Be Leery Of Governmental Distortion Of the Market

Ken Blackwell
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Posted: Dec 30, 2015 9:01 AM
Be Leery Of Governmental Distortion Of the Market

An activist government can wreak havoc on the free market. From our nation’s earliest days, it was heard that “the power to tax is the power to destroy.” But Americans should be especially wary of when the government steps beyond setting rules for the marketplace and seeks to set the marketplace itself. This is the risk when government regulators overplay their hand with pending mergers and acquisitions.

Consumers are served best by free markets, even when market forces drive some competitors to consolidate or merge. 2015 was the biggest year ever for corporate mergers, with roughly $4.7 trillion in mergers signed last year[1] encompassing everything from pharmaceuticals, breweries and telecommunications. This has caused the federal government to strike an even more aggressive posture against some mergers.

This government contortion of the free market can ultimately hurt the very consumers the government is purporting to protect. It denies companies the ability to make decisions that will ultimately increase their own sales and improve customer satisfaction. We are seeing this take place today in the cable industry.

It’s no secret that many Americans have a less than positive view of cable companies. Internet and WiFi expansion have given consumers greater access to entertainment and information options than ever before. And when it comes to telecommunications, Americans increasingly demand the most innovative equipment and tools. A generation ago, a family’s television or phone was expected to last for decades. Today, their functional lifespan is measured in just years.

To adjust to these new realities, Charter Communications, Time Warner Cable and Bright House Networks are seeking to merge into one company -- New Charter. According to the companies’ shared public interest statement, the merger would allow New Charter to make substantial investments in commercial and residential upgrades giving consumers access to the latest fiber-optic and digital capabilities. The company is also pledging to give consumers access to the fastest entry-level broadband speed in the marketplace at a price lower than their competitor’s base packages.

Judged fairly on its merits, this merger would seem to give consumers what they want, allow the companies to act in their own interest, and be a natural product of the free market. Yet opponents of the merger are using the government approval process to try and distort the marketplace and defend a status quo that is clearly unpopular with the American public.

One of the most vocal opponents to the merger has been a competitor, the DISH Network. DISH does not seem predisposed to oppose industry mergers, having reportedly been in talks to merge with companies like DirecTV, T-Mobile and Hulu. But now DISH is aggressively expanding its lobbyist presence in Washington, DC in an effort to convince government regulators to oppose the creation of New Charter.

DISH’s action is an obvious distortion of the government’s role in this process, which is to be an independent referee judging whether a government intrusion into the free market is warranted. The government’s role is not to inject itself in the process in order to prop-up struggling companies that might be hurt by the creation of a new company.

The power to shape the marketplace is a power that should be used rarely and cautiously. When it is used it should be to defend the free market, not distort it. While Americans should always kick the tires of any deal/merger, they ought be leery of an overzealous government whose decisions could unfairly manipulate the marketplace.