As a neo-liberal approach to media policymaking has spread, many nations have relied more heavily on competition and the marketplace to shape the structure and output of their electronic media industries. The result has been a greater reliance on antitrust laws designed to maintain a competitive marketplace rather than industry-specific regulations. Indeed, this faith in the marketplace to produce optimal outcomes has been so great that it has often led to a view that promoting competition is virtually the only concern policymakers should have. But there has also been a countervailing force at work. In an era of growing media globalization and regionalization, many governments have seen the need to allow media corporations to grow in order to compete in this new global media economy. The result has often been a reluctance to apply antitrust laws as rigorously as in the past.
Origins Of Antitrust Regulation
In the United States, antitrust laws developed in the late nineteenth century as a reaction to the growth of big business. These laws were designed to limit the economic and political power of these firms and their ability to collude in the creation of cartels to dominate an industry by destroying potential competitors and setting prices at levels that harmed consumers.
Wells (2002) has observed that this reaction against cartels was a particularly American phenomenon. Their existence in other countries was often tolerated and sometimes even supported by governments as a way of stabilizing markets. However, following World War II, the United States began to actively export its ideas about the role of antitrust laws. Wells notes that these efforts were successful in Europe but failed elsewhere, for example in postwar Japan.
Antitrust And The Electronic Media
The application of antitrust law in the case of a specific industry requires both the definition of the relevant market and an assessment of the level of competition within that market. But defining the boundaries of the relevant market in the case of electronic media industries can be especially difficult. For example, if there are two competing providers of satellite radio to a nation, how should that market be defined if they wish to merge? Is it just the existing satellite radio market that should be considered? Or should terrestrial radio broadcasters be seen as participants in the market? Perhaps even providers of online services allowing consumers to download music should also be included.
Napoli (2001, 153 –176) has noted the difficulty in defining the geographic market for media products before making an assessment of the level of competition, since, while satellite services are aimed primarily at a national market, competition between broadcast radio or television stations often takes place in a more localized market. In addition, Napoli also distinguishes between various content markets and audience markets. Here the concept of substitutability is important in the assessment of the level of competition in a media market. For example, in an audience market, two competing broadcast radio stations may be attracting audiences with little or no overlap. To a potential advertiser the members of one audience are not substitutable for those of the other. However, as Napoli points out, even if the relevant market can be defined, the issue of how to assess the level of competition in that market is not without its problems.
Various competition-concentration indices have been used, including, in the United States perhaps most frequently, the Herfindahl-Hirschman Index (HHI), which is calculated by summing the squares of the revenue shares of all participants in a market. This works well if the measure chosen for the analysis is the share of the total advertising revenue attracted by all participants in a market. The problem with this type of assessment of the level of market concentration in media industries is that while this kind of measure may produce an index that is too low to allow companies to use their market power to fix prices, the level of market concentration may still be seen as harmful to the democratic conversation. An inability to control advertising rates may not correlate with a desire for a diversity of voices to be heard in a community.
Antitrust And The Marketplace Of Ideas
In the approach promoted by the Chicago School of economics, the central issue in antitrust law is whether a company can use its market power to fix prices. This view came to dominate antitrust enforcement in the United States during the 1980s. From this viewpoint, antitrust law is solely concerned with levels of competition and market efficiency. It does not address the role communications media play in a democratic society by providing access to a wide range of diverse voices; that is, the creation and maintenance of a “marketplace of ideas.” While the application of antitrust laws in a way that is solely designed to promote economic efficiency will probably also promote some of the democratic ideals embodied in the concept of the marketplace of ideas, the question is what it will miss. For example, a market may be found to be entirely unconcentrated provided it does not give any of those operating in that market the power to raise prices, even if a particular category of media content is entirely absent. This could include the complete absence of media products reflecting the lived experiences of specific cultural or ethnic groups. In the case of a geographically defined local media market, there could also be no local content, with all media outlets in that market being programmed from remote locations.
As a result of this narrow definition of antitrust as a purely economic issue, there has been a reluctance in the United States to stop media mergers. Vertical integration leading to the creation of media conglomerates has rarely been challenged. Whether or not these mergers might harm citizens, rather than consumers, has been ignored in favor of the argument that such mergers create market efficiencies. Some have argued that this is a major flaw in the Chicago perspective and particularly troublesome in the way the antitrust laws have been used to assess large media mergers in the United States (Conrad 1996 –1997). They also conclude that case law and legislative history do not support this narrow interpretation of the role of antitrust laws to the exclusion of concerns about the marketplace of ideas (Stucke & Grunes 2001, 273 –275).
Antitrust And The Concentration Of Media Ownership
As the number of sector-specific rules limiting media mergers has decreased, some have expressed a concern that the application of antitrust law has proved an ineffective substitute for those rules in halting what they perceive to be the growing concentration of media ownership. Their concern is related to the concept of the marketplace of ideas discussed above, and they fear that the growing concentration of ownership is creating a situation where the leaders of a few large media conglomerates have the power to control the content of that marketplace of ideas (Baker 2002; McChesney 2004, 235 – 240). They call for antitrust laws to be applied with a focus not only on the benefits of allowing increasingly large media conglomerates to achieve market efficiencies, but also on the harm this may do to maintaining a vigorous democratic debate.
Critics of this line of thinking have responded by arguing that the media industries are not highly concentrated if one considers all media. They point to the proliferation of new media technologies in recent years, especially the Internet, and suggest that this is actually increasing diversity of control. They also argue that ownership does not necessarily confer control, since the day-to-day decisions made in the many divisions of a media conglomerate must be left to managers and cannot be overseen by the individual leaders. This argument is, however, countered by noting that while operational control over the day-to-day operations of media conglomerates may have passed to managers, the owners still have allocative control (Williams 2003, 73 – 95). For example, setting the expected profit margin for a particular division within a media corporation can have profound impacts on its day-to-day operations without any direct intervention. The need to make greater profits can result in decreased numbers of reporters in a newsroom or a reduction in the number of pages in a newspaper and the elimination of some types of news.
In conclusion, a reliance on antitrust law to regulate media industries, especially when those laws are interpreted solely in terms of whether companies can use their market power to set prices, may be inadequate to protect some of the democratic ideals raised by the special role media industries play in the democratic process.
- Baker, C. E. (2002). Media concentration: Giving up on democracy. Florida Law Review, 54, 839 – 919.
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- McChesney, R. W. (2004). The problem of the media: U.S. communication politics in the twenty-first century. New York: Monthly Review Press.
- Napoli, P. M. (2001). Foundations of communications policy: Principles and process in the regulation of electronic media. Cresskill, NJ: Hampton Press.
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- Stucke, M. E., & Grunes, A. P. (2001). Antitrust and the marketplace of ideas. Antitrust Law Journal, 69, 249 –302.
- Wells, W. (2002). Antitrust and the formation of the postwar world. New York: Columbia University Press.
- Williams, K. (2003). Understanding media theory. London: Arnold.