Comcast, Time Warner Cable To Face ‘Monopsony’ Claims In Antitrust Case
WASHINGTON (Reuters) – If U.S. antitrust enforcers decide to challenge the proposed $45 billion merger of Comcast Corp and Time Warner Cable Inc, it may be because of an idea with a funny-sounding name that has been gaining currency in government offices.
The idea is monopsony power, the mirror image of the better-known monopoly power but a concept that is just as old.
A monopoly is one seller with many buyers, while a monopsony (pronounced muh-NOP-suh-nee) is one buyer with many sellers. A textbook example is a milk processor that is the only option for dairy farmers to sell to, and that then forces farmers to sell for less.
The U.S. Justice Department’s Antitrust Division is all but certain to examine the potential monopsony power, or buying power, that a combined Comcast and Time Warner Cable would have over media companies that provide TV programming, according to lawyers with expertise in antitrust law.
The combined company would have a near 30 percent share of the U.S. pay television market, Comcast has said, as well as be a major provider of broadband Internet access.
“It’s a potential concern,” said Maurice Stucke, a former Justice Department antitrust lawyer who is now a University of Tennessee professor and of counsel at the law firm GeyerGorey.
“It’s not as much in the limelight as monopoly, but monopsony has always been part of the antitrust laws,” he said.
Monopsony concerns tend to have a lower profile because they may not directly affect consumers. The harm to the market comes if suppliers go out of business, which reduces society’s overall output, or if suppliers have less money to invest in new technology, equipment and expansion.
Consumers may even benefit from monopsony if a company cuts its prices, although the savings are not always passed along. In the case of Comcast-Time Warner Cable, it could be argued that a more powerful pay TV operator may be able to lower fees if it can negotiate lower programming costs with the TV studios.
“It’s a monopsony problem when it threatens to decrease output. If all it does is reduce cost, it’s a good thing,” said Herbert Hovenkamp, a University of Iowa law professor.
He added: “Monopsony is one of those things that is frequently claimed and rarely proven.”