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Proposed iHeart Media Acquisition Threatened by Antitrust Regulation

 The Wall Street Journal recently reported that Liberty Media Corp, which already owns Sirius XM satellite radio, including its Pandora streaming service, and 33% of concert promotion giant Live Nation Entertainment, wants permission from the US Department of Justice to purchase a controlling stake in iHeart Media Inc. iHeart is the largest radio station group owner in the US, with more than 850 broadcast radio stations. The deal would be a significant collaboration and monetization of how consumers access music, podcasts, radio, and other cross-platform audio media. 

Surprisingly, in light of the Trump administration’s stated opposition to regulation in other areas, lawyers at Justice worry that antitrust laws might be violated with the deal. They plan to look into the acquisition’s potentially anticompetitive effects this month and next.

But if you pull back the lens a bit to take in the larger picture, it shows the new firm’s potential to be a robust competitor to the world’s biggest pay-for streaming service, Spotify. Spotify boasts 108 million premium subscribers and 232 million total active users around the world. Those numbers, the recent explosion in the popularity of podcasts in general and streaming in cars being a direct competitor to radio, make Liberty’s interest in acquiring iHeart radio stations seem like a perfectly reasonable response to market conditions.

The intended deal is simply the marketplace responding to the success of Spotify and various podcasts.  Liberty is trying to rise to the scale and coordination needed to compete, which ensures more innovation for consumers. Just the opposite of being anticompetitive, the deal is proof the market works and keeps any one firm from being dominant without merit for long. If anything, the proposed purchase is proof that government antitrust action is not needed to ensure competition.

Unfortunately, news reports say that Liberty won’t proceed with an offer until the DOJ indicates it won’t attempt to block the purchase.

One of antitrust regulation’s harmful, unintended consequences is that the mere possibility of DOJ interference prevents what would otherwise be the optimal market response.  With costly, or perhaps lethal, DOJ opposition looming, the market response is stifled, delayed, or perhaps even ultimately abandoned. (If the DOJ does go on to block the deal, don’t be surprised if they find themselves threatening to break up Spotify or in some way reign in the dominance of podcasts in the future, claiming there’s no one big enough to compete with them.) 

There’s no need for DOJ to meddle in this potential deal. The U.S. already has rules of the economic road: private property, voluntary exchange, price signals and contract law is sufficient for outcomes that benefit consumers. The interests of Washington bureaucrats, the political gains, and the crony capitalism that all accompany antitrust actions don’t do consumers or innovation any favors.