This past July, the News Media Alliance (NMA), a trade association of approximately 2,000 U.S. and Canadian news organizations, announced that it was planning to ask Congress for a limited antitrust exemption to allow its members to negotiate collectively with Google and Facebook regarding digital advertising. With consumers increasingly accessing their news through web platforms, print and online newspapers have seen their ad revenues plummet, while Google’s and Facebook’s have soared.
As more and more papers go out of business, publishers are desperate to stanch the bleeding. But the fact that the NMA felt the need to seek permission to negotiate collectively points to the legal hazards of doing so in the private sector.
Legal roadblocks to coalition building
In negotiation, there can be strength in numbers. Parties that might not even be able to get a meeting with a monolithic counterpart often can get its attention by joining forces with other weak parties and attempting to negotiate collectively. For example, individual employees join labor unions to gain leverage in contract talks with management, and community groups often band together to negotiate environmental and zoning issues with manufacturers building in their towns.
When for-profit businesses try to negotiate collectively with key partners, however, things get more complicated. In the United States, the Sherman Antitrust Act prohibits any contract that would constrain interstate or international trade or commerce. Price fixing among industry competitors, including colluding with competitors to drive down bidding in auctions, is against the law, for example.
Business people typically assume that means they are not allowed to even talk to their competitors when participating in an auction or negotiation-auction (“negotiauction”) hybrid, writes Harvard Law School and Harvard Business School professor Guhan Subramanian in his book Dealmaking: The New Strategy of Negotiauctions (Norton, 2011). But explicit agreements among bidders generally are not forbidden if they would promote competition or marketplace efficiency. For example, private-equity firms sometimes team up to make bids for public companies, a practice that is generally tolerated by the U.S. Department of Justice.
David versus Goliath?
Today, newspapers and other media outlets are portraying themselves as modern-day Davids facing off against the two-headed Goliath of Facebook and Google. As consumers increasingly turn to online platforms for their news, the platforms are attracting ad revenue that used to go to media companies.
Forced to negotiate one on one, newspapers have been unhappy with the returns they’ve received.
Increasingly, news outlets have had to rely on Google and Facebook to make their articles visible to consumers. Forced to negotiate one-on-one with the big online platforms, the papers have been unhappy with the returns they’ve received, reports Jim Rutenberg in the New York Times. For example, the Times, Forbes, and other outlets backed out of Facebook’s “Instant Articles” feature—which shows Facebook users fast-loading articles in an effort to keep users on the site longer—after revenues proved disappointing, reports Digiday.
In an editorial in the Wall Street Journal, David Chavern, president and CEO of the NMA, writes that the web platforms rely on high-quality news and analysis for ad revenue, but the quality of that news is threatened by the news industry’s financial woes. To rectify the situation, he argues, publishers need the ability to negotiate collectively for “stronger intellectual-property protections, better support for subscription models, and a fair share of revenue and data.”
The fact that the NMA decided to ask Congress to pass a law allowing publishers to negotiate collectively reflects the alliance’s keen awareness of the perils of running afoul of antitrust law.
Back in 2007, five major U.S. publishers banded together to negotiate a new business model for e-book pricing with Apple, which was preparing to launch the iPad at the time. Unhappy with the prevailing wholesale model, which allowed retailers such as Amazon to set whatever prices they liked for the e-books they bought from publishers, the publishers successfully lobbied Apple to switch to an “agency model” in which publishers set their own e-book prices and gave a 30% sales commission to Apple. Amazon reluctantly agreed to adhere to the new model as well.
But then the U.S. Department of Justice stepped in to accuse the parties of colluding to artificially raise e-book
prices. The five publishers reached a settlement with the government, while Apple went to court and was found guilty of price fixing and ordered to pay $450 million in damages.
Clearly, with its appeal to Congress, the NMA is eager to help its members skirt that kind of legal trouble. The NMA’s request is expected to be a long shot, given the current adversarial climate between the press and Washington politicians. However, lobbying from News Corporation founder and executive chairman Rupert Murdoch, who holds sway with Congressional Republicans and President Donald Trump, may help, according to the Times.
3 guidelines for coalition building
When you’re trying to get the attention of a powerful party, the following advice may be useful:
1. Look for potential partners.
Before negotiating from a position of weakness, look around to see whom you might be able to team up with to strengthen your hand. That doesn’t necessarily mean banding together with competitors, as you may be able to find partners outside your field whose offerings complement yours and allow you to make a stronger bid.
2. Take a broad view of the landscape.
When antitrust regulators object to agreements, typically it is because the deal leaves consumers worse off. So, when thinking about teaming up with others for a negotiation with a powerful counterpart, don’t forget to consider the potential impact of whatever deal you might reach on outsiders, including customers, clients, and society at large. In creating benefits for those at the table, might your deal impose hardship on other parties? If your agreement would harm outsiders, you could end up breaking your own ethical code and possibly the law.
3. Ask your lawyers.
When thinking about teaming up with one or more competitors in a negotiation, consult in advance with lawyers who are thoroughly versed in antitrust laws and regulations. If your plans would violate industry standards or the law, abandon them or seek permission through official channels, being up front about your intentions.