In a world of options for consumers, fear of mergers is misplaced

The Baltimore Sun

CHICAGO -- Someone once said that the best way to get rid of a bad law is to enforce it vigorously, thus making its flaws visible to all. Federal regulators might not induce repeal of the antitrust laws, but they show a talent for making the statutes look obsolete.

It's widely accepted that one of the crucial functions of government is to protect against monopolists and cartels. Left to its own devices, many critics of capitalism believe, the market would allow voracious corporations to collude, joining forces to hold consumers upside down and shake the nickels out of their pockets. To ensure that free markets operate for the benefit of all, we are told, the government has to strictly police mergers to keep any company from gaining an unfair advantage.

That is what it claims to be doing in two different sectors. Federal Communications Commission Chairman Kevin J. Martin has expressed serious qualms about approving a wedding between the only two satellite radio companies, Sirius and XM. The Federal Trade Commission is going to court to block a merger between two organic grocery chains, Wild Oats and Whole Foods.

In both cases, the rationale is that fewer companies will mean fewer choices and higher prices. But consumers who want what these firms provide have more options than the Milky Way has stars.

Organic food consumers would not be the suffering captives of this new company. Every grocery store has a raft of organic offerings, and chains from Wal-Mart to Trader Joe's are fighting to get their share of sales. If the bigger Whole Foods tries price-gouging, customers can easily find other sources for what they want - from farmers markets to online suppliers.

The key government error is defining the market as a narrow sector isolated from other sectors that provide reasonable substitutes. That same mistake explains the FCC chairman's aversion to the satellite radio deal.

As it happens, the alternative to one satellite radio company may not be two companies but none. The existing ones have accumulated some $7 billion in losses between them. The merger may allow them to reduce costs, so they can eke out a profit and stay in business. Raising prices would not be easy, because consumers have plenty of affordable options. Music fans can listen to terrestrial radio, pop in a CD, find an Internet feed, turn on an iPod, flip to the cable TV music station or check out unknown talents on YouTube.

Web radio may not get as much attention as Howard Stern, but it has four times as big an audience as XM and Sirius combined.

The truth is, markets are more complex and dynamic than regulators assume. President Bill Clinton's Justice Department tried to break up Microsoft before it enslaved us all, but the feds got far less than they wanted. Microsoft, however, has found out that even a virtual monopoly doesn't guarantee prosperity. Despite controlling more than 90 percent of the market for computer operating systems, the company's stock price has been flat for the last decade - while Apple, which has only a tiny share, has skyrocketed in value since 2003.

Meanwhile, other companies, notably Google, have trounced the Big Meanie in other areas. Over the last decade, says Thomas Hazlett, a professor of law and economics at George Mason University, "Microsoft has seen its market position erode, and it has virtually nothing to do with the antitrust case."

The point is not that corporations will never try to suppress competition, as Microsoft is accused of attempting with its new Vista operating system, which it recently agreed to alter in response to a complaint from Google. The point is that they will usually fail, because of the many choices available to the buying public - and that on the rare occasions when they succeed, the success is invariably fleeting.

Even corporations that gain dominance find that no matter how they connive, they can't escape competition. In a market economy, today's fearsome predator is tomorrow's frightened prey.

Steve Chapman is a columnist for the Chicago Tribune. His column usually appears Mondays in The Sun. His e-mail is

Clarence Page's column will return Friday.

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