Principles in Practice: The Blog of the Objective Standard

Wednesday, February 28, 2007

Preventing Mergers Destroys Competition

Posted by ARI Media at 7:28 PM

Irvine, CA—Opponents of a planned merger between XM Satellite Radio Inc. and Sirius Satellite Radio Inc. are asking the government to block the merger in order to "preserve competition" in satellite radio.

But, said Alex Epstein, junior fellow of the Ayn Rand Institute, "The opposition to this merger is irrational. There is no way a voluntary merger can be a threat to genuine competition.

"Proper, free-market competition is a process in which businesses, free to produce and sell whatever products they choose, attempt to outdo one another in making consumers the best offers for their money. No combination of companies can force customers to buy its products, nor prevent other businesses from offering theirs—thus, no merger can thwart free competition. To the contrary, mergers are an extremely valuable form of competition. A good merger enables businesses to combine strengths and strip away unneeded costs in an attempt to improve the appeal and profitability of their products. This is exactly the outcome that the struggling satellite providers Sirius and XM are hoping for—as they attempt to sell a profitable product to customers who have the option of listening to terrestrial radio, high definition radio, Internet radio, audiobooks, podcasts, and CDs.

"When two businesses have so many outstanding competitors that they are bleeding red ink, how can anyone oppose a merger between them as a 'threat to competition'? These opponents do so only because they accept the perverse concept of 'competition' that underlies our antitrust laws. On this view, 'competition' is not a free process—it is an egalitarian outcome, in which every market and sub-market has as many viable competitors as possible, with no one ever growing or succeeding 'too much.' Antitrust advocates believe that the government must forcibly prevent any one company from gaining too great a market share—that is, prevent it from persuading 'too many' customers to buy its products.

"A conception of 'competition' that grants government bureaucrats the power to keep companies from becoming 'too successful' should not be preserved—it should be rejected as perverse and un-American. As a first step, we can tell our government to keep its hands off of satellite radio companies."

Labels: Business and Economics, Individual Rights and Law