Monday, August 6, 2018

Judge Leon (ATT/Time Warner) Should Have Read Chapter 16

If he had, the U.S. Dept of Justice might not have appealed Judge Leon's decision, arguing that he ignored the economics of bargaining.

The DOJ brief relies almost entirely on economics to make its case that when a vertically integrated content provider like ATT/Time Warner fails to reach agreement with a rival distributor, like Comcast or Charter, some consumers will shift to ATT's distribution (DirectTV).  This gives a merged Time Warner a better alternative which will allow it to capture a bigger share of the proverbial profit pie.

The ideas of Chapter 16,

The alternatives to agreement determine the terms of agreement

is reflected in the appellate brief:
It is fundamental to the economics of bargaining that a party derives leverage from having the ability to walk away, even if it never actually does so. If Time Warner truly could not walk away and the MVPDs knew that, it would have no leverage at all. 

All of this matters, because economics is what gives coherence to antitrust enforcement:
“To abandon economic theory is to abandon the possibility of a rational antitrust law.” Robert H. Bork, The Antitrust Paradox 117 (1978). That is what the district court has done, and why its ruling constitutes error. 

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