Stop! Turner Time!*

Can't touch this! Unless you know about the effects of vertical mergers. Ring the bell, school's back in, and Team Awesome is here to break it down.*

Time Warner, not to be confused with the fictitious Rowling-ian Time Turner,** is no stranger to the merging scene. Before it got together with AOL, Time Warner was involved in a merger with Turner Broadcasting. The 1996 merger of Time Warner and Turner Broadcasting System falls into the category of vertical mergers since Time Warner creates the shows that Turner broadcasts.

As with all vertical mergers, both the positive and negative impacts must be weighed. In the case of the Time Warner-Turner Corporation merger, the combining of these two companies had the potential to restrict competition in cable television programming and distribution (as with all vertical mergers). However, the FTC ultimately decided - and Team Awesome agrees - that with a number of structural changes and restrictions "designed to break down the entry barriers created by the deal", the positives of this merger outweighed the negatives. Specifically, the FTC pinpointed the major benefit of this merger: access. The FTC Chairman Robert Pitofsky said that "this settlement would preserve competition and protect consumers from higher cable service prices and reduced programming choices by ensuring that competing cable operators, new technologies and future programmers can gain access to Time Warner/Turner's customers and programming."

Team Awesome agrees with the FTC's decision - while vertical mergers often result in negative consequences, it is crucial to take other factors - such as access in this particular example - into account. This is one case where an analysis of welfare effects led to the conclusion that this vertical merger was too legit to quit.*

- Jon Carrier, Joyce Chang, Dexter Galazo, Vinu Ilakkuvan

*pop culture reference 1
**pop culture reference 2

A Stink About Subsidies

In “Imports Spurring Push to Subsidize Produce”, NY Times reporter Alexei Barrionuevo discusses the increasing pressure on garlic farmers in the United States as cheaper imports from China come pouring into the market. In the face of such pressure, garlic farmers are in turn pressuring the government to set up entry deterrents in the form of subsidies for garlic producers in the United States. These requested subsidies are not exactly like those currently provided to U.S. producers of various other agricultural products. Instead, garlic farmers, along with other specialty crop producers, have formed a coalition that submitted a bill asking for about $1 billion for programs that would help them better compete in the global market. Specifically, they are asking for money to go towards marketing, research, and conservation.

One of the garlic farmers mentioned in the article spoke of this type of subsidy being better than the direct farm subsidies of more than $15 billion a year provided primarily to growers of corn, cotton, rice, wheat, and soybeans. This farmer said, “nobody learns from [direct] subsidies. But you want to give them opportunities and resources and tools to make their industry better.” However, a comment on this article points out that most economists are in favor of abolishing all farm subsidies, as we might expect.

If the proposed subsidy is approved, it could turn out to be an extremely successful entry deterrent. By hindering competition, this could make consumers worse off, and thus Team Awesome, while in agreement that this type of grant from the government is better than a direct subsidy, still feels that this is not an economically optimal option*.

- Jon Carrier, Joyce Chang, Dexter Galozo, Vinu Ilakkuvan

*Team Awesome, very respectful of the "fiercely independent vegetable and fruit growers" and their desire to avoid direct subsidies, would not go so far as to say this option stinks.