NOVEMBER 1989 - VOLUME 10 - NUMBER 11
E D I T O R I A L
Time to Trust Bust
The U.S. reactions to the Sony Corporation's purchase of Columbia Pictures ranged from fear to outrage to resignation; but all of these responses viewed the sale primarily as yet another sign that Japan is overshadowing the United States as a world economic power. If the Japanese can buy Hollywood, the essence of American culture, little is sacred.
All but a very few missed a key issue in this deal: it was another corporate merger in the communications industry. Now Sony not only produces audio cassette tape, video cassette tape, video cassette recorders, television sets and movie cameras, it also produces movies, videos and television programs and owns movie theaters and movie channels.
Thus, Sony's control over film production extends from raw materials and equipment to creative and marketing decisions. Sony can decide what is made, how it is made, how and where it will be distributed and what it will cost the consumer. By diversifying vertically within film, Sony has become dominant in the film industry. Domination of this type is just as harmful to the industry, the economy and the consumer as the more widely understood horizontal monopoly.
Having vertical control over a field allows companies to distort the market in many ways. Columbia Pictures could make only movies which have a content and style that further Sony's interests; the movies could be made with Sony cameras and distributed through Columbia's movie theaters; when they come out on video, they could be available on Sony's video cassettes; when they show on cable television, they could be broadcast on Columbia's movie channel. The parent company is able to make many decisions which affect market choices and prices for consumers as well as for others in a particular field. When Sony's video cassettes get the contract for Columbia's video releases, smaller cassette manufacturers lose out and, perhaps, die out. In this way, the vertical concentration spreads horizontally and dominant companies continue to grow larger and more powerful.
Corporate mergers strengthen corporate control and power. When these mergers occur in the communications industry, they strengthen corporate control over the flow of ideas and culture. Such media mergers are on the rise. In the June 12, 1989 issue of The Nation, Ben H. Bagdikian, author of The Media Monopoly, described the power that the few executives at the head of this empire now have. He wrote:
Together, they exert a homogenizing power over ideas, culture and commerce that affects populations larger than any in history. Neither Caesar nor Hitler, Franklin Roosevelt nor any Pope, has commanded as much power to shape the information on which so many people depend to make decisions about everything from whom to vote for to what to eat.In 1983, most of the country's broadcast and film business, newspaper, magazine and book publishers were owned by 50 corporations; by 1987, only 29 companies controlled the field; and the number is only expected to shrink in the nineties.
This kind of concentration is taking place in other industries as well. It has increased in recent years in the United States in part as a result of the failure of the Reagan/Bush administrations to enforce antitrust laws and regulations. The Reagan administration loosened the regulations in 1982 and 1984 and proposed relaxing anti-merger law radically. Under Reagan, the staff of the Justice Department's Antitrust Division was cut by more than a third. The Justice Department received 10,723 pre-merger notifications between 1981 and 1987 and challenged only 26 of those deals. By comparison, the challenge rate was 25 times higher in 1979, when the Justice Department challenged 53 of the 861 pre-merger notifications filed.
Bush's new appointees to the Justice Department have announced that they will be tougher on anti-trust enforcement, though Bush's strong ties to big business and business's history of opposition to almost all forms of anti-trust regulation may limit any new anti-trust initiatives. Even putting such skepticism aside, former Federal Trade Commission officials point out that Reagan's federal courts upheld the mergers of the eighties and Bush's Justice Department may not be able to convince the federal judiciary to reverse its position.
Either way, it is important to recognize that Bush's anti-trust regulators could do a great deal more than Reagan officials did and still not adequately address the current monopoly madness. The regulatory apparatus in this country was devastated by the Reagan presidency; it must be strengthened and rebuilt through legislation and with increased allocation of resources to the appropriate agencies.