Pulse Price Report: Media Merger Raises Antitrust Questions

This week, AT&T offered to buy Time Warner for $85.4 billion, a merger between the major media distributor with a major media producer. The deal is being heavily scrutinized for its monopolization of media and presidential candidates Donald Trump and Hillary Clinton are even in agreement about it.

AT&T is claiming that by merging their broadband and wireless services with the production power of Time Warner (which owns channels such as CNN, HBO and Warner Bros. Studios), the company can provide that premium content to consumers on mobile devices. This service benefits the consumer, says the broadband giant.

But regulators are not so sure.

The biggest fear is the vertical structure of the potential new business. While AT&T doesn’t necessarily compete with Time Warner in the products they offer, by mixing production and distribution into one business, consumers may find themselves with limited options.

AT&T could say that DirectTV, its own pay-provider, is the only place consumers could watch CNN, HBO or Warner Bros. movies (although that policy is not likely to survive scrutiny from regulators). At the same time, DirectTV could favor Time Warner content on its channels, leaving little room for competitor production companies. They could charge spiked rates for that content on mobile devices. In the end, the antitrust regulators, including the Department of Justice and Federal Communications Commission (FCC), will decide whether the consumers win or lose with the merger.

Donald Trump is opposed to the deal, calling it, “too much concentration of power in the hands of too few.”

In the Democratic corner, vice presidential candidate Tim Kaine said, “pro-competition and less concentration, I think, is generally helpful, especially in the media.” Bernie Sanders said it would only mean higher prices and fewer choices for consumers.

As congressional committees and the federal departments review the deal, the matter is likely to be passed on to the next president’s administration.

Between 2011 and 2013, Comcast took over NBC Universal in a smaller but similar deal of distributors mixing with producers for $30 billion. Most analysts have since seen the deal as neutral. The business runs more efficiently but it hasn’t meant much for consumers.

Deals between distributors and producers are not uncommon, but rarely are they this big. In 2016, Comcast bought DreamWorks Animation for $3.8 billion to better compete with Disney. In 2000, AOL bought Time Warner for $160 billion, riding the wave of the new internet phenomenon and creating the biggest corporate merger of all time, which has since been called the worst merger of all time.

Antitrust regulators don’t really care if the deal will help the consumer watch Game of Thrones in high definition on their cell phone or tablet. The merger doesn’t have to help the consumer, AT&T just has to prove that the merger will not hurt the consumer’s options or their pocketbook.

Crop prices (Oct. 17)

Rio Creek Feed Mill – Algoma

Fox River Valley Ethanol – Green Bay

Basis: The difference between the local cash price for a commodity and the Chicago cash price (where the Board of Trade sets national futures price).

Gas Price Averages

United States: $2.23

United States one year ago: $2.21

Wisconsin: $2.15

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Northern Door: $2.22

Sturgeon Bay: $2.21

Other Commodities

Gold: $1,272.90/troy ounce

Silver: $17.76/troy ounce

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Sources: aaa.com, agweb.com, gasbuddy.com, cnn.money, National Public Radio, Fortune Magazine