The rebirth of the Reagan antitrust movement

Thanks to the recent efforts of Congress and the White House, the United States is moving back to President Reagan’s approach to antitrust — nonpartisan, light regulation to ensure the interests of consumers, not corporate interests, are prioritized.

Reagan’s Department of Justice recognized that government involvement in the economy often produces the corrupt result of raising prices and picking winners and losers in the marketplace. But fear of consumer abuse still prompted occasional antitrust action, typically with consent decrees, to increase competition in areas where large governmental footprints exist. 

{mosads}Take the Bell System phone monopoly, for example. The company had a nationwide monopoly because government, both state and federal, restricted competitors from entering the marketplace. As a Bell System confidante reported, the government permitted the company to “raise rates and get new money” five months after nationalization, with 20 percent rate hikes for certain calls. 

Thankfully, the Justice Department’s 1982 consent decree restored many of the market forces in telecommunications that were destroyed by interventionist forces in the preceding decades. The decree was celebrated by those who lean both left and right. 

Although the Obama administration’s more activist approach to antitrust incited stress on the business community and American people at large, the DOJ recently announced an initiative to “terminate over 1,000 open antitrust consent decrees.” Each decree will be assigned to an Antitrust Division attorney, who will review the relevant casework and crack down on cases of federal overreach that harm the American people. 

But as underscored through the Bell System case, some consent decrees exist to protect consumers. In that vein, members of both parties on the Judiciary Committee have been guiding the Justice Department on which decrees to retain. 

For example, in a recent committee hearing, Sen. Richard Blumenthal (D-Conn.) argued that the two decrees that impose checks on the major music collectives must remain in place to ensure that collusion and malfeasance do not occur. Songwriters typically register their copyrights with just one of two music collectives — ASCAP or BMI — where everyone who commercially plays music, from radio stations to restaurants and others playing background music, go to get licenses. The antitrust suits to prevent them from abusing their monopoly powers go back eight decades.

Sen. Blumenthal is right. As with Bell, there is little to no opportunity for more competition to arise in the music industry because of government action. Intellectual property laws, although necessary, give music collectives a monopoly over everything in their individual repositories.

Music publishers, who otherwise are competitors, take advantage of their government-granted protections by organizing into ASCAP and BMI to fix prices, thereby greatly expanding their market power. Historically, this allowed them to rig prices upward and take advantage of both songwriters and the small businesses that must purchase licenses. 

Even with the consent decrees, ASCAP and BMI still explore ways to evade the law — prompting a 2016 DOJ investigation that led to a near $2 million settlement. Later that year, Justice concluded that no modifications should be made to their antitrust consent decrees. If anything, they should be strengthened, not removed.

Also at the recent hearing, Sen. Amy Klobuchar (D-Minn.), the ranking member of the Antitrust Subcommittee, demonstrated concern about competition and expressed hope that the subcommittee will again research the music consent decrees. Klobuchar’s concern is valid.

Antitrust Subcommittee Chairman Mike Lee (R-Utah) carefully analyzed this issue in 2015 and applauded the thoroughness of DOJ’s review the subsequent year. Senator Lee should take up the issue again by calling for new subcommittee hearings. Newer members should be briefed on the subcommittee’s past findings so that knowledge gaps do not prevent Congress and the Justice Department from working together efficiently and cohesively. 

After decades of excessive federal overreach, it is indeed refreshing to see President Trump’s Department of Justice take a more relaxed approach to antitrust. However, failing to adequately handle Bell System-like consent decrees, such as those restraining the music industry, will not only detract from the positive outcomes that Justice intends; it also will lead to a significantly worse market landscape than if the DOJ opted not to deregulate at all. 

Here’s hoping that DOJ will allow Congress to serve as its guiding light so that existing open marketplaces do not soon go dark.

Lewis K. Uhler is founder and chairman of the National Tax Limitation Committee and National Tax Limitation Foundation (NTLF). He was a contemporary and collaborator with President Ronald Reagan and economist Milton Friedman.  

Peter Ferrara is a senior fellow with the Heartland Institute and NTLF and teaches economics at King’s College in New York. He served in the White House Office of Policy Development under President Reagan, and as associate deputy U.S. attorney general under President George H.W.  Bush.