Populist Antitrust and the 1927 Radio Act

Abstract

In policy circles of Washington DC, in academia, and among advocates and lobbyists, there has been growing attention to the role of antitrust enforcement versus regulation in today’s economy (see, e.g., Shapiro in Int J Ind Organ 61:714–748, 2017). Various populist arguments seek an expanded role for antitrust law, as proponents seek to control the perceived political and free speech dangers associated with market concentration. These new populists are particularly interested in large, content-laden companies such as Google, Facebook, and broadcast and cable firms. Strong interest in content companies is, of course, not new. This essay explores different political, economic, and philosophical regimes at play when the United States chose to enact the Radio Act of 1927 and regulate, rather than leave to antitrust controls, the emerging radio industry. By examining antitrust at the dawn of the Radio Act of 1927, there are lessons to be learned for the political treatment of today’s social media, broadcast, cable, and telecommunications industry. In particular the story of the Radio Act of 1927 highlights two historically recurring political themes: (1) a longstanding, near-universal political goal to control content and (2) the tension between selecting an ex post antitrust enforcement regime versus an ex ante regulatory regime to control economic concentration and power. It is this second theme that is primarily explored here.

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Notes

  1. 1.

    See, e.g., note 2.

  2. 2.

    The Communications Act of 1934, 47 U.S.C. § 151 et seq.

  3. 3.

    See, generally, Feld (2017), arguing why cable television is a unique product (and appropriately designated as such by legislation) that presents potential public interest concerns beyond those usually considered in antitrust merger reviews.

  4. 4.

    For example, there is a strong argument that the 2015 Open Internet Order that declared Internet Service Providers were “telecommunications” providers as defined by the Congress of 1934 was a product of an over-reaching FCC and facilitated by an overly solicitous court. Congress has yet to speak to the regulation of this new content transmission system.

  5. 5.

    Town of Concord v. Bos. Edison Co., 915 F.2d 17, 22 (1st. Cir. 1990), cert denied, 499 U.S. 931 (1991); See also United States v. FCC Satellite Bus. Sys., 652 F.2d 72, 88 (D.C. Cir. 1980) (quoting N. Natural Gas, Co. v. Federal Power Comm’n, 399 F.2d 953, 959 (D.C. Cir. 1968) that “[s]ince ‘the basic goal of direct governmental regulation through administrative bodies and the goal of indirect governmental regulation in the form of antitrust law is the same—to achieve the most efficient allocation of resources possible,” we have insisted that the agencies consider antitrust policy as an important part of their public interest calculus.” (internal citations omitted)).

  6. 6.

    See Trinko, 540 U.S. 398.

  7. 7.

    The seminal antitrust case Standard Oil captured the public concern regarding monopolization in general:

    [T]he conviction was universal that the country was in danger from another kind of slavery sought to be fastened on the American people, namely, the slavery that would result from aggregations of capital in the hands of a few individuals and corporations controlling, for their own profit and advantage exclusively, the entire business of the country, including the production and sale of the necessaries of life.

    Standard Oil Co. v. United States, 221 U.S. 1, 83–84 (1911) (Harlan, J., concurring and dissenting).

  8. 8.

    See Boliek (2011, p. 1647), Current Regulatory & Antitrust Boundaries graph for a pictorial view of the jurisdictional boundaries of antitrust law and the FCC’s regulatory authority.

  9. 9.

    Sherman Act, 15 U.S.C. §§ 1–7 (1890).

  10. 10.

    Standard Oil Co. v. United States, 221 U.S. 1 (1911).

  11. 11.

    United States v. American Tobacco Co., 221 U.S. 106 (1911).

  12. 12.

    United States v. E.I. Du Pont De Nemours & Co., 188 F. 127 (C.C.D. Del. 1911).

  13. 13.

    United States v. United States Steel Corp., 251 U.S. 417 (1920).

  14. 14.

    Clayton Act, 15 U.S.C. §§ 12–27 (1914).

  15. 15.

    Although decided later, the dicta in Von’s citing to the 1897 case Trans-Missouri Freight perfectly captures this populist view.

