The Trump Administration’s Antitrust Revolution
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The Jeff Sessions Justice Department is currently undertaking what is perhaps its most important cause yet. It is taking strides to unshackle the free market by actively reviewing the United States’ 1,300 antitrust consent decrees.
Approximately 70 percent of the DOJ’s antitrust actions comes in the form of consent decrees. In retrospect, few would dispute that there are far too many of them on the books. Time and time again, big stick advocates have used the power of misinformation and fearmongering to push for consent decrees that break up some of America’s best and brightest companies.
In fact, Congress even founded our antitrust laws on false premises. When Congress first began debating trust-busting legislation during the Progressive Era, advocates provided a list of “predatory monopolies” that were allegedly wreaking havoc on consumers’ well-being. However, in his well-reasoned book, Dr. Dominick Armentano determined that big doesn’t necessarily mean bad. His research found that nearly all the industries noted on their list were actually driving down consumer prices to record lows – some by over 50 percent. Nearly every 19th-century economist scorned anti-trust laws during the time of their deliberation for a reason.
Skeptics of the Trump DOJ’s consent decree review process who still have their big stick pressed firmly in their hands should consider analyzing the details of the United States v. Microsoft Corp. case from 2001, where the Justice Department expressed concern that Microsoft’s operating systems accounted for 90 percent of the marketplace. Fast forward to the present and the market share of the Windows operating system has dropped dramatically due to an influx of competition that has forged more user-friendly consumer options. Markets almost always react to fulfill consumer needs through the laws of supply and demand.
Have no fear, though – the current Justice Department does not appear blinded by soundbites either. It seems to understand that this laissez-faire rule-of-thumb is not applicable is when government-chartered power leaves a handful of entities with the ability to price gouge, discriminate, and innovate less than what would occur in a free and open marketplace.
That is likely why at a recent roundtable, the DOJ spent a disproportionate amount of its time analyzing the consent decrees governing ASCAP and BMI, the two largest music public right organizations (PROs) that control the performance rights of roughly 90 percent of the nation’s songs. Since conservative commentators have long billed these decrees as necessary market correction mechanisms, the Department is ostensibly working to ensure that they do not deregulate important stabilization tools that do what the invisible hand can’t.
These two collectives were put under federal consent decrees over seven decades ago because by their very existence they are both walking antitrust violations. ASCAP and BMI are comprised by music publishers, which otherwise compete against each other, that have banded together to fix prices. While ASCAP and BMI serve the important function of creating market efficiencies, their massive aggregation of music licenses gives both monopoly power.
Once a PRO licenses one copyright holders’ performance rights to a song, that music collective is in complete control of it. Put another way, there is no way for a scrappy competitor to enter the market and impose upward pressure on innovation or downward pressure on prices for ASCAP or BMI’s performance licenses as is the case in the soda industry with Pepsi and Coke or desktop operating market with Android and Windows.
This is evident by PROs’ payment of settlement fees for allegations of price gouging, the monopoly status of even their smaller competitor, SESAC, and the large disparity in innovation between the distribution and licensing side of the music business. That’s why preservation of ASCAP and BMI’s consent decrees, which prevents discriminatory practices and monopoly pricing, is so important.
After its thorough review, it’s unlikely that the Sessions Justice Department will go after consumer protections like these. After all, less than two years ago the Justice Department concluded that these consent decrees were vital to the functioning of the marketplace. Nothing has changed about ASCAP and BMI’s market power over the past two years. In fact, nothing has changed with respect to either’s market power over the past 70 plus years.
The Department of Justice’s end goal is simply to ensure that consumers, not Washington politicians, can pick and choose the products that deserve their business — something that removing necessary safeguards like the ASCAP and BMI consent decrees wouldn’t achieve.
The Trump DOJ deserves praise for working to restore a fair and open marketplace by beginning the tedious but long overdue task of examining each antitrust consent decree with a fine-tooth comb. Except in the cases, like the music industry, where consent decrees protect against unrestrained pricing and other monopoly abuses, consent decrees serve a very limited purpose and should be eliminated. The most significant government loophole to sweat and hard work has lasted long enough.