News Media Cartels are Bad News for Consumers
Competition Policy International's North American Column (April 2019)
7 Pages Posted: 1 May 2019
Date Written: April 29, 2019
Antitrust has two legal standards by which to assess firm conduct. The first is the rule of reason, which applies to the majority of antitrust matters that appear before competition agencies. The second standard is per se condemnation, which is reserved for conduct that is deemed so plainly harmful that the act itself is sufficient to find liability — the canonical example being cartel price fixing. The reason why cartels are condemned under a per se standard is because there is little to no redeeming social value from allowing competitors to jointly set the terms of trade in a market. Put simply, cartels are the antithesis of competition. They collectively negotiate on behalf of their members in order to extract a greater share of the market surplus while also damaging the market through higher prices, lower output, and/or lower quality.
This takes us to the Journalism Competition and Preservation Act. This bill was introduced with the professed objective of allowing small newspaper publishers to band together in negotiations with Facebook and Google in order to secure a more fair and equitable distribution of profits from online advertising. As virtuous as that may sound, the reality is quite different. The bill would allow all online newspaper publishers (including conglomerates such as the News Corporation, AT&T, and Viacom) to form a cartel to fix prices and other terms of trade. This is not a bill aimed at small publishers, nor is it a bill aimed at ensuring “quality” (which is often a red herring in antitrust as it invokes a desire for incumbents to create artificial barriers to entry). Rather, the bill would create antitrust immunity for colluding media conglomerates.
In this short article, we first describe precisely what is in the bill. Next, we describe the structure of the online news market, and the role that online platforms play in distributing news content. Finally, we detail the impact that such collusion would have on the market.
Keywords: antitrust, Journalism Competition and Preservation Act, competition, price fixing, Facebook, Google, online platform, publisher, collusion
JEL Classification: K2, K21, L4, L40, L82
Suggested Citation: Suggested Citation