Posts Tagged NFL
In light of recent stories hinting that the Federal Trade Commission (FTC) will not pursue antitrust claims that Google discriminates in its search results, advocates for rival websites are sounding the alarms. One attorney who represents several websites that have complained about Google’s alleged favoritism in search decried: “If a settlement were to be proposed that didn’t include search, the institutional integrity of the FTC would be at issue.” Ironically, the opposite is true: By reportedly dropping search discrimination from its case, the FTC has bolstered its integrity.
This is not to say that discrimination against rival websites is a good thing. Rather, discrimination of the kind allegedly practiced by Google is generally not recognized as an antitrust violation. With the exception of extreme cases, such as when a monopolist refuses to sell a product or service to a competitor that it makes available to others for discriminatory reasons, a firm does not expose itself to antitrust liability by merely refusing to deal with a competitor. (By contrast, a firm may expose itself to antitrust liability by refusing to deal with customers or suppliers so long as they deal with the firm’s rival.) Because Google is not refusing to sell a product or service to a rival website that it makes available to others, but instead places its specialized search results—such as maps, image, shopping or local results—at the top of the page when it believes they will be useful to consumers, Google arguably has no “duty to deal” under the antitrust laws.
To make a discrimination square peg fit into an antitrust round hole, the FTC would have needed to invoke an unorthodox section of the FTC Act (Section 5), thereby stretching the agency’s authority. By recognizing the incongruence between the conduct that the antitrust laws are meant to stop and the consumer-centric justifications for Google’s behavior, the FTC appears to have spared itself a tough slog. For example, one element of a duty-to-deal claim under the Sherman Act is proving that Google’s treatment of rival websites harms consumers; even the cleverest economist would be stumped with that assignment.
Google’s rivals are now seeking a do-over at the Justice Department (DOJ). They analogize the Google case to the FTC’s Microsoft investigation, where the DOJ picked up that case shortly after the FTC commissioners deadlocked in 1993. But the FTC does not appear to be deadlocked here; the agency is likely rejecting the Google case because the antitrust law does not support the complainants’ arguments.
Although regulatory relief at the FTC appears to be fleeting (and the DOJ is not the proper forum), website rivals could seek protection against search discrimination from Congress. The blueprint is already established: In 1992, Congress amended the Cable Act to protect independent cable networks against discrimination by vertically integrated cable operators. Section 616(a)(3) of the Act directs the Federal Communications Commission to establish rules governing program carriage agreements that “prevent [a cable operator] from engaging in conduct the effect of which is to unreasonably restrain the ability of an unaffiliated video programming vendor to compete fairly by discriminating in video programming distribution on the basis of affiliation or nonaffiliation of vendors in the selection, terms, or conditions for carriage of video programming provided by such vendors.”
This explains why, for example, the NFL Network brought a discrimination cases against Comcast—a vertically integrated cable operator that owns a national sports network—under the Cable Act and not under the Sherman Act. Had the NFL Network pursued its discrimination claims in an antitrust court, it likely would have failed. By styling its case as a program-carriage complaint, however, the NFL Network took advantage of cognizable harms under the Cable Act such as preserving independent voices that, for better or worse, are not appreciated by the antitrust laws.
If independent websites such as Nextag want relief, then they should lobby Congress to write the analogous non-discrimination provisions covering search engines. Once an agency is designated with the authority to police Google and other vertically integrated search engines (Bing included), website rivals could pursue individual discrimination claims just like the NFL. Importantly, website rivals would have to fund these battles, not with taxpayer money (of which millions were likely spent by the FTC in its antitrust investigation of Google), but with their own resources. Self-funding ensures that only the strongest discrimination cases would come forward; when someone else is footing the bill, all bets are off.
Admittedly, the relief contemplated here would not come quickly. It took years for independent cable networks to convince Congress of their plight. But the impatience of Google’s rivals is no reason for the FTC to bend the antitrust laws. Better to keep the powder dry—and the FTC’s integrity intact—and go after a monopolist that is more blatantly violating the antitrust laws on another day.
Can Profit-Maximizing Enterprises Systematically Leave Money on the Table? The Curious Case of the BCS
For years the public has been clamoring for a playoff system to crown a champion in college football. Yet the geniuses at the BCS stubbornly defended—at least until now—their computer-knows-best system for inviting the two most worthy teams. By injecting doubt over the legitimacy of its invitees, the current system diminishes the meaning of the BCS title game, as evidenced by the abysmal Nielsen ratings for Monday night’s Alabama-LSU game (only 13.8 percent of U.S. television households tuned in to watch the television equivalent of paint drying) and last year’s Auburn-Oregon title game (15.3 percent). By comparison, the title game between Alabama and Texas just two years ago drew 17.2 percent of U.S. households; if this were a publicly traded firm, its shares would be falling fast.
Even worse, the current system diminishes the importance of the other BCS games. Besides alumni, who wants to watch an exhibition game between Oregon and Wisconsin (this year’s Rose Bowl) if the winner cannot advance to the next round? This year’s Rose Bowl drew a meager 9.9 percent of U.S. television households, down 15 percent from last year’s Rose Bowl between TCU and Wisconsin. And last year’s Rose Bowl drew 11.3 percent, down 15 percent from the prior year. Can anyone spot a pattern?
In contrast, the first round of the NFL playoffs this year drew massive audiences. For example, NBC’s coverage of the Saints-Lions earned a 19.3 overnight rating, the third-best overnight for a Wild Card Saturday game since the 1999 playoff season. Along with 42.4 million of my closest friends, I found myself compelled to watch the Broncos-Steelers Wild Card game (25.9 rating), not because I care about either team, but because the investment of my time would pay off in even greater happiness next week.
It is a tragedy that the BCS would run these valuable assets into the ground. Imagine the excitement of a Cinderella team like Baylor, Boise State, or TCU sneaking into the championship. Organized as a playoff, the Rose Bowl (or any BCS non-title game) would experience a significant lift in ratings, along the lines of the lift enjoyed by NFL post-season games relative to NFL regular-season games. To be fair, the profit function of the BCS conferences is presumably much more complicated than “maximize the value of the television revenues for the BCS games.” But these television revenues must be a critical component of their joint profits. Which begs the question: Why would the BCS systematically err when so much money is at stake?