The AT&T-Time Warner Deal: Perspective from the Great Trustbuster

First of Three Parts

 by Virgil, with Theodore Roosevelt

Okay, this is confusing to me: Two big corporations, AT&T (worth $221 billion at last count) and Time Warner (worth $66 billon), want to combine to become even bigger, and yet in response, the two major American political parties are not to be found in their usual ideological positions.

Today it’s the Republican, Donald Trump, himself a big businessman, who is loudly opposed to the mega-merger, while the Democrat, Hillary Clinton, seems to be quietly in favor of it.  Huh?  Again, I’ll admit, I find it hard to understand; perhaps you, do, too.  So before I get to my interview with Theodore Roosevelt . . .

Wait, there seems to be a murmur: Some are asking, how can I be claiming to have an interview with Theodore Roosevelt—the Theodore Roosevelt, America’s 26th president—when, in fact, he died in 1919?  Well, that’s a good question, which I can only answer this way: How is it possible that you are reading something from Virgil—the Virgil, the designated bard of the Roman Empire—when he died in 19 BC?  So that’s my answer: If it’s possible to hear from Virgil, then it’s also possible to hear from Teddy Roosevelt.  And so, unless there are further questions, I will proceed.  I am confident, indeed, that you will be hearing the authentic views of the historical TR, updated to today.

But first, let’s get back to Saturday, October 22, 2016, in Gettysburg, PA, when Donald Trump, the Republican real estate mogul who has discovered his inner populist, spoke out in fierce opposition to the proposed AT&T-Time Warner merger, describing it as “a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few.”

So we must also ask: Where does Hillary Clinton, the 2016 Democratic presidential nominee, stand on this high-flying issue?  So far at least, she has said nothing critical of the deal; she has left it to a campaign spokesman to offer this thick dollop of mush:

We think that marketplace competition is a good and healthy thing for consumers, and so there’s a number of questions and concerns that arise in that vein about this announced deal, but there’s still a lot of information that needs to come out before, before any conclusions should be reached.  Certainly, [Clinton] thinks that regulators should scrutinize it closely.

Those are nice words, not saying anything—nicely. Meanwhile, of course, in the minds of the two companies, the deal is already on track: So if the government doesn’t actively step in to stop it, it will happen.  And if Clinton is happy just saying that she wants the deal to be “scrutinized,” well, those are just words, rolling off the dealmakers like water off a walrus.  We know that the deal will be scrutinized; the question is, will it be stopped?

Here we can pause to make two points:

The first point is that there’s a significant backstory on the whole subject of corporate mergers, mostly on the Democratic side of the aisle.  Way back when—that is, during his 2008 presidential campaign—Barack Obama pledged to “reinvigorate antitrust enforcement.” And yet his actual record in office has been much different.

In fact, during the the last eight years of the Obama administration, we have seen record levels of business concentration.  For example, in 2010, Northwest Airlines merged into Delta Airlines; in 2012, Continental Airlines merged into American Airlines; and in 2013, US Air merged, also, into American Airlines.  And so today, just four companies are in control of more than 80 percent of the market.

Okay, now let’s look at another business sector: health insurance.  In the last few years, Aetna and Humana have merged, as well as Anthem and Cigna, and so the traditional Big Five have become the Big Three.  And we could make the same point about the accelerated concentration of the banking industry in the wake of the 2008-9 bailouts; today, in spite of all the talk about not wanting banks that are “too big to fail,” just five banks control almost half of the banking sector’s assets.

In addition, we can consider the super-sizing of the cable/broadband sector: After Charter Communications’ takeover of both Time Warner Cable and Bright House Networks earlier this year, two companies, Charter and Comcast, will control, according to Consumer Reports, between 70 and 90 percent of the high-speed broadband market. (Yes, that’s right, until just a few years ago, Time Warner had significant cable assets in the former of Time Warner Cable; the company chose to sell them off.  And yet now, if the AT&T deal goes through, Time Warner will once again be joined to a cable company.)

Here we might insert that economists generally draw a bright line between “vertical integration” and “horizontal integration”; both are terms of art in law and economics.  A vertically integrated company owns an entire supply chain, from production to distribution.  By contrast, a horizontally integrated company owns an entire market segment, or at least a big share of it.

