Last week in Washington, famed horror author Stephen King testified in court on behalf of the Department of Justice, about something scary but real: how to hold corporations accountable to the American people.
Mr. King was in court to testify that the merger of the nation’s two biggest book publishers is a violation of this country’s antitrust laws; rules which are meant to ensure our economy remains vibrant by blocking corporations from merging with the intent of eliminating competition.
The Biden administration is suing to block this merger between Penguin Random House and Simon & Schuster, because without competition in the publishing industry, this new massive publisher would be able to dictate terms to authors – and authors would have little recourse if they didn’t like the financial what was being offered to them.
Ironically, the publishing industry feels the need to merge to strengthen their bargaining power, because they were decimated by another monopolistic company: Amazon. For years, the Jeff Bezos owned business has sold books at cost or even for a loss in order to corner the market and get people to pay the annual fees to join Prime.
Another recent antitrust action, the Federal Trade Commission (FTC) has decided to sue Meta – the parent company of Facebook, Instagram and WhatsApp – to block them from purchasing a virtual fitness company called Within. What is so unique and aggressive about this approach by the FTC, is that the federal agency is stepping in to block Meta from trying to take over the virtual reality business, before they actually take it over. An ounce of prevention is worth a pound of cure.
To date, Lina Khan has flown under the radar of the American people, but the FTC Commissioner has changed the status quo of a hands-off federal government that allows corporations to merge, even if there are antitrust concerns. This casual approach to upholding our nation’s antitrust laws has plagued both Republican and Democratic administrations.
Before Khan came on the scene, the Department of Justice and FTC, would allow most proposed mergers but require the companies to promise they didn’t engage in future uncompetitive behavior. Known as “behavioral and structural remedies” this strategy has become something of a joke. Companies agree to these terms, and then violate the agreements in the future knowing the government has little recourse. Keep in mind, the leadership of the companies make massive fortunes from these mergers, so they don’t really care what happens afterwards.
A perfect example of the folly of “behavioral and structural remedies,” according to a recent lawsuit, was the 2018 merger between T-Mobile and Sprint, the cellphone carriers. When T-Mobile purchased Sprint, they promised the DOJ and Attorneys General around the country that they would protect workers previously employed by Sprint. Indeed, the former CEO of T-Mobile, John Legere, testified before the U.S. Senate that “Our merger will be jobs positive from day one – and going forward.”
But now, former Sprint store owners are suing T-Mobile for breaking that promise and closing stores and letting Sprint employees go. But, as pointed out by the prominent antitrust journalist Matt Stoller: “Sprint’s Executive Chairman and former CEO Marcelo Claure received an estimated severance payment of $61.5 million, Michel Combes, Sprint’s current CEO, got something like $26.1 million, and Legere himself managed to get more than $137 million out of the deal.”
When shooting down the blockbuster merger between the defense contractors Lockheed Martin and Aerojet Rocketdyne, Lina Khan told Sen. Elizabeth Warren (D-MA) that “antitrust agencies should more frequently consider opposing problematic deals outright.” In other words, why not block bad deals outright.
My organization has alerted the FTC and the Justice Department about these matters and asked T-Mobile for their comment. We await their responses.
Of course, corporations will always want to merge with their competitors, after all, it’s easier than innovating or lowering prices to attract new customers. President Joe Biden has made antitrust a priority, let’s hope he delivers.