Uncertain Antitrust Trajectory
The proposed XM/Sirius satellite merger — awaiting OKs from the Justice Department and Federal Communications Commission (FCC) — represents the antitrust establishment’s latest target… and potential casualty.
Smokestack-era antitrust law presents one of today’s gravest threats to hyper-competitive frontier industries and the customers they serve.
Fortunately many Wall Street analysts foresee a favorable decision come early December. Bear Stearns analysts put approval at 70 percent.
Yet that optimism must be qualified by recognizing the damage caused by subjecting every major but routine voluntary alliance to months of wealth-draining "analysis" and groveling. The companies have given the government millions of pages of "documentation," a situation that has become routine.
This ceaseless intervention by government in every significant market transaction is to the economy what constant noisy interruption is to a conversation. The costs are enormous. Bear Stearns should be analyzing actual deals, not the odds on government intervention while companies twiddle their thumbs.
Some merger opponents are the usual anticapitalist, anticorporate advocates who see big business as an almost personal affront and regard the market as a zero-sum game. Our society is capitalist and corporate enough for them to enjoy the leisure of complaining, so they do.
Meanwhile, competitors — in this case, traditional broadcast radio — lobby strongly against mergers. Competitor opposition is usually a given; it’s really the foundation and lifeblood of today’s entire misguided antitrust enterprise.
Think about it: Competitors would cheer an inefficient merger, since that would keep them from having to reduce their own prices or improve their offerings. The mergers that competitors try to block are the efficient ones that benefit consumers.
Thus for innovative companies seeking to merge, appeasement becomes mandatory. A few weeks back, XM and Sirius promised not to raise prices during their first year as a combined entity.
Agreeing to such concessions benefits competitors but hurts the competitive process and customers. Competitor response and new market entry in a profitable field are sufficient discipline. As many commentators have noted, satellite radio competes with free radio, podcasts, mp3 players and more. XM/Sirius’ greatest threat may be "wi-fi everywhere" mobile Internet radio with user-programmable stations.
This XM/Sirius promise amounts to a self-imposed price control. But price controls hurt consumers: A low price is not a good price if it means inferior service or discourages needed investment and innovation.
Like all market prices, satellite radio fees are not a legitimate concern of responsible government. Prices are best kept in check by a marketplace clearly swarming with competing media platforms.
An efficient merger forces competitors to respond by expanding consumer choices even more aggressively. That’s hard work, so it’s no wonder some would try to block it. Keeping XM and Sirius apart merely constitutes "corporate welfare" for rival platforms, who would get a reprieve from making tough choices and innovating.
Too many businesses view competition like exercise — as good for other people. But for a functioning market economy, it is indispensable that competition discipline all players. The XM/Sirius merger, by creating a leaner, streamlined satellite radio industry, would energize competition among all forms of media.
Unelected bureaucrats should not dictate the structure of a competitive market. FCC can best expand consumer choice by liberalizing the government-controlled electromagnetic spectrum, deliberately scaling down its own oversight in favor of competition through auctions and new spectrum exchanges.
Such market dynamism is its own reward. Unfortunately, we remain on the wrong path. The concessions the merged XM/Sirius may have to offer are troublesome for free enterprise at large. When Lewis Carroll’s Alice crawled into the rabbit hole, she encountered a crazy world whose characters had to perform wasteful tasks to avoid arbitrary punishments by the Queen of Hearts. It was supposed to have been fiction.