Traditionally, regulators have looked more askance at horizontal integration, since it’s more obviously a monopoly if one or two companies control all the sales of a given category of product.

We might also note that the corporate sectors cited above—airlines, health insurance, banking, and cable—are all examples of horizontal integration.  So yes, anyone conscious of antitrust issues has a perfect right to wonder what the Obama administration has been doing these past eight years, and why.

By contrast, the AT&T-Time Warner deal looks rather harmless, because it’s a case of vertical integration.  That is, if the acquisition goes through, it will not decrease the number of business players in either the content-creation sector (Time Warner), or the content-distribution sector (AT&T).

Yet the new deal will still face hurdles, because most people, including most politicians, don’t draw fine distinctions between vertical and horizontal integration.  All they know, or think they know, is that “Big” is bad.

Indeed, some leading Democrats, such as Sen. Bernie Sanders of Vermont and Sen. Elizabeth Warren of Massachusetts, have already come out strongly against the deal, as part of their crusade against Big Business overall. We can observe that this rising tide of left-populist activism has swept like a tidal wave through the Democratic Party in the last year or so, threatening to wash away the pro-corporate stance of President Obama and, before him, of Bill Clinton.  (In fact, sometimes it seems as though Sanders and Warren sound more like Trump than Obama.)

And for sure, in the last quarter-century, Big has has been growing Bigger.  As The Economist reported in September, the share of GDP generated by the 100 largest US companies has risen substantially in the last two decades, from 33 percent of GDP in 1994 to 46 percent in 2013.  That’s a lot of concentration, no matter how one looks at it.

So that’s the context for today, when we can wonder: Where does the Obama administration stand on the AT&T-Time Warner deal?

In fact, the administration hasn’t formally taken a position, but oftentimes, actions speak louder than words.  Hence this headline in Monday’s Washington Post: “FCC may not be involved in reviewing AT&T’s big deal: Absence could make it easier for company to absorb Time Warner.”  In other words, the Obama Justice Department, led by Obama loyalist Loretta Lynch, will examine the deal, but not the Federal Communications Commission, which has often been more skeptical of such mergers.  Such was the case, for example, in 2011, when the FCC blocked AT&T from buying T-Mobile.  (That failed deal was an instance of would-be horizontal integration.)

So today, it’s safe to say that if the administration wanted the FCC in the mix, it would indeed be there.  And yet the word “Obama” does not even appear in that Post story.  To put the matter another way: As part of its overall policy of allowing most mergers to go forward, the Obama administration appears to want the AT&T-Time Warner deal to slip through as well, with the minimum possible fuss.

Of course, the big variable, these days, is Hillary Clinton.  As we wait to hear more from her on this deal, we might add this footnote: Time Warner employees and political action committees have given Clinton more than $800,000 during the course of her career; Time Warner, in fact, ranks as her ninth-largest donor.

Indeed, Clinton seems quite comfortable around big money—and big money seems  equally comfortable around her.  By the end of September, Hillary had raised $1.14 billion for her 2016 campaign; that takes a lot of schmoozing and hobnobbing.  In fact, she and her husband Bill have raised an astonishing $4 billion during the course of their careers.  That indeed suggests an epic amount of schmoozing and hobnobbing, and it’s easy to see how the interests of the business and financial elite would come to take precedence in her mind over any other considerations.  In fact, it’s also easy to see how the Clintons’ personal wealth would affect their overall worldview: Just in the years 2007-2015, Bill and Hillary added $139 million to their net worth.  Once again, that’s a lot of schmoozing and hobnobbing with fatcats.

Yet still, Hillary Clinton is a Democrat.  Therefore she talks, frequently, about raising taxes on the rich and bringing back “fairness.”  Indeed, she pledges to change the “rigged game.” And yet for their part, the rich riggers don’t seem to mind; not only do they not see her as a threat, they see her actually as an ally.

So we might ask: How could this be?  Perhaps the explanation for this plutocratic complacency can be found in this 2015 headline from Politico: “Clinton’s Wall Street backers: We get it/ Populist rhetoric, many say, is good politics—but doesn’t portend an assault on the rich.”  In other words, maybe for Hillary it’s all an act—a cosmic joke on her non-plutocrat supporters.

