The Justice Department has said that the United States District Court’s ruling in favor of AT&T’s bid to acquire Time Warner will harm consumers.
But Judge Richard Leon, who made the decision, has done consumers a favor. His ruling will help legacy media companies stand up to Facebook, Amazon, Apple, Netflix and Google.
These tech giants have revolutionized the customer experience and disrupted everything from our viewing choices to our shopping habits and how we pay for goods and services. But some fear that those companies will use their scale, influence and technological know-how to eventually upend almost every industry.
The question is: At what point should regulators step in to check their ambitions?
Those five companies hold considerable influence over the internet. Search engines can direct consumers to preferred sites. Online retailers can direct us to their choice of offerings. Content is increasingly distributed by a narrow set of platforms, and algorithms and artificial intelligence deliver news according to our inferred preferences.
This poses new challenges for regulators. They must catch up to the reality that new technologies, and the disruptive strategies of the companies employing them, can lead to unassailable market positions that affect consumer choices.
One way to improve competition would be to break up those heavyweights — not unlike splitting AT&T into eight “Baby Bells” nearly 40 years ago, or the European Commission’s verdict on Microsoft’s dominant market position in the 2000s.
But until regulators conclude that such action is necessary, the United States needs an approach to merger regulation that protects consumers by supporting transactions that create enterprises capable of standing head-to-head with the tech giants.
The decision to allow AT&T to acquire Time Warner is a step in this direction. So was the decision to approve Disney’s purchase of much of 21st Century Fox.
In a rapidly transforming marketplace, regulators should enable incumbents to stand up to the largest tech companies that are using new technologies — such as cloud computing, big data and artificial intelligence — to upend existing industries.
“Old economy” companies must be allowed to combine in order to increase their scale and innovation capabilities so that they are on a level playing field with the tech giants.
Regulators must now take notice of the verdict in the AT&T case so that they can calibrate their approach in the next round of transactions. That will allow them to think more about creating rivals to the present crop of technology giants, rather than standing by as they tighten their stronghold on consumers.
Hernan Cristerna is co-head of global mergers and acquisitions at JPMorgan Chase. The bank advised AT&T on its purchase of Time Warner and the Walt Disney Company on its bid for much of 21st Century Fox.
