The AT&T-Time Warner merger is approved, further fueling the media merger frenzy and providing the Second Gilded Age with “another layer of gold”; net neutrality is officially dead, and media ownership rules are once again on the table; and should every American have his own account with the Federal Reserve?




  • Two days after Judge Richard Leon approved the AT&T-Time Warner merger, imposing no conditions and rebuffing the Department of Justice’s attempt to block the deal, AT&T has completed the $85 billion acquisition. The DOJ has said it will forego the option of seeking a stay, but did note it might still appeal the decision.


  • The AT&T-Time Warner decision could prove momentous not just for the US media landscape—which it will further concentrate—but for the American economy and democracy as a whole. In The Nation, David Dayen analyzes the ruling’s impact, arguing that it will spur a frenzy of vertical mergers within and outside the media industry. The decision, he writes, shows the limitations of the modern antitrust jurisprudence, namely the consumer welfare standard. “The Second Gilded Age just got another layer of gold,” he writes.


  • In the New York Times, James B. Stewart also homes in on antitrust jurisprudence, arguing that Judge Leon’s ruling shows the “need to rethink antitrust laws.” When it comes to vertical mergers, he writes, quoting Columbia Law School professor Tim Wu, US antitrust law “is stuck in the 1980s.” Wu himself, also in the NYT, writes that antitrust law, in particular the 1950 Anti-Merger Act by which US courts review corporate mergers, has “wandered far” from its original intent. Leon’s decision, he writes, “barely touches on Congress’s concerns about excessive concentration of economic power or other guiding principles or values. Instead, the opinion is mostly a tedious dissection of whether customers might end up paying an extra 45 cents per month for pay-TV service.”


  • The ruling, as many have noted, is set to unleash a wave of corporate consolidation. In the media industry in particular, as Wu writes, it “implicitly encourages” consolidation. Comcast has already launched a $65 billion bid for 21st Century Fox’s TV and film studios, in an attempt to thwart its pending sale to Disney.


  • The Justice Department, meanwhile, is licking its wounds after Judge Leon handed it a blow that could dissuade it from challenging other vertical mergers in the future. Cleveland State University law professor Christopher Sagers (who wrote about the AT&T – Time Warner deal in ProMarket)  told the Wall Street Journal that he expects antitrust enforcers to “become more like the Obama administration” and focus on traditional cases instead of trying to challenge vertical mergers. “Litigated challenges will become plausible only for the biggest horizontal deals,” he says. Harvard University’s Einer Elhague, however, tweeted that Judge Leon’s “opinion is so case-specific that it has little implication for future merger cases.” Former Obama antitrust official Gene Kimmelman told the Journal that the ruling “demonstrates exactly why the Obama administration was very cautious about litigating vertical mergers.”


  • FCC chairman Ajit Pai is reportedly planning a vote next month to change the FCC’s media ownership rule, which limits broadcasters’ reach at 39 percent of the national audience. Pai’s proposals to loosen the rules, according to Bloomberg, “are all but certain to pass with votes from the Republican majority he leads.” This move, which has long been expected—especially after the FCC voted 2 to 3 to loosen cross ownership rules in November—would benefit Sinclair Broadcast Group and its planned $3.9 billion acquisition of Tribune. Pai is currently being investigated by the FCC’s inspector general in regards to his relationship with Sinclair and whether he and his top aides improperly pushed for the rule change to benefit the company.


  • The net neutrality repeal that Pai initiated late last year is now officially in effect. The fight over it, however, is far from over. In CNET, Marguerite Reardon explains how net neutrality is connected to the AT&T-Time Warner decision and to media consolidation.


  • In The Atlantic, Robinson Meyer profiles the increasingly influential legal scholar Lina Khan, the antimonopoly work done by Khan and her colleagues at the Open Markets Institute, and the new antimonopoly movement they helped inspire. “For most people, their everyday interaction with power is not with their representative in Congress, but with their boss. And if in your day-to-day life you’re treated like a serf in your economic relationships, what does that mean for your civic capabilities—for your experience of democracy?” says Khan of the importance of antimonopoly. Khan has also recently published a new piece in the Yale Law Journal (a response to Jonathan Baker, Jonathan Sallet, and Fiona Scott Morton’s introduction to the YLJ’s “Unlocking Antitrust Enforcement” issue) on the ideological roots of America’s market power problem.


  • Earlier this week, the Open Markets Institute hosted its “Breaking the News” conference, focusing on the impact of tech giants on speech and journalism. During the event, DOJ’s antitrust head Makan Delrahim vigorously defended the consumer welfare standard, arguing that enforcers should not consider other factors such as tech monopolies’ effects on democracy or free speech. “Enforcement actions purportedly aimed at supporting our democracy carry too great a risk of inadvertently undermining our constitutional values. Second, we don’t need to go beyond the consumer welfare standard because it can get the job done on its own,” said Delrahim. BuzzFeed’s Mat Honan covers the event.