    From this country's beginning there has been an abiding and widespread fear of the evils which flow from monopoly—that is the concentration of economic power in the hands of a few. On the basis of this fear, Congress in 1890, when many of the Nation's industries were already concentrated into what it deemed too few hands, passed the Sherman Act in an attempt to prevent further concentration and to preserve competition among a large number of sellers. Several years later, in 1897, this Court emphasized this policy of the Sherman Act by calling attention to the tendency of powerful business combinations to restrain competition "by driving out of business the small dealers and worthy men whose lives have been spent therein, and who might be unable to readjust themselves in their altered surroundings".

    United States v. Von’s Grocery, 384 U.S. 270, 274 (1964), citing United States v. Trans-Missouri Freight Assn., 166 U. S. 290, 323 (1897).

  16. 16.

    Standard Oil, supra note 11.

  17. 17.

    In Federal Trade Commission v. Western Meat Company, 272 U.S. 554 (1926), the Court decided that Section 7 applied only to stock acquisitions not asset acquisitions thereby creating a loophole that rendered the section largely irrelevant. Full merger review power under Section 7 of the Clayton Act was not restored until the Cellar-Kefauver Act of 1950 amended Section 7 to apply to asset acquisitions in addition to stock acquisitions.

  18. 18.

    American Column & Lumber Co v. United States, 257 U.S. 377 (1921).

  19. 19.

    268 U.S. 563 (1925).

  20. 20.

    Address of C.W. Hunt before American Grocery Specialties Association, October 22, 1928.

  21. 21.

    One of the early examples of this pattern involves the printing press: after the initial development of the printing press in the West, it had spread rapidly across Europe by the late 15th century. In Venice, printing had exploded and created an abundance of works, which was a cause of concern to Venetian government. By the middle of the 16th century, the Venetian government forced all printers into a guild and restricted the type of books that could be printed and sold—in what they considered to be an early version of copyright protection. However, such “protection” effectively allowing the government to “suppress heretical works” May (2002).

    Around the same time period England had similar laws with regard to copyrights of printed works. While not explicitly censoring content, the Crown gave exclusive printing rights to loyalist companies that would not publish material that Crown or courts deemed “politically or religiously objectionable.” Lange (1992).

  22. 22.

    Hoover v. Intercity Radio Co., 286 F. 1003, 1007 (D.C. Cir. 1923).

  23. 23.

    Hoover did not completely abdicate his role, see Messere (2001), op. cit.

  24. 24.

    See also Godfrey (1977, 1979) and Benjamin (1998).

  25. 25.

    See, Credit Suisse Secs. (USA) LLC v. Billing, 551 U. S. 265, 267–268 (2007) (holding that antitrust enforcement must yield to securities laws when the two conflict).

  26. 26.

    United States v. Sw. Cable Co., 392 U.S. 157, 172–174 (1968) (upholding FCC’s ancillary jurisdiction over cable based on the agency’s Title III authority to regulate broadcast).

  27. 27.

    United States v. Midwest Video Corp., 406 U.S. 649 (1972).

  28. 28.

    Cable Communications Policy Act of 1984 (codified at 47 U.S.C. ch. 5). Moreover, the FCC has directly intervened to shape content. As an additional criteria for meeting the public interest in content, for example, the FCC established the Fairness Doctrine in 1949. For a layman’s description, the Fairness Doctrine “required the holders of broadcast licenses both to present controversial issues of public importance and to do so in a manner that was—in the Commission's view—honest, equitable, and balanced.” Wikipedia, Fairness Doctrine, https://en.wikipedia.org/wiki/Fairness_Doctrine [last visited Nov. 28, 2017] (emphasis added).

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Babette E. Boliek is Professor of Law at Pepperdine University School of Law.

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Boliek, B.E. Populist Antitrust and the 1927 Radio Act. Rev Ind Organ 56, 5–16 (2020). https://doi.org/10.1007/s11151-019-09692-8

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Keywords

  • Antitrust
  • Populist antitrust
  • Radio act
  • Communications act
  • Broadband
  • Open internet order
  • Radio
  • Cable
  • Hazlett
  • Herbert Hoover