Monopolies Are Antithetical to Democracy

The proposed AT&T-Time Warner merger is a watershed moment for our political system. Will we continue to allow the further concentration of economic power at the top, or will this be the moment when democracy fights back?

ATT-Time Warner would be a giant in pay-TV, wireless service, broadband, news and entertainment — it could certainly shape the media to its advantage in a myriad different ways.

A very real reason for the merger is fear of Facebook, Amazon and Google, the data conglomerates chewing through our media, advertising, book and retailing industries at a scale we haven’t seen since perhaps the dominance of 19th century industrial barons. AT&T is trying to join this small club.

“A de-concentration of economic power would lift up the middle class. Antitrust law was formerly used to reduce inequality, fight corruption and create a politically stable social contract all at once.”

Concentration like this is economically harmful and a threat to freedom. As the founder of the modern antimonopoly movement Barry Lynn has found, concentration reduces job growth, crimps productivity, kills small business formation and generates inequality.

Proponents of the Chicago school of law and economics — who have largely dominated policymaking for 40 years — argue that mergers are generally efficient and don’t cause price hikes. For them, big is good. But this is not the case. A recent retrospective study of mergers that were allowed by the Federal Trade Commission in concentrated markets found that mergers do indeed lead to price hikes. The Fed also just released a paper showing that, systematically, mergers raise prices, not productivity.

But most people don't need these studies to know they are being ripped off by their cell phone, broadband, and cable providers, and that medicine and air travel, for example, cost too much.

For most of the 20th century, forcing competition into markets was the American model for ensuring democracy in the commercial sphere. New Deal competition policy was a response to the concentration of power in the hands of financial tycoons, which helped lead to the collapse of the banking system in the Great Depression.

Attacking monopolies was a method for reducing inequality, fighting corruption and creating a politically stable social contract all at once. In the 1970s, however, scholars embraced a different, pro-concentration philosophy, and 40 years later, the result is that power is once again concentrated in the hands of a small group, the supremely wealthy.

This already threatens our liberties. Facebook and Google engage in censorship; seven tech giants were caught illegally suppressing employee wages; and Comcast, which bought NBC seven years ago and never adhered to the merger conditions to which it agreed, sometimes bans political speech over its airwaves. AT&T has incentives to do the same thing: It already priveleges its own DirecTV contentacross its own distribution network and could pick and choose who what gets heard in America and what doesn't.

But the U.S. has a model for de-concentrating power in order to lift up the middle class.

In 1938, Roosevelt responded to a recession at home and the rise of fascism abroad by launching a broad attack on monopolies. The understanding that concentration would bring oligarchy and political instability was held on both sides of the aisle. Indeed, a year later, the Federal Trade Commission noted that “Monopoly constitutes the death of capitalism and the genesis of authoritarian government.” The result of the following decades-long attack on such concentration (by both Democrats and Republicans) was a strong middle class.

But there is a more recent example of success the U.S. could look to: Until 2011 Israel had a similar concentration problem. Social protest and aggressive journalism pushed a “concentration bill” through the Knesset, and the results rippled through society. More competition in the mobile market led to a 90 percent price drop.

More interesting still: The concentration bill was approved by all parties in Israel, from the extreme right to the extreme left — a rare feat in a country with fractious politics. Starting with AT&T-Time Warner, perhaps stronger anti-monopoly policy is something all Americans can agree on.