Antitrust : Fighting Monopoly in the Age of the Oligopoly

Introduction:

The entertainment industry of today is dominated by a handful of companies that act as an oligopoly. A driving force behind the evolution of the film and entertainment industry is it’s complicated relationship with the government and the consequences that resulted from this.

Below is a brief history of the film industry with a focus on antitrust, deregulation, monopoly and what that means for us, today.

The Sherman Antitrust Act:

A mindset for antitrust began to form early; A few decades before the start of the New Deal era with the passing of The Sherman Antitrust Act in 1890 under President Benjamin Harris.

  • The Sherman Act consists of three main sections. The first two are quoted below and the third one speaks to the jurisdiction of the act:
John-Sherman-2

Nice looking out Senator John Sherman

  1. “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”

  2. “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony”.

What this means is that it would be illegal for any company to try to conduct activities or collude to create an intentional monopoly. Under the Antitrust policy, the government was able to break up major existing monopolies. For the film industry it meant that companies would no longer be able to vertically integrate.

WHAT IS VERTICAL INTEGRATION?

Before the 1980s , the film industry was an oligopoly between 5 major companies. A large part of this was due to these companies not only being able to produce films but owning the resources to distribute and exhibit them; In other words, they were vertically integrated.

After government investigation and intervention, these companies were given the choice between keeping their distribution license or their exhibition theaters. They chose to keep their distribution licenses and consequently had to sell their cinemas.

Deregulation:

Different administrations took different approaches to government regulation. During President Ronald Reagan’s administration, a more neoliberal mindset that believed that less government involvement would help increase competitiveness took root. This led to deregulation in the film industry.

“Though ‘free market’ ideology was touted during the Reagan era as the only way to preserve true competition, it actually worked to stifle competition by allowing for higher degrees of market concentration and control”

-Jennifer Holt (Empires of Entertainment)

His administration took a more lax approach to mergers and acquisitions occurring in the industry at the time. Although, in theory, the logic behind deregulation was that if there was less government involvement it would bolster competition and reduce monopoly but in practice it enabled just the opposite.

The Empires of Entertainment in today’s world

At the end of the 1980s the film giants were established. This was primarily due to 3 factors: Increasing globalization was affecting the way in which the industry was run. Overseas mergers and acquisitions allowed for larger reach and bigger profits. Globalization coupled with the deregulation at the time allowed for large market concentrations to emerge and thus the six (companies) phoenixes arose from the ashes of antitrust and the television boom.

Screen Shot 2017-10-25 at 8.00.07 PM.png

The Big 6 at the end of the 1980s

 

What does this mean for us, today? The problem with oligopolies.

Screen Shot 2017-10-25 at 7.58.35 PM

* In millions. ** # of total movies tracked that were released in 2017.

 

Today we see the market distribution of film being shared among a handful of companies. Barriers of entry and cut throat competition against powerful and established, media consolidations mean that smaller and less known companies do not last long before going belly up.

 

 

There is a host of problems that come with highly concentrated industries, one of them is that the oligopoly that exists in the film industry today, acts just like a monopoly because they all have similar practices. This does not violate the antitrust policies which, since the time of the Clinton administration, has since been more strictly reinforced and implemented.  This is a major loophole in the policies regarding government. Although antitrust policies protect the market against monopoly; Oligopoly whose members work in parallel, creating the effects of a monopoly are not in violation of the antitrust law.

This means that anticompetitive and monopolistic behaviour can take place without serious repercussion. Oligopolies don’t only exist within the entertainment industry, it exists most services that have made themselves a part of our lives. The times are changing and this means that some practices will no longer be suited to the current landscape; If something is no longer able to do what it was created for, is it time for a change?

 

 

Sources:

Sherman Antitrust Policy 

Market Share in Hollywood 2017

The Big 6

Empires of Entertainment

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