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Obama kicks off antitrust rough ride out of office

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Robert Cyran
President Barack Obama is kicking off an antitrust rough ride for his final months in office. A record wave of corporate consolidation has decreased competition in the US economy, encouraging the president to channel a predecessor, Republican Teddy Roosevelt. Unpopular cable firms and expensive set-top boxes make a good first target. But technological change makes it tougher to be a trustbuster today than it was a century ago.

Last year saw $2.3 trillion of mergers and acquisitions in the United States, according to Thomson Reuters. That's the strongest recorded period for M&A, and the climax of a long boom. One result has been increased market share - and reduced competition - in many sectors, from airlines to pharmaceuticals to retailing.
 
While the trend unquestionably bolsters corporate profits - they are near record highs as a percentage of gross domestic product (GDP) - it may harm consumers. The Obama administration has fought back by killing numerous blockbuster deals, like Comcast's $45-billion attempted purchase of Time Warner Cable.

But squelching deals can't generate competition where it doesn't exist. Proprietary set-top boxes are a good example. The average customer pays over $230 a year to rent a device. While technology hardware is prone to deflation, set-top box fees have risen faster than inflation.

The cable industry argues that allowing customers to choose their own boxes will stifle innovation. But cable companies are no Bell Labs. Giving Apple or TiVo greater opportunity looks like a golden chance to lower prices and improve quality.

The Obama administration says it wants more of these sorts of measures. Similar actions such as unlocking cell phones so consumers can transfer more easily to another operator have been, on the balance, beneficial.

They must be crafted carefully. Rules that encourage small firms to bid on wireless spectrum have been more effective at encouraging attempts to game the system than fostering competition. Pay-TV giant Dish Network, for instance, tried to win spectrum at a 25 per cent discount by bidding through entities that Dish effectively controlled.

Technology adds complication. Companies like Google and Amazon benefit from network effects and consumers may even benefit if one company's dominance allows it to give away other services for free, as is the case for internet search. Taking on monopolists is a worthy goal for Obama, but not one so easily accomplished with just a few months left in office.

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First Published: Apr 17 2016 | 9:21 PM IST

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