Okay, so now for the second point to be made: A specific wrinkle in the AT&T-Time Warner deal is that Time Warner owns CNN.  And here’s Trump on that:

As an example of the power structure I’m fighting, AT&T is buying Time Warner and thus CNN.

Ah yes, CNN.  That news channel, sometimes called the “Clinton News Network,” threatens to symbolize the whole deal, eclipsing everything else in the AT&T-Time Warner corporate array—the Harry Potter franchise, people’s mobile phone contracts, and so on.  As Trump has said, CNN is “biased and very dumb,” and millions of Americans agree, at least, with his argument about CNN’s bias.

Trump’s accusation of bias is bolstered by the Media Research Center (MRC), the conservative watchdog group, which has monitored CNN for decades.  Just on October 18, noting that CNN’s Brian Stelter had dismissed allegations of collusion between reporters and the Hillary Clinton campaign—Stelter had labeled the allegations as “false,” “ludicrous,” and even “damaging”— MRC’s Brent Bozell Tim Graham jibed back at Stelter, “On what planet does this man live?  Even by Clinton News Network standards, this is ridiculous.”  In other words, in Bozell and Graham’s view, the CNN man was far from candid about MSM bias.

To further illustrate the level of open hostility between Trump and CNN, we can add that just on Monday, Trump spokesman Jason Miller blasted a CNN story—while on CNN:

That piece [on Trump and the polls] from Jim Acosta was one of the most heavily-edited, most dishonest intro packages I’ve probably ever had set up.  . . . Everything from Kellyanne [Conway]’s words to the description of what’s going on in the race was just nonsense.

Needless to say, such hostility works both ways.  So we can conclude that by openly declaring his opposition to CNN itself, as well as to its corporate interests—including its possible purchase by AT&T—Trump has amplified the network’s already vehement antipathy toward him.

Yet without a doubt, Trump is striking a resonant chord with the right-of-center audience, which was already mostly convinced that the MSM has been out to get them.  For instance, there’s an October 9 column by Carl Cannon, appearing in the The Orange County Register: 

The 2016 election will be remembered as one in which much of the mainstream media all but admitted aligning itself with the Democratic Party

In fact, some on the cultural left concede the point: On October 23, comedian Michael Che said on Saturday Night Live, “It does seem like virtually every media outlet is doing everything in their power to prevent a Trump presidency.”

And we can’t leave this subject without taking note of Dana Milbank’s column in the October 24 edition of The Washington Post. Milbank took the extraordinary step of declaring that the normal rules of journalistic objectivity should not apply to reporters covering the Trump campaign.  As the Post-man put it:

In an ordinary presidential campaign, press neutrality is essential.  But in Trump we have somebody who has threatened democracy by talking about banning an entire religion from entering the country; forcing Muslims in America to register with authorities; rewriting press laws and prosecuting his critics and political opponents; blacklisting news organizations he doesn’t like; ordering the military to do illegal things such as torture and targeting innocents; and much more.  In this case, attempting neutrality legitimized the illegitimate.

Okay, so that’s Milbank’s opinion.  And here’s the opinion of many, if not most, Republicans: MSM reporters are Democratic Party operatives with bylines.

Of course, Democrats see things differently.  For openers, they reject the media-bias accusation.  And yet increasingly, as we have seen, Democrats have come to accept their growing congruence with corporate-media interests.  And in the meantime, Trumpists, as well as many Democrats, are becoming more and more populist, in defiance of the last couple of Democratic presidents.

I’ll admit, this is confusing for me, Virgil, to understand.

I mean, I am—okay, I was—the greatest Latin poet, for Jupiter’s sake!  I was the court-favorite of the legendary Augustus Caesar.  So sure, I learned a lot about imperial politics hanging around the Domus Augustii.  And yet how in Hades am I supposed to figure out American politics when the familiar partisan battle lines are shifting so profoundly?

So to help me make sense of this, I knew I needed some help from a solid source, deeply embedded in the history of antitrust enforcement—Teddy Roosevelt.  That interview is coming up next.

Next in Part Two: My exclusive interview with Theodore Roosevelt.