After weeks of speculation, the Antitrust Division of the U.S. Department of Justice sued to prevent AT&T and Time Warner from merging into a media and information behemoth. Those of us who believe in antitrust enforcement and the value it preserves for consumers and citizens should celebrate this decision as a welcome surprise. The Bush Administration all but shut down the Antitrust Division: Among other things, it allowed a 2-to-1 merger in satellite radio and issued a report essentially condemning the very idea of enforcing the anti-monopoly provisions of Sherman Act §2. Given how Trumpian populism has proved to be anything but populist, there was real concern that this history would repeat itself – or worse. As AT&T’s reaction itself suggests, this lawsuit was hard to see coming.
That’s particularly true because the Antitrust Division and Trump’s choice to lead it, Makan Delrahim, would have had plenty of excuses for abstaining from enforcement here. In part because of the consistency with which Republicans have appointed antitrust skeptics to the courts – and the disappointing absence of a meaningful focus on competition issues among Democratic judicial nominees – the courts are not particularly hospitable to efforts to block so called “vertical” mergers. A merger is “vertical” when it unites companies that do not compete against each other directly (i.e. “horizontally”) and instead brings together two companies that lie above or below each other in the supply chain. AT&T’s merger with Time Warner fits that bill because information infrastructure companies like AT&T acquire media content from companies like Time Warner – be it CNN broadcasts, HBO programs, Harry Potter movies, or the like – and then sell that content on to consumers through their mobile internet, cable, or satellite TV distribution channels. Though there are many ways that consumers could be worse off with AT&T in direct control of Time Warner’s media empire, the skeptical view is that the merger does not eliminate any direct competition among rivals, and instead creates a vertically integrated business model that could itself compete (to consumers’ benefit, maybe) with other conglomerates (like Comcast/NBC) or other models (like DISNEY/ABC/ESPN – which licenses content to distributors without owning information infrastructure itself). To simplify the point that matters here, it is enough to say that, given the skepticism towards vertical mergers in the courts, the Division could easily have thrown up its hands and said there was nothing it could do to block this merger.
To the genuine surprise of those who watch these issues, that’s not what it did. Confronted with a similar merger between Comcast and NBC/Universal, the Obama administration had settled for so-called behavioral remedies, rather than risk defeat in court. (It essentially got Comcast/NBC to promise to something like “net neutrality” before that policy had been enacted for internet providers generally). But the Trump Administration has opted for so-called structural remedies instead: It purportedly told AT&T it would settle for divestiture of major media assets (Turner) or distribution assets (DirecTV), and then sued to stop the merger entirely when AT&T declined to go along. The result is that the Trump Administration is now, quite unexpectedly, at the helm of the most critical challenge to a vertical merger in anyone’s recent memory – a case that will have a profound effect on the course of antitrust law, the American economy, and consumer and citizen welfare in an environment where privacy and information access feel increasingly at the mercy of companies like the proposed AT&T/Time Warner conglomerate.
Because this development is so unexpected, antitrust watchers have been raising their eyebrows – even if they are otherwise sympathetic to the Division’s position. Sources inside AT&T seemed to believe that the Administration was targeting Turner for divestiture because it owns CNN, and Trump has infamously targeted that network for foul treatment in behavior that wildly diverges from presidential (or governmental, or just plain social) norms. Because we did not see this enforcement decision coming, we wonder: Is this selective enforcement against a perceived enemy or political rival? Would the Trump Administration block this merger if AT&T were buying Fox News’s corporate parent instead of CNN’s? And suppose that we agree with this decision even if we question its motives – we face another tough question: Is selective enforcement better, at least, than no enforcement at all?
