Convergence Of Powers In The New Media Sector And How It Relates To Competition Law

The SAXLAW Report
Spring/Summer 1999

"In a world of e-Commerce, tomorrow is only seven hours away. It's the speed of change."
–Michael M. Sax, Sax Law Office

In the business world that pre-dated e-Commerce, the objectives and roles of specific companies were well known and understood. Television networks, software companies, and advertising firms all operated in their separate industries. Although they would occasionally interact, from a business point of view, they were separate entities altogether. Convergence is not a new idea. Disney was one of the first companies to converge media, fusing film, television, and entertainment parks with merchandising and cross-marketing techniques. In recent years, the Bronfman family have gone from selling bottled entertainment (in the form of Seagram's brand liqueur), to the entertainment industry, buying majority interests in such companies as MGM/Universal and Polydor Records.

In the changing climate of e-Commerce, there is a steady movement of powerful industries, converging into one. With the aggressive actions of Bill Gates and Microsoft, the message is clear that all business is on the move. Microsoft has recently shown interest in the cable television market. This move would create a strong bond between the computer industry/ Internet and traditional television media. It has increased the ability of one industry to enter another easily and possibly exercise undo market power. It is possible that there will be one "communication industry". What does this do for competition and antitrust law? Alan Greenspan's view is that it is extremely difficult to predict which high-tech mergers are likely to cause anti-competitive effects, since the industry's characteristics of creativity, rapid change, and growth make it less likely that a merged firm could exercise market power.

What happens when as a result of electronic commerce a manufacturer sells directly to the consumer without going through its normal distribution channel as it wishes to converge manufacturing, distribution, and retail sales? Is this an anti-competitive behavior as the manufacturer could exercise its dominance over the distribution channel by entering that segment itself? In the rapidly expanding e-Commerce market, any business has the potential to quickly and efficiently converge its resources and talents to enter into any market. Although an unsettled area, it is important to look at competition issues when venturing into e-Commerce.

THE SAXLAW REPORT has been prepared by Michael M. Sax with assistance from David Sax and Annalysa Cabral for information purposes only and does not constitute a legal opinion. This representation is not intended to create, and the receipt of it does not constitute a solicitor-client relationship. Readers should not act upon this information without seeking professional counsel. This information is forwarded on the basis and understanding that Michael M. Sax, Barrister & Solicitor is under no responsibility or liability whatsoever in respect thereof.