Cronyism & Comcast

Comcast is in the process of buying Time Warner Cable, a deal that will create the largest cable provider in the U.S.

The FCC, of course, has to approve the deal. It is no surprise that Comcast and Time Warner Cable have done their best to grease the wheels for approval through political donations and programming.

However, a recent column  by Matthew Continetti  on NRO leads conservatives in the wrong direction on both cronyism and public policy.

On NRO, Matthew Continetti writes:

It is something of a political irony that Republicans, who for ideological reasons are pro-business, have not raised questions about, or objections to, the conjoining of two Democratic institutions into a media trust. If Republicans had any sense, they would wage war against Comcast and its Democratic enablers and turn the merger into a live issue.

Continetti wants Republicans to go after Democrats, and that is fine. But he errs as he speaks with a misunderstanding of the economics involved:

Critics of the deal say it would lessen competition and lead to even shoddier customer service. They are probably right, as all of us will soon find out, because there is little chance the merger will be stopped.

The problem is that the antitrust laws Continetti would have the Republicans employ are designed from the ground up to hinder competition, not increase it. They have been used to almost exclusively by companies and regulators to stop activities favored by the vast majority of market participants. In both cases, the objectionable feature of the activity is profit. The companies don’t like profits earned by their competitors, while the regulators usually object to profit in and of itself. This is how we wind up with the corporate cronyism that Continetti accurately portrays in his article.

Mergers usually get heightened attention from antitrust regulators. But this is misguided. As my coauthor and I wrote in our paper, Protecting Innovation: The Role of State Attorneys General in Antitrust Enforcement:

Antitrust enforcement should not be concerned with vertical or conglomerate mergers at all, ever, because such mergers can never injure competition or harm the consumer on their own, without an additional, entirely separate violation of the antitrust laws. And even horizontal mergers, which receive the most [antitrust] scrutiny, have significant potential for increased efficiency and consumer welfare.

I’d go further than my coauthor was willing to go and say that even horizontal mergers, which is what is happening with the Comcast-Time Warner deal, should not be a concern of regulators. If there is a lack of competition in the cable industry, it is because of the vast, complex maze of federal, state, and local regulations imposed this industry. Which, by the way, takes the place of competition by imposing the opinions of a few regulators in place of the opinions of the millions of consumers and producers in this market.

Conservatives are right to look out for cronyism. However, they should also know better than to support antitrust regulation in place of competition in the market.