Award Winning Blog

Tuesday, October 18, 2022

What Do Juries, Prunes, and Antitrust Policy Have in Common?

Long ago, while a student at University of Virginia School of Law, my Criminal Procedure professor likened optimal jury size with the correct number of prunes to achieve proper effect.  Consistent with the Goldilocks story, juries should not be too large, or too small.

OK, I got that, but advocates for megamergers use the same logic.  They conjure the number at three.  A market—apparently, any market—only needs three competitors to remain robustly competitive.  If there are three, any incumbent should be free to acquire market share and extinguish the seemingly unnecessary competition generated by more than three ventures.

This does not pass my smell test, as corroborated by the U.S. mobile telecommunications and commercial aviation markets.  I cannot understand how market consolidation to three magically stimulates competitive juices making the market “more competitive” than when four or more ventures operated.

From my empirical perspective, I see the cellular carriers bundling video content and never fully disclosed handset subsidies, but never really going head-to-head on net, out of pocket costs.  There are plenty of obscure fees, sponsored advocates attempt to frame as taxes, scrimping on customer service, and lots of commercials that tout anything but lower costs.

Help me out, here: does TMobile offer, net out of pocket rates, significantly below what consumers can get for AT&T and Verizon?  Can consumers opt out of “free” video streaming and secure a lower price?  How much lower are rates, if you already have a smartphone?

Do the Big Three airlines aggressively compete on price, after you factor in all the now ala carte “amenities” that used to constitute part of the base fare? I see a preoccupation with Business Class seat enhancements and creation of a new Premium Economy option, because the margins are spectacular.

A now rarely used term, “conscious parallelism,” describes market behavior where so-called competitors do not seem to compete.  Remarkably the three major airlines offer an identical fare from A to B.  But what about the Low-Cost Carriers, who also want to merge and become better competitors?  Are they truly “functional equivalents” when they only offer a few flights from A to B and engage in “bait and switch” with teaser fares that come close to the legacy carrier rates after including all the ala carte amenities, such as the privilege of bringing a carryon bag aboard?

For a short time, my home airport had a fourth carrier available.  It offered one flight a week to a remote airport in Florida.  While the airport managers self-congratulated themselves, consumers faced a carrier offering no option when, predictably bad weather, flight irregularities, and “Air Traffic Control” issues scrubbed the flight.  Do these passengers have any options other than to cancel their vacations, often with non-refundable booking, or hope for “reaccommodation” (an airline non-word) a week later?  This option, akin to a weekly “charter flight” does not constitute a functional equivalent to the options available from legacy carriers.

Oh, but what a robustly competitive market we have in State College, PA!