Independent and effective news reporting is at the heart of the democratic process. The dangers to media plurality and local journalism that Sanders identifies are real. It is time that these issues become part of the political debate.
Bernie Sanders’s proposal to “save journalism” is built around two laudable goals: protecting news plurality and resurrecting local journalism. The media merger review process is toothless and needs to be reformed. It’s also time to consider some serious form of public funding for investigative journalism.
However, casting the whole issue as a fight between brave selfless journalists and dark “forces of greed” leads to vague and misguided policy proposals.
As part of his bid to win the Democratic primaries, Bernie Sanders has recently announced a policy program to “reform the media industry and better protect independent journalism at both the local and national levels.” He has committed to implement these policies if elected.
Independent and effective news reporting is at the heart of the democratic process. The dangers to media plurality and local journalism that Sanders identifies are real. It is time that these important issues become part of the political debate.
In this brief note, I try to go beyond the abundant rhetoric to review the substance of Sanders’s program to reform the media. His proposed policy proposals (quoted in italics) can be grouped around four themes:
- Create special provisions for media mergers
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“We are going to institute an immediate moratorium on approving mergers of major media corporations until we can better understand the true effect these transactions have on our democracy.”
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“We will reinstate and strengthen media ownership rules, and we will limit the number of stations that large broadcasting corporations can own in each market and nationwide. We will also direct federal agencies to study the impact of consolidation in print, television, and digital media to determine whether further antitrust action is necessary.”
Let me applaud Senator Sanders for bringing this set of issues to the forefront of the political debate. I am terrified of media concentration. There is ample evidence that powerful media owners can manipulate public opinion, “capture” government, and subvert democracy. We must prevent wealthy people from accumulating news outlets, the way Andrej Babis did in the Czech Republic in recent years before becoming prime minister.
Standard competition policy—even with strict enforcement—is meant to protect consumer welfare and it is not meant to prevent the build-up of concentration in the news industry. Indeed, with existing US rules it is difficult to prevent individual owners from acquiring a large number of news providers and using them to influence voters (witness Sinclair’s scripted news).
However, Sanders’s proposal to reinstate the media ownership rules that worked in the 1960s is misguided.
They worked in the 60s because back then, the only two platforms for news were the press and network television. Those same rules would be toothless and/or arbitrary today, in a world where the set of news platform is larger and in continuous evolution. A more modern solution consists in measuring the “attention share” of every news provider, independent of the platform they operate on.
The competition authority will scrutinize and potentially block mergers involving companies with high attention shares. The attention share approach was recently used by the UK Competition and Markets Authority to block a proposed acquisition by Rupert Murdoch, who would otherwise have been approved on the basis of consumer welfare analysis alone.
- Strengthening existing antitrust provisions especially for tech mergers
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“We will reverse the Trump administration’s attempts to make corporate media mergers even more likely in the future. We are not going to rubber-stamp proposals like the new plan to merge CBS and Viacom into a $30 billion colossus.”
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“I will appoint an Attorney General as well as Federal Trade Commission officials who more stringently enforce antitrust laws against tech giants like Facebook and Google, to prevent them from using their enormous market power to cannibalize, bilk, and defund news organizations. Their monopoly power has particularly harmed small, independent news outlets that do not have the corporate infrastructure to fight back.”
These points are more general than the ones above, which referred to the negative effect a media merger can have on the democratic process. Here, Sanders promises to give competition policy more bite.
Again, I am happy a presidential candidate is pushing these issues. There is a general sense that US merger review has been way too lax, especially when it comes to Big Tech. For instance, many observers agree that letting Facebook buy tens of companies including rivals like Instagram was a mistake because it increased the market power of a company that was already a quasi-monopolist.
This laxness is due to two sets of reasons. First, US antitrust enforcement is particularly weak: this can be seen in comparison with the activism of the European Commission. In this sense, the change in leadership and mission proposed by Sanders could be very useful. However, this is not the whole story.
We know it’s not just a US issue because, despite all its zeal, the European Commission approved the Facebook acquisitions too. The problem is that the main standard that is used to block a merger on both sides of the Atlantic is whether the merger is likely to raise prices for consumers. That criterion has no bite for tech companies like Facebook that do not sell to consumers.
Some scholars have proposed getting rid of the consumer welfare standard altogether, while others suggest adapting it to encompass indirect damages through other markets (for instance, through monopolization of the advertising market). Either way, Bernie Sanders should advocate not just tactic changes in the Department of Justice and Federal Trade Commission but also a deep re-think of our competition policy law, so it continues protecting consumers in a digital world, perhaps along the lines suggested in the Stigler Report.
- Ensure media mergers do not lead to journalist layoffs
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“In the spirit of existing federal laws, we will start requiring major media corporations to disclose whether or not their corporate transactions and merger proposals will involve significant journalism layoffs.”
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“We will also require that, before any future mergers can take place, employees must be given the opportunity to purchase media outlets through employee stock-ownership plans—an innovative business model that was first pioneered in the newspaper industry.”
Here, Sanders starts from a correct premise and a false one. The real news is that the number of professionals engaged in local journalism has gone dramatically down and this is leaving a dangerous news desert. The fake news—which is implied in these policy proposals—is that this decline is mainly due to evil big media putting profit before the truth.
The truth is that the decline in local news is due to the death of the advertising business that supported it. Decades ago, local newspapers thrived because of local ads and classified. The internet—starting with Craigslist—put an end to it, and local news no longer has a strong for-profit business model. While consolidation may have played a short-term role in this, it is unlikely that Sanders’s proposals will make a difference.
What journalism needs is a new business model, which takes me to the last proposal.
- Create public funding, especially for local news providers
“We should consider taxing targeted ads and using the revenue to fund nonprofit civic-minded media. That will be part of an overall effort to substantially increase funding for programs that support public media’s news-gathering operations at the local level—in much the same way many other countries already fund independent public media.”
Information is the archetypical public good. As such, we should expect it to be underprovided in a pure market environment. That’s why it makes plenty of sense to offer some public funding to support news production.
The Stigler Report reviews a number of possible models and their potential cost, and comes down in favor of a voucher system: each adult is allocated a yearly amount, say $50, to donate to news providers of their choice, on any platform. To protect plurality, there would be a cap to the amount that a single outlet can receive. To foster local journalism, one can also add a requirement that some of the money goes to regional outlets.
Andrea Prat is the Richard Paul Richman Professor of Business at Columbia Business School and a Professor of Economics at Columbia’s Department of Economics.
The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy.
