The Federal Trade Commission (FTC) and Antitrust Division of the U.S. Department of Justice (DOJ) held another installment of their “listening tour” on April 27, 2022,¹ with a focus during this session on the media and entertainment industry. As with the forums before it, the FTC and DOJ held the discussion to allow smaller market participants – in this instance artists, content creators, journalists and the public – to express their views on the effects of consolidation in the media and entertainment industry as part of the wider effort to obtain feedback to inform the pending revisions to the antitrust agencies’ merger guidelines.

Summary of the Media and Entertainment Listening Forum

FTC Chair Lina Khan opened the forum by highlighting significant market changes in the media and entertainment industry over the last decade and emphasizing how the advent of new technology has transformed the way media – be it television, movies or music – is consumed by the public. Kahn noted a significant amount of vertical consolidation between cable and broadband companies in recent years and expressed concern that now only a handful of companies controlled a bulk of the entertainment supply chain. These changes had led to a similar concern by industry watchdogs that these integrated entities would wield their market power against industry workers and content creators and limit the diversity of content reaching consumers. With respect to news media, Kahn cited statistics estimating that roughly half of the counties in the country have only a single newspaper, frequently owned by a larger news media company, creating concerns that local coverage and access to information are being stifled. In sum, Kahn cautioned that unchecked consolidation in the media and entertainment industry could allow “outsized power on how information is distributed in our country” affecting, in her words, the “lifeblood” of our democracy.

Panelists next shared anecdotal accounts echoing Kahn’s opening comments. From stagnating compensation for audio engineers, content creators and musicians, to the effects on local journalism, free speech principles and national security, the participants echoed one clear message: The antitrust agencies cannot address the anticompetitive effects that flow from further consolidation through behavioral remedies in consent decrees settling challenges to proposed mergers. Panelists insisted the antitrust agencies must be more aggressive in litigating to block anticompetitive transactions and prevent any further consolidation in media and entertainment. Jonathan Kanter, who heads the DOJ’s Antitrust Division, and Khan, in supplemental remarks, sympathized with these “gripping” accounts and assured the panelists their concerns would be considered as the merger guidelines undergo revision. Beyond the economic impact of anticompetitive mergers expressed by the panel participants, Khan reiterated the ongoing – and many times immeasurable – dangers of consolidated news and media distribution platforms susceptible to the malfeasance of foreign actors. For his part, Kanter echoed Khan’s sentiments, reiterating in closing that the media industry is the “lifeblood” of our democratic society, contributing meaningfully to the “essence of what makes our country amazing.”

Key Concerns

A key concern that surfaced from participants during this listening tour was the effectiveness of the FTC’s and DOJ’s use of consent decrees and settlement agreements in regulating anticompetitive conduct. Although neither Kahn nor Kanter made any remarks that heralded either agency’s abandonment altogether of the use of such measures, the tenor of their comments certainly emphasized a concern that antitrust regulation and enforcement of the last few decades had depended too heavily on regulation of markets through the use of consent decrees, rather than shaping the law through litigation of antitrust cases to judgment.

Since the early 1990s, the use of consent decrees and settlement agreements to resolve litigation brought by both the DOJ, in criminal and civil contexts, and separately by the FTC, has been widespread.² While the DOJ has notionally suggested a shift from a “regulatory” to a “law enforcement” approach to enforcing federal antitrust laws during the prior administration,³ these types of resolutions have persisted. The combination of the various criminal and civil litigations that the DOJ has pursued in the past year, coupled with the continuous messaging announced from the highest levels of the FTC and DOJ, demonstrate the current administration’s commitment to pursue a significantly more litigation-focused enforcement approach.

In recent months, the agencies have offered two reasons for why they intend to litigate more cases than they have in the past. First, if successful, litigation will prohibit anticompetitive mergers – full stop, and without any compromises. Second, litigation will allow the agencies to advocate to courts in favor of their views of how the antitrust laws ought to be interpreted and, if they succeed, will help them develop the law. A third unstated consequence of this policy shift would be to heighten the deterrence effect for parties contemplating consolidations that raise potential anticompetitive concerns.

As emphasized during this most recent listening forum, FTC and DOJ are acutely tuned in to the impact of consolidation in the media and entertainment industry (as well as many others) on economic conditions. Kahn and Kanter have each expressed concerns over the past few months that existing antitrust jurisprudence is out of step with current market realities. In order to change the law, the DOJ and FTC must litigate more lawsuits to judgment. Whether the government has the resources to implement its preferred policy perspective of using consent decrees as an exception to litigation, rather than a rule, remains to be seen. Khan and Kanter also face the additional challenge in seeking changes to antitrust jurisprudence that has been decades in the making – but appear committed to taking on that challenge.

Conclusion and Considerations

In the near term, organizations both in the media and entertainment space and more broadly considering or pursuing mergers should be aware that, if the antitrust agencies raise concerns with their transactions, those issues may not be capable of resolution through divestitures or behavioral commitments that the agencies would have accepted in the past. Thus, engaging antitrust counsel early in the merger process remains a best practice. Market participants committed to pursuing strategic transactions should undertake a cost-benefit analysis to evaluate their willingness to pursue the transaction through litigation because, based on Khan’s and Kanter’s comments, that may increasingly be what it will take for merging parties to pursue their objectives.

As the government’s approach toward consent decrees shifts from behavior-focused resolution tactics and toward a model where government-led litigation challenging merger attempts becomes more commonplace, Holland & Knight’s Antitrust Team, which includes former leaders in the federal and state antitrust enforcement agencies, stands ready to advise and, if necessary, defend clients as they navigate this new enforcement environment.

Footnotes

1. This listening forum follows prior forums related to the food and agriculture industry and healthcare industry. See Holland & Knight alerts published on March 31, 2022, and April 19, 2022, respectively.

2. Douglas H. Ginsburg and Joshua D. Wright, Antitrust Settlements: The Culture of Consent, in Vol. I William E. Kovacic: An Antitrust Tribute – Liber Amicorum 177 (Charbit et al. eds., 2013).

3. See former U.S. Assistant Attorney General Makan Delrahim’s remarks to the New York State Bar, Jan. 25, 2018.