Vertical Integration and Media Regulation in the New Economy

Abstract

Recent mergers and academic commentary have placed renewed focus on what has long been one of the central issues in media policy: whether media conglomerates can use vertical 'integration to harm competition. This Article seeks to move past previous studies, which have explored limited aspects of this issue, and apply the full sweep of modern economic theory to evaluate the regulation of vertical integration in media-related industries. It does so initially by applying the basic static efficiency analyses of vertical integration developed under the Chicago and post-Chicago Schools of antitrust law and economics to three industries: broadcasting, cable television, and cable modem systems. An empirical analysis reveals that the structural preconditions recognized by both Schools as necessary for vertical integration to harm competition do not exist in any of these industries. In addition, the cost structure of these industries suggests that vertical integration may well lead to efficiencies sufficient to justify allowing such integration to occur.