February 29, 2016
When you hear about “crony capitalism,” what comes to mind? The Export-Import Bank? The ethanol mandate? Fannie Mae and Freddie Mac? Tax credits and loan guarantees for “green energy”? These are all prime examples of government intervention enriching narrow yet politically savvy corporate interests at the expense of taxpayers and consumers. But many other pernicious forms of crony capitalism slide under the radar. A case in point: the Federal Communications Commission’s (FCC) vetting of media and telecom mergers, a highly politicized process that empowers a few unelected bureaucrats to shape the future of entire markets.
Almost a year ago, the cable company Charter made a deal to purchase another cable company, Bright House Networks. Then, after the FCC decided to block another cable deal—Comcast’s attempted acquisition of Time Warner Cable (TWC)—Charter announced that it...
October 14, 2015
The folks at Food & Water Watch are pissed. And I don’t mean “pissed” as in drunk; they are mad as hell about the proposed merger between two big breweries and demanding the Department of Justice step in and block the deal. Despite the fact that big breweries have been merging and acquiring bits and pieces of each other for decades, F&WW believes that allowing Anheuser-Bush InBev to acquire SABMiller would bring about an end to this golden age of beer we’re currently enjoying. My advice to them is to crack open a beer and take a deep breath.
After months of negotiation, Anheuser-Busch InBev (purveyor of Budweiser, Stella, and now Corona) announced it had reached an agreement to acquire...
August 21, 2015
This is the third in a series of essays on the FTC’s investigation of Apple Music. In Part II of this series, we demonstrated that, even if Apple were to ban rival music services from offering iOS apps, competition in the smartphone market would significantly mitigate any threat to competition in the music streaming market. This section will ignore this effect and look instead at how Apple’s actual actions, unhindered by consumers’ ability to switch phones, would affect competition in the music streaming market.
Recall from Part I that although Apple imposes several restrictions on rival music streaming services, these restrictions are largely illusory because they apply only to sales made through these services’ iOS apps. Any consumer can...
August 3, 2015
This is the second in a series of essays on the FTC’s investigation of Apple Music. Part I discussed the reason for the FTC’s investigation as well as the facts behind the allegations levied at Apple. This part will look at the situation from an economic perspective and examine the extent to which competition in the market for smartphones would mitigate any threat to competition in the music streaming market arising due to Apple’s supposedly anti-competitive actions.
Before we consider the competitive effects of Apple’s actions, it’s important that we investigate the extent to which the severity of Apple’s actions is even relevant. Consider the following thought experiment:
Assume that Apple were to unilaterally ban all music streaming companies from offering iOS apps...
July 29, 2015
When launching a new product, the goal is to create excitement, as any company will tell you. But Apple’s newly launched music streaming service, Apple Music, may be generating more excitement than desired. According to a report in The Washington Post, the Federal Trade Commission has launched an investigation into Apple’s treatment of competing music streaming apps sold in its mobile App Store.
The controversy stems from Apple’s requirement that any company selling digital goods through iOS, its mobile platform, use Apple’s In-App Purchase interface (IAP), which restricts sellers’ offerings in several important ways. Apple Music, however, is...
April 27, 2015
CEI responded to the news that the Comcast-Time Warner merger failed. You can read more analysis from CEI's Vice President for Policy Wayne Crews here.
"The deck was stacked against this deal from the beginning: Comcast and Time Warner Cable had to seek permission to merge from not only the Department of Justice, but also the Federal Communications Commission. While the DOJ must win in court before it can block an acquisition, the FCC has unilateral power to send a transaction into regulatory limbo for years before the merging parties get a chance to be heard by an independent federal judge. This process turns the rule of law on its head, and only Congress can fix it."...
-- Ryan Radia, Associate Director of Technology Studies
April 23, 2015
Today we’ve learned again that bureaucrats and their enormous kingdoms come before consumer welfare.
The collapse of the Comcast-Time Warner Cable merger merely because of the interference of government, not because of actual market rejection, illustrates the overwhelming power of the modern state in undermining the advance of communications technologies and services specifically in this instance, and of free competitive enterprise generally.
The proposed transaction was first announced well over a year ago, and as is now the unfortunate and disruptive norm, the parties had to await the verdicts of bureaucracies rather than set immediately about serving consumer markets. Now, the Justice Department’s Antitrust Division and the...
February 3, 2015
Over the decades I’ve spent in this Heart of Darkness (a.k.a., the bowels of American politics), I’ve learned two lessons that have encouraged the steady politicization of the American economy:
- When the right time comes, I’ll take a principled stand (sadly, too often, once you’re no longer in office); and
- Of course, we know the “right” answer is often to liberalize current rules, but that would be politically naïve, so our goal should be to avert even worse rules (but, of course, sacrificing principle rarely assuages those favoring more government control).
And both lessons seem to have been forgotten in the Republican rush to avert the threatened action by FCC Chairman Tom Wheeler to transform the Internet into a federally regulated utility. Senator Thune, Representative Upton, and Representative Walden have proposed a “...
September 16, 2014
The U.S. Senate Committee on Commerce, Science, and Transportation has scheduled a markup for tomorrow afternoon of the Surface Transportation Board (STB) Reauthorization Act (S.2777). If enacted, the bill (specifically, Section 14) would threaten much needed investment in railroad infrastructure and reverse three decades of progress on railroad regulation.
Senate Commerce chair Sen. Jay Rockefeller (D-W.V.), irresponsibly joined by Sen. John Thune (R-S.D.), has for years sought to...
August 20, 2014
Does it make sense to require a park campground operator that has a few hundred employees at 120 different locations to come up with 120 separate affirmative-action plans, one for each site? Just because it also receives a measly $52,000 federal contract to clean bathrooms used by tourists (which it does very cheaply, at cost, in order to make its nearby concessions more attractive)?
To any economist, the answer would be “no.” But to the Obama administration, the answer is “yes.” If a federal contractor gets $50,000 annually from the federal government, or “serves as a depository of Government funds in any amount” or has “government bills of lading” worth $50,000, it generally has to have a separate affirmative action plan for “each of its...