When competition gets too tough, how about collusion?


Imagine the following. You are in an industry where technological change has made your main products redundant. Your revenues have crashed. It is far from obvious that you can re-engineer your business to survive. What do you do?

  1. Ask antitrust authorities to allow you to collude?
  2. Try to change the law to undermine your competitors?
  3. Both of the above?

The clear answer for newspapers in the US is “both of the above”. And the FTC appears to be listening.

Earlier this year the FTC released a discussion paper “Potential policy recommendations to support the reinvention of journalism“. Two recommendations are ‘statutory limits to fairuse’ and ‘collaborative actions and antitrust exemptions’. Put simply:

  1. stop news aggregators from reducing consumer search costs for news items so as to raise barriers to entry; and
  2.  allow existing newspapers to collude to avoid competition and allow them to ‘coordinate’ on prices for internet content.

I have commented on some of these issues before. A brief review of the issues and Google’s response is here.

The frightening part is that the FTC appear to be taking some of these proposals seriously. The FTC’s approach appears to be based on a basic confusion. The FTC notes that:

The news is a “public good” in economic terms.

It also notes that:

[N]ewspapers have not yet found a new, sustainable business model, and there is reason for concern that such a business model may not emerge.

But the news is not newspapers. The fact that many newspapers might be dying does not mean that there is a concern with news production and delivery. Indeed, technological change through the internet clearly means that most consumers today have access to far more news at a far lower price than 20 years ago. The internet has led to a massive increase in news production and delivery. Yes, many newspapers might die – but do we really care when we are able to access more news from a huge range of sources at a minimal cost?

Even if we just think of newspapers, consider the following. Pre-internet, most people could access one or two newspapers a day on a timely basis. Today, even though many newspapers have gone bust already, we can access thousands of newspapers a day through the internet covering a vast range of topics. And even if another 90% of newspapers go bust, we will still have more access to news from newspapers via the internet than 20 years ago. Plus we will have all the other sources of news from the internet – blogs (like this), people’s journalism, new media (e.g. crikey, business spectator) and so on.

So a message to the FTC. Newspapers are not news. And collusion never helps competition. Do not fall into the trap of protecting vested interests to the detriment of the consumers.

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