The emerging Trump doctrine on mergers and antitrust

Wall Street regaled the election of Donald Trump. Conventional wisdom suggested the new president would hector a new era of growth and deregulation, especially for industries complaining of Obama’s heavy hand. Banking, finance, and telecom companies all looked forward to the lifting of erstwhile rules that were, according to the president, disincentives to growth. Investment capital, parked on the sidelines for years, revved up the engine in anticipation of little — or light touch — regulation.

Wall Street has not been disappointed. The market is way up; rates are stable; money is abundant, and growth is steady. Strict regulations are giving way to easier new rules, or no rules at all. The spirit of deregulation abounds.

{mosads}Nowhere has this been more manifest than in the telecom, media and technology sector, where the chairman of the Federal Communications Commission promised to “fire up the weed whacker and remove those rules that are holding back investment, innovation and job creation.” With serial precision, Chairman Ajit Pai has cut down Obama-era rules on media ownership, privacy and so-called net neutrality rules for internet service providers. For this he has been praised by the industry but pilloried by the public interest bar.

But all is not well in the big-dollar world of media mergers. While the FCC may be singing a familiar song, there is a discordant tune over at the Department of Justice, where signs of inconsistent decisions are emerging. First, DOJ sued to stop the $85 billion AT&T-Time Warner merger. Next, it scrutinized the $4 billion Sinclair-Tribune deal, requiring what some see as unreasonable divestitures. 

So far there has been no notable reaction to the proposed $15 billion Discovery-Scripps deal, or the $2.8 billion Meredith-Time, Inc. merger. And then there is the $66 billion Disney-Fox deal, which the president initially said, “would be good.” But that, too, could change.

The fact is that each of these mergers has its own merits and “would be good” for a lot of reasons. But those merits have been overlooked by the Justice Department’s inconsistency. If investors value anything other than high returns, it is predictability. But therein lies the disconnect, because the DOJ approach has been anything but predictable. It was once conventional wisdom that vertical mergers — those between companies that do not compete against each other — posed no threat to competition. This axiom was burnished into the pillars of antitrust law, providing reliable precedent on many deals for decades.

Out of nowhere the president’s Justice Department has upended decades of reliable merger regulation, replacing it with an ad hoc approach to deals. Whether grounded in politics or personality, this is not what the captains of industry signed up for when they overwhelmingly supported candidate Trump, nor is it consistent with Republican orthodoxy. 

With unprecedented growth in the telecom and media sectors, now is not the time to douse the sparks of mega-merger deal making. In 2017, media was the top industry for proposed or announced deals over $10 billion. And from 2013-2017, media was second only to pharmaceuticals for big deals. In addition, mergers involving newspapers, magazines, TV stations and digital platforms increased over the last few years. These transactions often lead to more jobs, economic growth and enhanced services for consumers in the long-term and provide incentives for increased competition. The notion that bigger is not necessarily bad should not be lost on this administration.

Like many other tenets of the Trump doctrine, antitrust policy is evolving. In its evolution, decision-makers should not forget the economic principles that got them where they are today.

Adonis Hoffman is chairman of Business in the Public Interest and CEO of The Advisory Counsel, Inc. which advises investors on telecom, media and fintech policy and regulation. He is an adjunct professor at Georgetown University.