03 September 2003

According to the New York Times, NBC and Vivendi Universal have reached at least an agreement in principle to merge. I'd like to give a special thanks to Ed Meese, Reagan's Attorney General, for making this kind of agreement possible. (My "special thanks" is a big raspberry and some hard questions about personal finances, personal interests, and the rule of law.) The Reagan Administration gutted much of antitrust law, and made it substantially harder for antitrust interests that cannot be numerically defined to even be heard.

   The really sad aspect of this "merger" is that on its face it violates the Justice Department's guidelines for determining whether a merger is "questionable," as it depending upon the market definitions the Herfindahl-Hirshman Index even pre-merger ranges from 1780 to over 2300. Under the DoJ's guidelines, an Index value (which is calculated by squaring the market shares out of 100 of each of the comparable market players) over 1800 is to be viewed with skepticism, while a value over 2000 is presumptively suspicious. And that's before getting into the "vertical integration" aspects of the merger, which are actually far more troubling.

   Admittedly, this has less direct effect on publishing than on TV and film; but that is assuming that the HHI levels set in the guidelines are appropriate in the first place. Harcourt is not a market-dominant unit, except perhaps in K–12 education. The qualitative aspects of vertical integration in providing content counsel against looking at just the numbers. In reality, I do not expect that to happen; General Electric is too big a gorilla for the DoJ to want to fight against, especially after its experiences with IBM (which still resonate in the department's culture a quarter of a century later).