CFA News Update - April 28, 2014

Proposed Merger Would Stifle Emerging, Online Video Competition

The recently proposed Comcast-Time Warner merger violates the antitrust laws and the Communications Act by such a wide margin that it cannot reasonably be approved, according to a CFA report released earlier this month.  The report shows that the consent decrees that Comcast entered into with the Department of Justice (DOJ) and the Federal Communications Commission (FCC) to obtain approval of the previous Comcast-NBCU transaction are inadequate to deal with the immense increase in market power that would result from the proposed Comcast-Time Warner merger.

“Comcast executives have claimed that the proposed merger is ‘approvable’ because the two firms do not compete head-to-head, and Comcast agreed to conditions in its acquisition of NBC that address the concerns of federal and state authorities reviewing the merger,” said CFA Research Director and report author Mark Cooper. “Nothing could be further from the truth.

This merger causes such a massive increase in two other forms of market power – buyer and bottleneck market power – that it doesn’t just violate the antitrust laws and the Communications Act, it obliterates them,” he added.

The report, entitled, Buyer and Bottleneck Market Power Make the Comcast-Time Warner Merger “Unapprovable,” explains why buyer and bottleneck market power are important in this merger review:

  • Comcast would be so large, as a buyer of content, that it would have the power to dictate the prices, terms and conditions and, because Comcast sells content, it would be more than glad to weaken competition in the market for those products.
  • Comcast would have such a huge broadband footprint it would have the ability to undermine online video distribution by raising its rival’s cost, degrading its quality of service, or blocking the delivery of its product altogether.

“We have moved from potential competition to incipient competition in which Internet distribution of video content has begun to dent the anticompetitive armor that cable operators have built around their abusive business model,” Cooper said, “but they are attempting to rebuild their defenses by extending the industry’s anticompetitive practices to cyberspace and leveraging their control over broadband access.  The overwhelmingly dominant firm that would result from this merger would be uniquely capable of coordinating those industry-wide efforts to undermine competition,” Cooper added.  “This merger would deal a severe, if not a death blow to emerging competition.”

“When all is said and done, the merger is too large and the leverage points too numerous to try and repair the damage to competition with conditions,” Cooper concluded.  “Competition, consumers and the public interest will be best served if the merger is blocked.”

ATV Injury Report Prompts Calls for Design Improvements

Responding to the latest report from the Consumer Product Safety Commission (CSPC) on ATV-related deaths and injuries, consumer safety advocates renewed their call for design changes to improve the safety of these vehicles.  According to the CPSC report, at least 54 children lost their lives in 2012 and 26,500 were injured seriously enough to require treatment in a hospital emergency department.  This represents a slight decrease in the number of child deaths caused by all-terrain vehicles and a slight increase in the number of serious injuries to ATV riders of all ages.

“ATV deaths and serious injuries impact the lives of over 100,000 families every year. ATVs cause more deaths and injuries than almost any other product under CPSC’s jurisdiction,” said CFA Legislative Director Rachel Weintraub in a press statement.  “The significant impact of ATV deaths and injuries compels design and other changes to substantially reduce these tragic incidents.”

In 2002, consumer groups filed a petition with the CPSC calling for the CPSC to ban the sale of adult-size ATVs for use by children.  While the agency under the leadership of Chairman Hal Stratton denied the petition, the CPSC began a rulemaking process to create new ATV safety standards.  Former CPSC Chairman Inez Tenenbaum had directed staff to follow the mandate of the Consumer Product Safety Improvement Act and promulgate new federal safety rules.  On August 12, 2011, Congress passed H.R. 2715 which amended the CPSIA and which directed the CPSC to complete the ATV rulemaking within a year of enactment. The rule has not yet been completed.

Earlier this year, CFA released a report, “ATVs on Roadways: A Safety Crisis,” documenting the growing trend of states’ permitting ATV use on roads, a practice that contradicts recommendations from CPSC, public health experts, consumer advocates, and ATV industry groups.  “CPSC’s data in the Annual Report of ATV-Related Deaths and Injuries is a critical source of information for those working to decrease ATV deaths and injuries,” Weintraub said. “It would be even more useful if CPSC included information about ATV deaths and injuries taking place on and off road.”

Groups Call for End to NSA Telephone Record Collection Program

In the wake of a European Court of Justice ruling invalidating the EU Data Retention Directive, 18 consumer and privacy organizations sent a letter to the White House earlier this month urging the president not to renew the NSA telephone record collection program when it expires in  June.   “We believe that this opinion bears directly on the White House’s review of the NSA Telephone Records Collection Program and also the White House study of Big Data and the Future of Privacy,” the groups wrote.

In calling for the NSA telephone record collection program to be discontinued, the groups noted that it is widely viewed as ineffective and as exceeding current legal authority.  “The routine collection of all telephone records, even for national security, is not ‘necessary and proportionate’ for a democratic society,” the groups wrote.  Moreover, they noted that there is bipartisan support to end the program.

In addition, while the EU court ruling is based on different laws and different traditions, the groups argued that it is directly relevant to the administration’s ongoing work on “big data.” “This decision is the most significant legal opinion from any court in the world on the risks of big data and the ongoing importance of privacy protection,” they wrote. “The Court has made clear that privacy must be protected.”

New Data Shows Property/Casualty Insurers Profiting from Excess Rates

New data on 2013 financial results for the nation’s property/casualty insurers show the industry earning extraordinarily high returns on the record high premiums paid by consumers, businesses and public agencies in 2013, calling into question the adequacy of state insurance regulation.  “The data make it indisputably clear that insurance companies are overcharging their customers in order to rake in huge profits,” said CFA Director of Insurance J. Robert Hunter in a press statement.

Analyzing data collected from the insurance industry and released last week by the Insurance Services Office, CFA found that in 2013:

  • Property/casualty insurers’ earned premiums were the largest in history at $478 billion.
  • Pre-tax Operating Income was the third highest in history at $64 billion, even adjusting for inflation.
  • The surplus held by insurers is at a record high dollar level of $653 billion, the highest ever even when adjusted for inflation.

“It is good for the P/C industry to make fair profits,” Hunter said, “but it is unacceptable for insurance companies to be squeezing so much profit out of consumers who are required by laws and financial institutions to buy coverage. At a time when low- and moderate-income Americans are increasingly unable to afford unfairly priced auto insurance and many homeowners struggle to afford home insurance in many parts of the nation, huge profits like those realized in 2013 raise serious questions about the adequacy of state regulation of insurance.”

Leading Policymakers Address National Food Policy Conference

The 37th annual National Food Policy Conference held earlier this month in Washington, D.C. featured keynote speeches by: Rep. Jim McGovern (D-MA); Kevin Concannon, Under Secretary of Food, Nutrition and Consumer Services for the Department of Agriculture; Sam Kass, Executive Director of Lets Move! and Senior Policy Advisor on Nutrition Policy for the White House; and Jay Campbell, Vice President of Hart Research Associates. Watch C-SPAN coverage of Sam Kass’s conversation with Mary Clare Jalonick, and Kevin Concannon’s keynote address. Also click here to access presentations from the conference.