Understanding the state of antitrust enforcement in the United States
AYESHA RASCOE, HOST:
A not-so-sexy legal topic was very, very hot in Washington last week - antitrust - and two companies were in the spotlight. The U.S. Justice Department and eight states are suing Google, saying that the company is trying to neutralize or eliminate competition. And Ticketmaster was grilled by senators last week about its crash during ticket sales for Taylor Swift's tour. They say the company is too dominant in its market. Michael Carrier is a professor at Rutgers School of Law and an antitrust expert. Welcome to the show.
MICHAEL CARRIER: Thanks for having me.
RASCOE: Let's start with Taylor Swift and the Ticketmaster fiasco as a case study. Walk us through what the senators are trying to achieve.
CARRIER: So Ticketmaster merged with Live Nation in 2010. At the time, some people were really worried because Ticketmaster has control of the ticketing arm of concerts, and Live Nation Entertainment was in charge of promotion and artists. They have control over the primary ticketing, the secondary ticketing. Now, because of the merger, the artists, the venues - they have control over everything. And so in antitrust law, to be found guilty of monopolization, there need to be a couple things. One is you have to be really big and have monopoly power, and the second is you have to do something bad. You have to have some sort of exclusionary conduct. So it's not a violation of antitrust law just for being really big. The question is, have you done something bad?
RASCOE: Is it difficult then, though, for the government to take on these companies? - like, kind of a David and Goliath situation - because these companies - they are really big. They're really influential, and I assume they got bucketloads of money. And the government, you know, has a lot of power, but does it have the ability to take on these companies?
CARRIER: You're absolutely right that the government has very finite resources compared to these really big companies. When the companies are faced with an antitrust violation, that could change their way of doing business. So you might bet that there is no bottom to how much they will spend in terms of high-priced lawyers to make sure that they fight the government for years. These antitrust cases can go on for at least five years, maybe even seven or eight. And on the other hand, the government does not have as many attorneys. They can't bring that many big cases at once, and so you could think of it as David v. Goliath.
RASCOE: When was the last time that the government actually succeeded in breaking up a company?
CARRIER: It was AT&T. There was control over the entire market - the local market, the long-distance market - and there really was no choice for consumers. And so the court broke them up. The Department of Justice brought that case, and the court broke them up. The thought then was that there really was no alternative to the phone system, and so AT&T was not providing competition.
RASCOE: Is the real power of the government blocking mega-mergers or do they have teeth, when a company is already really big and expansive, to do something to rein them in?
CARRIER: So there could be a middle ground. The middle ground could be to divide up the company into smaller pieces or, for example, to take one part of it and take it off the table. So look at the pharmaceutical industry. Oftentimes, you have mergers between large pharmaceutical companies, and the government doesn't try to block the entire merger. It just requires what's called divestiture of overlapping product lines. So let's say that two drug companies each have a treatment for, say, headaches. The combined company wouldn't be allowed to keep both of those treatments for headaches because that would give them too much power. So they would need to divest one of those to a third party. The hope there is that there would be competition when the third party now is developing the headache medicine.
RASCOE: And so why is this important - to focus on this, to have the government looking into this? I mean, some people may go, well, I mean, it's Ticketmaster. It's - even with Google, it works fine. Why do we care about this?
CARRIER: We care about this because free markets are at the heart of our economy, of our society. And when companies don't play by the rules, they make it harder for competitors and they make it harder for consumers. Consumers have to pay higher prices than they otherwise would. The quality suffers. The innovation suffers. That is something that antitrust doesn't stand for, and the application of antitrust promises to improve consumers' lives.
RASCOE: So what needs to happen so that you don't have companies growing and becoming so dominant, as we seem to see happen pretty often these days?
CARRIER: Well, the government needs to keep bringing cases. Private parties need to keep bringing cases, too. And maybe the courts could be a little more accommodating. Over the last 50 years or so, the courts have made it really difficult to win antitrust cases. And so, for example, you look at what the courts have done, what the government hasn't done in the airline industry. We now are paying a lot more money than we used to with quality that doesn't seem to be as good. So we still need a robust enforcement regime and courts that are willing to recognize anti-competitive behavior and do something about it.
RASCOE: That is Michael Carrier, a law professor at Rutgers University. Thank you so much for being with us.
CARRIER: Thanks for having me. Transcript provided by NPR, Copyright NPR.