Between speculation If Warner Bros. Discovery and Paramount will pursue a merger, it's worth asking: Would antitrust agencies try to block the deal? That question poses an interesting test for new Guidelines for joint mergers released by the Federal Trade Commission and the Department of Justice last month.
The guidelines represent the most significant articulation of American antitrust policy and come at a time of public recognition that antitrust law has failed to stop the relentless concentration of economic power in a few companies. One of the biggest questions at stake is whether we should abandon the consumer welfare standard that has dominated (or some would say, decimated) antitrust law for decades.
The rule asks courts to protect competition on behalf of consumers who suffer at the hands of sellers with market power to raise prices or erode product quality. It also protects people and companies forced to sell to buyers with market power who can unfairly suppress prices for suppliers and (perhaps most relevant to any merger between Warner and Paramount that would consolidate employers in the entertainment industry) keep low wages of workers.
Some critics of the consumer welfare standard would expand the goals of antitrust laws to other social goals served by competition, such as safeguarding democracy or protecting small competitors for their own good. Therefore, the guidelines could have abandoned the consumer welfare standard in favor of a “kitchen sink” antitrust law that would leave courts balancing too many conflicting objectives.
But fortunately for the prospect of meaningful antitrust reform, the new guidelines continue to focus on how monopoly power can harm consumers and workers. There's just one key twist: While the old consumer welfare standard considered only short-term impacts, the new policy takes a long-term view. Addresses anticompetitive actions by companies that can inflict serious long-term harm even if they have little immediate effect on consumers and workers.
The impact of this change could be profound. Consider a possible deal between Paramount and Warner Bros. Discovery. Under the old guidelines, the merged company can be seen as offering stronger near-term competition against bigger fish in its pond, such as Netflix and Disney+. However, a long-term view would see the creation of another media giant making it easier for the industry to coordinate, not compete, in setting wages and laying off workers or setting high prices for access to content. And a more concentrated industry could operate in a long-term vicious cycle because it would make it even more difficult for new companies to enter the market and change things.
The new guidelines' focus on the long term would also closely examine the vertical aspects of any Paramount-Warner merger, asking whether the combined company would have control over a product that its rivals need to compete. Another media megamerger between AT&T and Time Warner in 2017 survived the old short-term standard because the court did not focus on the long-term effects of vertical integration between the creators and distributors of that content. The updated guidelines call for a different approach.
Thinking strategically about how companies compete over the long term will have an impact beyond merger law and also on other areas of antitrust enforcement, such as monopolization. Making short-term benefits to consumers the center of a monopolization case – where courts must decide whether a company's conduct primarily benefits its consumers or increases its market power – is how we ended up with giants like Google, Apple, Amazon and Meta, whose rise to extreme market power growth and subsequent consumer harm could have been avoided with a longer-term view of consumer well-being.
This new approach requires some trade-offs. The error rate in over- and under-application increases the further into the future courts try to predict harm. But antitrust law has for too long treated potential over-enforcement of the law as catastrophic and under-enforcement as essentially gratuitous, believing that markets naturally self-correct and erode monopoly power, which contrary to economic fact and common sense. Years of courts predicting (incorrectly) that doing nothing was good for consumers has generated enduring monopoly power that shows no signs of abating.
And what about safeguarding democracy from the harms of monopoly and protecting small producers? Have regulators abandoned these goals? The question is especially pressing when it comes to a potential Paramount-Warner Bros. Discovery merger that could further consolidate news sources and crush the little guys. The protection standard long-term Consumer well-being can also support those goals. If we reduce the ability of monopolists to prevent entry and crush nascent competition, we will probably end up protecting smaller companies. And all of these measures will make monopolies less stable over time, reducing their power to distort the democratic process through lobbying and information control.
Under the new guidelines, a potential deal between Warner Bros. Discovery and Paramount would present regulators with familiar questions about whether streaming subscribers, moviegoers, writers and content creators would be better off or worse off after the merger. But their time horizon has changed, allowing them to assess whether such an entertainment giant would hinder competitive entry, innovation, improved content and cheaper prices in the future. If we are serious about the well-being of consumers and workers, these are the right questions to ask.
Rebecca Haw Allensworth is a professor of antitrust at Vanderbilt Law School.
