Wired - Ad Mergers Won't Save Journalism. Strict Merger Rules Would

Open Markets Institute policy analyst, Daniel Hanley, calls for federally enacted bright-line rules ahead of the abandoned merger between leading recommendation engines Taboola and Outbrain in Wired.

AS COVID-19 ACCELERATES the collapse of the news industry, a tech merger should have been dead on arrival. Instead, though the Justice Department hastily approved the merger, it took a year and an investigation by the UK competition authority for the merger to be abandoned. Bright-line merger rules would have led to this result much more quickly. Without such, mergers will continue to threaten the vitality of the news industry and make a catastrophic situation even worse.

In late July, the Justice Department approved the merger of Taboola and Outbrain, two of Google and Facebook’s few competitors in online advertising. The combined Taboola and Outbrain (T/O) billed itself as a savior of journalism. They justified their merger on the specious grounds that the combined corporation would be a serious competitor to the duopoly of Google and Facebook that has long siphoned off revenue from news publishers. Skeptical of this claim, the UK competition authority decided to challenge the merger, and was one of the primary reasons why the merger was abandoned.

This merger would not have saved journalism; it would have threatened journalism. In its haste to approve it, the Justice Department ignored both the combined corporation’s market power and the advertising industry’s need for more competitors, not fewer. The merger would have substantially lessened competition in the market for the type of digital advertising that T/O provides, and would have created another dominant platform to drain desperately needed revenue from news organizations.

To prevent advertising monopolists from continuously taking advantage of lackluster merger enforcement and eroding the news industry, and to stop depending on foreign competition authorities to prevent mergers, federal agencies must enact bright-line merger rules. Such rules would free journalism from the Google and Facebook duopoly, prevent dominant firms from entrenching market power through mergers and acquisitions, and foster a competitive environment where firms instead invest in innovation.

Since the pandemic took hold in the United States in March, prominent news organizations have laid off thousands of journalists, once-powerful nationwide chains such as McClatchy have declared bankruptcy, and more than 50 local newsrooms have closed, accelerating a decades-long collapse. Between 1990 and 2016, news organizations fired and laid off almost 300,000 journalists. Some 20 percent of US newspapers have disappeared during the past 15 years. The industry broke down because advertising revenue declined 62 percent from 2008 to 2018. These firings and closures threaten the vitality of democracy, as less local journalism undermines citizens’ ability to hold public officials accountable and to know about public affairs in their communities, the nation, and the world.

Read the full article on Wired here.