Federal Communications Commission Chairman Michael Powell seems to long for his days as an antitrust lawyer in the Clinton Justice Department. According to news reports this week, Powell directed FCC economists to devise “an objective scientific formula” for the Commission to use in deciding whether there’s enough “diversity” in local media ownership. Powell’s goal is to have an FCC equivalent of the Herfindahl-Hirschman index (HHI), a quirky figure used by the Justice Department in deciding whether to prosecute innocent businessmen for antitrust violations.
The HHI is a notoriously simplistic figure. It takes the square of the market share of each company in an industry and adds them together. For example, if you had five competitors in a market, and each firm had 20% market share, the HHI would be 2000. Under DOJ policy, this means the market is “dangerously concentrated,” since the maximum acceptable HHI for any industry (regardless of context) is 1800. This means if two of these firms were to combine, the DOJ would be more likely to take antitrust action.
If this sounds like an arbitrary way to govern antitrust enforcement, it is. The HHI is simply a pretext that allows the DOJ to regulate any market it likes, since the components of market share for HHI purposes can be easily manipulated to suit political needs. Usually when the DOJ is faced with a market where the actual HHI is less than 1800, the government will simply eliminate a few competitors from the marketplace to raise the index. More importantly, however, the HHI is something the DOJ employs only after it decides to take action. It’s merely a scientific-sounding cover for what is, at its core, an arbitrary exercise of power.
This is precisely why Powell wants his own HHI. Like most regulators, especially antitrust lawyers, Powell genuinely believes he is in the best position to decide what kind of marketplace consumers want. In order to acquire the power he needs to do this, however, there must be an illusion of objectivity in the process. Especially in Powell’s case, where he’s looking to measure “diversity,” something that cannot be objectively defined, much less measured. Ideally, Powell’s index will subtly emphasize things like “minority” ownership of media outlets and diluting the power of larger media companies, like radio giant Clear Channel.
In effect, we’re talking about an illusion. The FCC would continue to act arbitrarily and capriciously, but now when they’re called out on it, they can point to their mystical formula and say “see, we used science,” as if no actual human thought was necessary.
You also compound the HHI’s problem of deciding what constitutes the marketplace. In the age of the Internet and new media, it’s nearly impossible to credibly define a local marketplace for information. The time required to make these determinations–assuming the FCC simply doesn’t decide these questions by whim–on a market-by-market basis will likely nullify any efficiencies gained through Powell’s index.
All of this demonstrates why Powell’s action defies rational thinking. Rather than let market forces govern the market, Powell is convinced there must be a simplistic, centralized solution that can allow government to act without a great deal of thought. It’s one of the purest forms of tyranny known to exist–an omnipotent bureaucracy allowed to operate independently of fact or objective law. In Powell’s world, individual businesses are not entitled to act in their own interests (or even their customers), but instead must submit to a larger “public interest” that can only be defined through “diversity,” whatever that may mean. Since the government dictates the formula, it has the final word above all others, even if the methods and conclusions are shown to be clearly erroneous.
If any of the FCC economists working on Powell’s formula have a conscience–or even a minimum regard for individual rights–they will tell their chairman that the best formula is no formula at all; indeed, that the best way to promote a healthy media market is for the government to get out of the way entirely.