhile, are often stuck with unresponsive call center customer service and hidden fees.
Just think about the hours you spend talking to Spectrum when service is bad – would you spend those hours if there was real competition? It hurts the small and medium sized business owners that are the vibrant, innovative heart of a thriving democracy. It also hurts our democracy: these companies are like little fiefdoms, spending millions in politics to buy silence from lawmakers.
The federal government has shown little willingness to stand up to corporate monopolies, and use its powers under the existing antitrust statutes, including the powerful Clayton Act and Sherman Act. What makes the AT amp;T merger unique, in fact, is that it represented the rare case where the federal government actually sued to block the merger, instead of suggesting that the merger go through, with conditions. The Department of Justice should continue its’ effort to block the merger and appeal the decision in this case.
But this monopoly moment is about more than this case, and it requires new leadership. Some of that new leadership has to come from State Attorneys General. Indeed, the State Attorneys General have played a critical role in big antitrust cases in the past. Most notably, the states led the antitrust effort against Microsoft, pursuing an aggressive investigation that resulted in 19 states and the District of Columbia suing Microsoft for monopolizing.
Today State Attorneys General again have the opportunity to lead the way when it comes to a new era of trust-busting, with both state and federal laws to help them. New York State’s Donnelly Act gives power at least as great – many think greater – than that of the Sherman Act. We have strong consumer protection laws that can be used to protect against scams and frauds by corporate monopolists.
But there’s more. Section 7 of the Clayton Act gives the federal government--and, under Section 17, state attorneys general--the power to challenge mergers and acquisitions that would tend substantially to lessen competition or that would tend to create a monopoly. State Attorneys General also can sue under the federal Sherman Act as Parens Patraie for the states.
This is a big pair of swords in the fight against monopolies, and it’s time to sharpen them. The merger mania isn’t about to end with AT amp;T. In New York, we have to look just at the recent Charter merger which created the current Spectrum to see how mergers come with big promises, and leave us with crappy service and big CEO payouts.
Too many enforcers got used to bigger-is-better mentality in the last 40 years, and have come to a position of learned helplessness when facing big, politically connected companies.
Whether it is AT amp;T or the next Big Ag Merger, all of us need to step up. We need to pressure lawmakers to hold hearings on pending mergers, and pressure federal and state enforcers to use their full powers.
Zephyr Teachout is a candidate for Attorney General of New York, and an associate professor at Fordham Law School
America is getting crushed by big, unresponsive, powerful corporate monopolies