Newspapers Don't Need Anti-Trust Immunity

The $2.7 billion fine the European Union imposed on Google for violating European antitrust law led the Washington Post editorial board to observe that “Brussels vs. Google…seems to be a case of punishment without crime.” Nevertheless, the Post, part of the News Media Alliance, seems to have conducted its own investigation of Google, Facebook, and other platforms and concluded that Congress should exempt newspapers from antitrust enforcement. The rationale for this exemption is to allow newspapers to bargain collectively with “dominant online platforms.”

The newspaper industry is, indeed, struggling. But allowing competitors to collude is not the answer.

Newspapers have asked for special antitrust treatment before. The Newspaper Preservation Act of 1970 provided a partial exemption to antitrust laws, ostensibly for the purpose of maintaining competing newspapers in local markets. The Act has had mixed reviews to say the least. But it did have the plausible defense of allowing newspapers to improve productivity by sharing printing and distribution expenses.

The new newspaper proposal, by contrast, would permit the newspaper industry to form a cartel. Antitrust economists and lawyers often disagree about aspects of antitrust enforcement, but they agree almost unanimously that cartels are bad for consumers and the economy. It is, therefore, unsurprising that a bipartisan Antitrust Modernization Commission in 2007 described antitrust exemptions as “harmful,” “pernicious,” and “likely to harm both U.S. consumers and the U.S. economy.”

The News Media Alliance argues that an antitrust exemption is necessary because “antitrust enforcers have declined to address Google and Facebook’s growing dominance, enabling the digital giants to roll up the information economy.” The Alliance notes that these two companies together account for more than 70 percent of the $73 billion spent on digital advertising. Setting aside the fact that this statistic distorts the extent of competition by ignoring entry into the market by major players such as Amazon and News Corp, it is wholly irrelevant to the real problems newspapers face.

The newspaper industry has been disrupted. But it was disrupted by the internet, not by Google or Facebook. Print advertising began to collapse in 2006 as newspapers lost out to classified advertising websites like Craigslist. Additionally, newspapers currently receive about 70 percent of the ad revenue collected through Google’s and Facebook’s networks. In 2014 that plus other digital ad revenue totaled about $3.5 billion. Collecting the remaining 30 percent would yield a net increase to newspapers of over $1 billion. That’s not going to do much to make up for the $30 billion in print advertising revenues they lost since 2006.

Yet, even the News Media Alliance CEO acknowledges that despite the newspaper industry’s loss in revenue, “never in history have so many people consumed so much news.” The internet makes it possible for consumers to access publications from virtually anywhere. However, internet distribution of news has also meant the erosion of whatever local market power newspapers once had in local news gathering and reporting, distribution, and advertising. Somewhat ironically, as consumers have access to more news sources, the number of such sources may well decline.

Given the real problems facing local news — declining revenues, the large amount of resources necessary to conduct investigative journalism and cover global stories, and the growing importance of the large platforms to the news ecosystem — it would not be appropriate to let companies like Google and Facebook off the hook entirely. There is an inherent tension between these platforms, which want to maximize the amount of information freely available to their users, and newspaper publishers, many of whom want to preserve the subscription-based model.

Resolving this tension is a tough challenge. But shielding the newspaper industry from competition is not the way to do it. Ultimately, the newspaper industry will have to come up with the answer itself. Newspapers have long been criticized for being behind the curve when it comes to developing new business models appropriate for the internet age. The time to turn that around is now; perhaps The Washington Post will lead the way.

Thomas M. Lenard is President Emeritus and Senior Fellow at the Technology Policy Institute.