  • During the same conference, New York Times CEO Mark Thompson accused Facebook of setting itself up “as the digital world’s editor in chief, prioritizing and presumably downgrading and rejecting content on a survey- and data-driven assessment of whether the provider is ‘broadly trusted’ or not.” Thompson also accused Facebook of inadvertently “supporting the enemies of quality journalism.” The New York Times’s Ben Sisario writes about the escalating tensions between Facebook and the news organizations that once sang its praises.


  • On that note, a new study by the Reuters Institute at Oxford University finds that the use of Facebook for news in the US has dropped by 9 percent from 2017 to 2018.


  • Elliot Schrage, head of Facebook’s public policy and communications operation, is leaving the company, though ReCode reports that Schrage will still advise CEO Mark Zuckerberg and COO Sheryl Sandberg. Schrage, reports the New York Times, was the architect of Facebook’s responses to its numerous recent scandals—in the latest, the Wall Street Journal reported last week that Facebook had shared user data with companies well after the point in 2015 when it claimed to have stopped do so—for which it has been heavily criticized.


  • Meanwhile, as Facebook and other tech platforms ramp up their lobbying efforts, the European Parliament is tiring of Facebook’s answering its questions by sending lobbyists. Following Zuckerberg’s evasive appearance before the European Parliament last month, the chair of the EP’s civil liberties committee, Claude Moraes, sent Zuckerberg a letter beseeching Facebook to “send staff members that are in charge of the departments concerned in your company and not public policy team members,” according to The Next Web.


  • In the Wall Street Journal, James Mackintosh analyzes the dominance of the tech’s Big Five over the US stock market. Apple, Amazon, Alphabet, Microsoft, and Facebook, he writes, “now make up more than 15 percent of the S&P, the most for any top five since early 2000.”



  • In Bloomberg, Cathy O’Neil argues that Facebook should allow data scientists to measure and track its influence on democratic elections. “Facebook insists that people can trust it to manage its giant social network in a way that doesn’t undermine democracy. I say verify: Let’s send in an army of scientists to study its role in the upcoming 2018 elections,” she writes.


  • From The Intercept: “Liberal groups have grown concerned that Senate Minority Leader Chuck Schumer will squander his power to recommend Democratic nominees for financial regulatory commissions by sending up milquetoast, industry-friendly functionaries, instead of stalwarts opposed to loosening rules on big banks.”


  • From The New Republic: two former Obama officials argue that every American “should have the option to hold a bank account at the Federal Reserve, just as banks do. They believe this would solve a vast array of problems at once, ensuring that everyone is included in the financial system, driving down retail costs for businesses and consumers, and even making recessions less likely.”


  • From the American Banker: after a broad examination of more than 40 banks that began following the Wells Fargo fake account scandal, the Office of the Comptroller of the Currency has found “more than 250 specific items regulators wanted fixed at individual banks.”


  • On Sunday, the Swiss resoundingly voted no in a referendum proposal to prohibit money creation through fractional reserve banking. In the FT, Ralph Atkins writes that Swiss bankers are “relieved.” A spokeswoman for the Vollgeld initiative campaign called the outcome, in which one in four voters supported the radical proposal, “very respectable.”


  • A new whistleblower case in Ohio alleges that CVS Caremark, a PBM, fraudulently overbilled the Ohio state government for drug costs reaching hundreds of millions of dollars. PBMs serve as intermediaries between drug manufacturers and consumers; in this case the whistleblower claims CVS Caremark successfully negotiated with drug companies to reduce prices but did not pass on the savings to insurers who work with the state.  


Read here Craig Garthwaite and Fiona Scott Morton’s analysis on ProMarket of the role of PBMs in maintaining high drug prices.

  • In the wake of the mess of a G7 summit in Quebec last week, on Friday the United States ramped up its trade campaign against China, with new 25 percent tariffs imposed on $50 billion worth of Chinese exports. China said the measures constituted the launch of a trade war.


Chatter From the Ivory Tower


  • Gabriel Zucman (a recent interviewee on ProMarket) and coauthors released the working paper on profit-shifting that Zucman presented at the Becker Friedman Institute’s recent Globalization and Inequality conference. The paper pegs the estimate of the share of MNC’s profit shifted to tax havens each year at 40 percent. The New York Times discussed the paper in the context of the new corporate tax cut: “The new corporate tax cuts are unlikely to stimulate the level of job creation and wage growth that the Trump administration has promised… because high tax rates were not pushing much investment out of the United States in the first place.”


  • Daron Acemoglu and Alexander Wolitzky have put together a model of how the institution of equality before the law emerges in societies. They write: “It may be optimal even from the viewpoint of the elite to introduce full equality before the law, which combines high coercion with low inequality. The key mechanism is that by stripping the elite of their privileges, equality before the law enhances the carrot of future cooperation for normal agents. This encourages normal agents to exert greater effort, which can benefit everyone in society, including the elite.”


Stigler Center Goings-On


  • In the latest episode of the Capitalisn’t podcast, “All Roads Lead to Rome,” Luigi Zingales and Kate Waldock look at the recent formation of Italy’s populist government and analyze Steve Bannon’s attempt to forge a similar left-right coalition in the US.



  • Applications for the 2018–19 Stigler Center PhD Dissertation Award, Visiting Researchers Program, and Research Funding are now open through June 30. More details available here.


Disclaimer: The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy.