Sunday, February 8, 2009

An easy change to make

In his first month, the focus on President Obama’s policy choices has been his tax and spending policies. Given the fight over the $800? $900 billion in new spending (plus the $300b blank TARP check that Tim Geithner gets to spend) this is not all that surprising.

However, the change in administration is also going to bring a change in antitrust policy, something that (unlike economic stimulus) can happen relatively quickly.

It's not clear how dramatic the change will be, but given that Sen. Obama was clearly to the left of where Gov. Clinton was, it seems likely that this will be the most aggressive regulatory environment since Carter if not LBJ. The contrast will be dramatic, coming after the Bush administration, which next to Reagan was clearly the most laissez-faire postwar regime when it came to economic policy.

Two big test cases are coming up on antitrust regulation (called “competition policy” everywhere outside the US).

The easiest one will be the disposal of the excess licenses that Verizon Wireless acquired in its Alltel acquisition. As has been true with cellular mergers for nearly 20 years, the acquiring party must divest one license (usually choosing the weaker one) in any market where it would significantly reduce competition through the combination.

The WSJ reported last week that AT&T wants to buy the licenses that Verizon is divesting. AT&T has the most money and so would either give Verizon the best price or at least push up the price in a bidding war. (Sprint us unlikely to be able to bid given its problems). The problem is, AT&T has about 28% share and Verizon has about 31% share, so the acquisition would decrease competition more than letting the licenses go to the #3, #4 carrier or some private equity group (which hopes to flip it someday to a big 4 carrier).

So unless some AT&T exec has an insider relationship with the Obama administration (like Bernie Schwartz to Clinton or the Texas oil industry to Bush), this seems like an easy bid for Obama’s antitrust appointees at FCC to reject.

The more problematic — both legally and politically — is the pending merger between Live Nation and Ticketmaster, providing vertical integration in delivering live rock concerts. Ticketmaster essentially has a monopoly in reselling concert tickets, so it would normally be subject to the strictest scrutiny in its actions.

However, Live Nation’s plans to compete with Ticketmaster are only incipient and not fully realized. Plus the vertical integration could deliver some efficiencies. Finally, as with artists vs. record labels or actors vs. producers, Hollywood (and its political donations) are at least somewhat split here and not speaking with one voice.

The Obama administration has yet to tip its hand on antitrust issues, so there are no indications how strict it will be. I would not be surprised if the new administration ends up blocking both efforts — AT&T’s acquisition of Verizon Wireless assets and Ticketmaster’s purchase of Live Nation. I would also not be surprised if the efforts are allowed to proceed with restrictions. About the only thing that would surprise me is if both were allowed to proceed with few if any restrictions, the sort of Bush-like outcome that the president (and his allies) vowed to eliminate.

No comments: