Quality Collusion: News, If It Ain't Broke, Why Fix It?

By McMillan, Mark | Fordham Urban Law Journal, October 2012 | Go to article overview

Quality Collusion: News, If It Ain't Broke, Why Fix It?


McMillan, Mark, Fordham Urban Law Journal


Introduction

I. Background of Antitrust Law and the Media
     A. Antitrust Law and the Legal Treatment of Collusion
     B. The Economic Effects of Collusion
     C. Quality and the Local Television Broadcast Stations
II. The Divergence Between Antitrust Law and Practice
     A. Why the Antitrust Community Should Ignore Quality
        Collusion
     B. Why the Antitrust Community Should Not Ignore
        Quality Collusion

III. Suggestions for Closing the Gap Between the Law and the
     Practice of Antitrust Enforcement
     A. Increase Enforcement Actions Against Quality
        Collusion
     B. Develop Strategies for Quantifying Quality
     C. Utilize a Three-Factor Framework
        1. The Three Factors, Generally
        2. The Three-Factor Test as Applied to the LTN
           Market
     D. Conduct Retrospective Analyses of the
        Aforementioned Strategies
Conclusion

INTRODUCTION

It would be an Orwellian nightmare if one day we were to wake up and a single person decided which news stories were covered or how they were covered--in essence, if news stations colluded on their content. Every day in Honolulu, Hawaii, two stations simulcast their morning and evening news broadcasts. (1) In San Angelo, Texas; (2) Denver, Colorado; and Charleston, South Carolina, different on-air personalities read the same script across competing stations. (3) In Chicago, an editor coordinates the sharing of journalists, crews, and editorial staff of CBS, NBC, FOX, and CW to limit duplicative costs. (4) These are among the many examples of collusion in broadcast television news. (5) The nightmare is here.

Broadcast television firms have created various agreements of questionable antitrust legality to increase efficiency and profitability. (6) One example, known as a shared service agreement (SSA), coordinates the sharing of services and facilities between firms and inhibits quality-based competition between stations. (7)

Although antitrust laws cover almost all anticompetive activities, the agencies charged with enforcing the laws rarely pursue agreements on quality. (8) This lax enforcement probably stems from the difficulties of measuring quality and the procompetitive effects of standardization. (9) For some industries, such as local broadcast television news (LBTN), the justifications for ignoring quality collusion appear nonexistent. (10) Moreover, the quality reductions in broadcast television offend one of our society's cherished tenets: the freedom of the press. (11) Accordingly, the collusive agreements are worthy of closer scrutiny.

This Note discusses quality-based collusion in three parts. Part I provides a background of the legal treatment and economic theory regarding quality collusion and how economic principles apply to broadcast television. Part II discusses the divergence between the antitrust laws as written and antitrust laws as enforced against quality collusion. Part III provides strategies the antitrust community (the Community) (12) could adopt to enforce the laws more effectively, with local broadcast television as a backdrop for applying the strategies.

I. BACKGROUND OF ANTITRUST LAW AND THE MEDIA

Antitrust law has a long history extending back to 50 B.C. when the Lex Julia de Annona prevented the people from rigging Rome's corn market. (13) In the United States, the statutory history began with the passage of the Sherman Antitrust Act of 1890 (Sherman Act) . (14) While the debate over the purpose of antitrust law persists, (15) courts and enforcement agencies lean heavily on economic theory in interpreting the statutes. (16)

A. Antitrust Law and the Legal Treatment of Collusion

While a complete discussion of U.S. antitrust law and policy exceeds the scope of this Note, this Section provides a general background on antitrust law, the parties involved, and how antitrust laws relate to quality collusion. The bulk of antitrust law flows from two broadly written statutes: the Sherman Act (17) and Section 5 of the Federal Trade Commission Act of 1914. …

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