November of 2017 marked the beginning of a large controversyfor the United States Department of Justice Antitrust Division. As they filed asuit to bar AT&T’s $85.4 billion bid for Time Warner1, thepublic was quick to point this unusual decision towards several considerable factors.While some blame this “abrupt change of antitrust law”2 on politicalinterference due to Donald Trump’s prevalent dislike towards CNN, others wonderwhy this merger would get sued since almost every other previously proposedvertical merger during the past years passed through antitrust regulations.
Althoughmany of these explicit accusations are present against the Department ofJustice’s decision, I believe that this merger must be blocked because it concentratestoo much power in the hands of a few, itserves as a harmful leader for establishing more monopolies, and it becomes adomineering threat for smaller companies. Verticalmergers are thought to be the adjoining of companies in completely different industriesand therefore, it is assumed that the level of competition will not be affectedafter they merge. This means that this AT and Time Warner union will notyield a sudden decline or increase of additional competition. However, thismerger does show immense chances that this single entity will receive an unhealthyand unjust advantage compared to other companies. AT itself has admittedthat it will utilize Time Warner’s high status as an entertainment brand “toraise prices for any other competing video distributor and to slow competitionfrom online video.”3 The powerful combination of their tactics to beboth a distributor and a content creator will ultimately lead to increasedprices for consumers and other surrounding companies.
If thismerger is allowed spring into action, other companies could follow, resultingin vast monopolies within our market. Mark Thoma, an economist that oncefeatured on CBS’s “Moneywatch”, emphasizes that “when firms have such power,they charge prices that are higher than can be justified,”5 which leadsto lower demand from consumers. This in turn leads to an inefficient marketwhere demand is far too low due to high prices. Therefore, if the Department ofJustice allows this merger to take place, severe economic consequences couldresult as it expands and serves as an example to other firms that wish tobecome monopolies. ATwishes to employ a technique coined “zero-rating” after the merger occurs. Thisstrategy will allow consumers to view certain content and use several serviceswithout it affecting their data plan caps.
4 As a result, otherdistributors with similar content will be disadvantaged because users willchoose AT’s content over theirs in an effort to not drain their precious”data allotment.” Other companies, especially small businesses and startupswill find themselves in an inevitable situation, where they will be stuck in aposition unable to handle that kind of competition. Due to anunfair concentration of power, the likelihood of setting an example fornegative monopolies, and the poor position that it would leave small companiesin, this merger should not move forward. While several understandable argumentsare provided as to why the Department of Justice should not sue to block theAT&T and Time Warner merger, it is evident that many negative consequencescould occur as a result.