Crossed Lines: Why the AT&T–Time Warner Merger Demands a New Approach to Antitrust

February 21, 2017

As large firms like AT&T continue to explore methods of cementing their hold on their respective industries, regulators must proactively identify opportunities for anticompetitive abuses of market power in the 21st century economy. To this end, it is imperative that the Antitrust Division of the Department of Justice and the Federal Trade Commission abandon the outdated dogma espoused by scholars and jurists of the “Chicago School,” which holds consumer welfare as the sole metric by which proposed mergers should be evaluated. Instead, regulators should adopt a more holistic view of market power, specifically incorporating analysis of upstream impact of anticompetitive behaviors, especially those enabled by mergers. This would entail closer scrutiny of vertical mergers, positive price discrimination, and non-price-based schemes to profit excessively by withholding access to consumers.

By assessing the anti-competitive impact of the AT&T–Time Warner merger, this policy brief highlights the implications of the changing landscape of the telecommunications industry for antitrust and competition policy more generally. This brief will explore the following issues:

  • How efforts to deregulate the telecommunications industry through the 1996 Telecom Act and the stark change in antitrust enforcement dogma resulting from the rise of the Chicago School have brought the telecommunications industry to its current anticompetitive state
  • How recent studies have demonstrated the flaws of the Chicago School, in particular, its failure to accurately represent the anticompetitive effects of vertical integration
  • The consequences of increasing levels of vertical integration and other exclusionary behavior among telecommunications and media content creation firms
  • The broader policy impacts of the proposed AT&T–Time Warner merger