On that last question, I think the answer is no: Antitrust enforcement by the government’s chief regulators simply cannot be allowed to become a weapon of corporate warfare, in part because one of the chief concerns we should have about massive vertical mergers is the way these companies will wield their size and money as a source of political power—or, worse, use their control over information infrastructure to try to affect political outcomes themselves. The concern goes even beyond the ugly cronyism that has already plagued this administration. To be sure, it’s plenty bad if we have to worry that the president’s friends or family will use their control over the levers of power to line their pockets. But it is far more worrisome if they are willing to use selective merger enforcement to reshape the American landscape in ways that empower voices that support the existing administration or its allies, and disempower those who speak out on the other side. That’s not just bad superintendence of a critical law the Administration should take care to faithfully enforce; it is a violation of the First Amendment freedoms of speech and of the press.
But, look: That’s notwhat I think is going on here, in part because the Antitrust Division has a really good reason to bring this case. AT&T has a lot of market power in mobile internet, and with its other assets like DirecTV, wields enormous influence over information infrastructure more generally. That power resides at one of the key choke points in our current economy. It is really difficult to roll out new “pipes” for distributing information – it is wildly inefficient to build another set of cables across the nation (just ask Google), and it requires a risky investment of unfathomable amounts of capital for new entrants to try to compete in the areas where AT&T is the strongest. Among other things, there’s only so much spectrum available for mobile internet broadcast. So we cannot rely on the threat of competitive entry to warn AT&T off bad behavior, and allowing it to acquire a massive media company like Time Warner thus threatens anticompetitive outcomes where AT&T ties its products together and extends its ample market power into new realms. The Antitrust Division is right to worry about that, and it is right to go in search of structural remedies because corporate promises to do what is good for consumers are notoriously hard to enforce. Just like water always finds the bottom, corporate decisionmaking always finds the bottom line, and it will find ways to flow around the barriers we try to throw up. The contrast with previous decisions about vertical mergers might be worrisome at first glance, but on reflection, this is a decision that makes plenty of sense, and ought to be applauded.
What’s more, I think there are too many committed civil servants at the Antitrust Division for this decision to fly if it were clear that Trump was actually trying to weaponize their work. Unlike, say, the recent petition seeking vacatur and sanctions against the ACLU in the case concerning access to abortion services by detained aliens, the Division’s complaint is signed by plenty of non-political, career lawyers who are deeply committed to fair and evenhanded antitrust enforcement for consumers’ benefit. We can—I hope—trust their judgment, and Delrahim and other political appointees probably deserve the benefit of any doubts as well.
The problem, though, is that we just can’t trust Trump. These are the wages of breaking all of our political norms, and using the office of the presidency itself to attack companies perceived as political rivals, like CNN and Amazon. A year ago, an accusation that the President was using antitrust enforcement on a selective basis to help friends and hurt foes would not have merited a second thought. The sad reality is that that’s no longer true. The trust we can repose in this process in fact depends on believing (perhaps, implausibly) that decisionmaking at the Antitrust Division is effectively insulated against the President, his Twitter feed, and even an Attorney General who has seemed all too willing to act out the worst instincts of this Administration. When the citizens, and the courts, cannot trust the President’s oath, even the right decisions sometimes feel wrong. And that is a huge problem, because it may lead to rejecting positions that really are in the public interest.
Happily, though, the solution in this case is not to distrust merger enforcement. The reason the Antitrust Division has to sue to block the AT&T merger is precisely because the authors of our antitrust laws knew the dangers of selective enforcement, and they put the courts into the process as a check on executive excess. And it gets better: It’s not only the Antitrust Division that has the power to block anticompetitive mergers—state attorneys general, and even ordinary citizens, have the power to sue to block them, too. If we do not trust the President to avoid selective enforcement, the solution is not necessarily to distrust his every enforcement decision; courts can, instead, extend some of the deference they usually show towards federal enforcers to these other antitrust litigants. That way, we are not forced to live between the rock of selective enforcement and the hard place of no enforcement at all. Instead, we can continue to give the government the benefit of the doubt when it acts (we hope, admirably) to enforce our critical competition laws, secure in the knowledge that if it refuses to do the same for political friends and fellow travelers, others can step into the breach.