AAI Urges Breakup of Voter News Service Joint Venture, Blaming Prediction Errors on Absence of Competition

Nov 27 2000
Testimony and Interventions

Antitrust Group Urges U.S. to Break Up Voter News Service

The American Antitrust Institute today blamed the networks' erroneous reporting of the presidential election results on the absence of competition and urged that the Voter News Service, a joint venture of the principal news organizations, be broken up.

In a letter to the Acting Assistant Attorney General for Antitrust, Douglas Melamed, and the Chairman of the Federal Trade Commission, Robert Pitofsky, AAI Senior Research Scholar Robert H. Lande, a professor of law at the University of Baltimore, pointed out that up to and including the 1988 election, the major news organizations did their own exit polling and made their election predictions independently. In 1990 the five major TV news organizations - ABC, CBS, NBC, Fox, and CNN- and the Associated Press - decided to combine their exit polling operations so they would save money. Although there is still some small room for interpretation on the margin of the results and predictions made by the Voter News Service, all six rely on the same data and the same models. Instead of six independent organizations trying their best to figure out how to predict election results accurately, now there is essentially only one.

On the night of the election, the networks, relying on the exit polls conducted by the Voter News Service, all called the election in favor of Vice President Gore. A few hours later, they reversed themselves, calling it for Governor Bush. Finally, they had to admit that neither candidate had clearly prevailed. If there were still six truly competing organizations, the AAI says, they might have come up with any number of innovative election prediction techniques, which very well might have led to differing predictions. While each organization would have an incentive to announce a winner as early as possible, this motivation would be off-set by the fear of being wrong. When the principal news organizations move in lock-step, based on the same methodology and the same polling of the same samples, no single organization takes the risk of being wrong.

"The Voter News Service fiasco makes us wonder whether things have gotten to the point where a mistake or bias will not be corrected by the normal give and take of competition among media firms," says the AAI. "There is, however, a solution that will at least move us in the right direction: the antitrust enforcers should break up the Voter News Service."

The American Antitrust Institute is an independent research, education, and advocacy organization, described at www.antitrustinstitute.org.

Professor Lande's letter is attached.

November 22, 2000

Hon. Douglas Melamed Acting Assistant Attorney General Antitrust Division, US Dept. of Justice Washington, DC 20530

Hon. Robert Pitofsky Chairman Federal Trade Commission Washington, DC 20580

Dear General Melamed and Chairman Pitofsky:

One of the reasons contributing to the nation's ferment over the Florida election results is that prediction errors were made by an organization called the Voter News Service. At almost the same time, around 8:00 p.m. on election night, every major network declared that Vice President Gore had won the Florida primary. Within the next two hours all had withdrawn their predictions and declared the state "too close to call". Very early Wednesday most declared Governor Bush the winner. Then came the final mass switch back to "too close to call." Thus, the news producing organizations called it wrong twice: once for each candidate.

Why the uniformity of (wrong) results? This can be explained by a lack of competition. All of the "competing" major networks are actually colluding with one another, and they call their collusion the Voter News Service. Since they all relied upon the same pooled data, naturally they all made the same error.

Up to and including the 1988 election the major news organizations did their own exit polling and made their election predictions independently. In 1990 the five major T.V. news organizations - ABC, CBS, NBC, Fox, and CNN - and the Associated Press - decided to combine their exit polling operations so they would save money. There is still some small room for reporters' interpretation on the margin of the results and predictions made by the Voter News Service. But all six organizations use the same data and the same models. Instead of six independent organizations trying their best to figure out how to predict election results accurately, now there is essentially only one.

If the six largest manufacturers of automobiles, canned food, or aluminum decided to close existing operations and pool resources to save money, the antitrust enforcement agencies would be after them instantly. Whether they called their project a joint venture, merger, or consortium, it would be scrutinized carefully under the antitrust laws. Why should the Voter News Service be any different? If anything, the antitrust laws should be applied more strictly when the media is involved. We can live with too few manufacturers of automobiles, canned food, or aluminum better than we can live with too few independent sources of news. Free and full competition in the news market is fundamental to a democracy.

Under the recently issued federal Antitrust Guidelines For Collaborations Among Competitors, the legality of the Voter News Service would be judged under the rule of reason, an analysis that considered all of its benefits and costs. The Defendants would point out that the anticompetitive harm from most cartels is higher prices, but that they did not raise prices to anyone. All they did was save costs.

But they also lowered consumer choice. Competition does not only lead to lower prices. It also leads to innovation and higher quality. It leads to different varieties of products from which consumers can choose. When we are considering the prospect of too little competition in the news market, the defense that the colluders will save money should be given very little weight.

The Voter News Service might point out that in 1945 the Supreme Court held that it was legal for dozens of newspapers to help form and participate in the Associated Press. But the Associated Press is able to do a large number of crucial things (i.e., send reporters to the far corners of the globe) that few individual newspapers can do by themselves. While it often is legal for newsgathering organizations to work together, this defense would not apply to the Voter News Service because, before its formation, each of the major news organizations had been able to make independent election predictions.

If there were today six truly competing organizations they might come up with any number of innovative election prediction techniques. Instead of (as is sometimes alleged) only competing to be the first to call a state, they might also compete to be the most accurate. They would certainly have an increased incentive to do so. If only one of the networks had made a seriously wrong prediction they would have risked becoming the butt of Jay Leno "Dewey defeats Truman" jokes for months. Since they all erred equally, however, no one network will suffer very much. They know they have not been hurt relative to their competitors, and this is what they care about most.

Members of the media sector have consummated or proposed an alarming number of huge mergers in recent years, with AOL/Time Warner being the largest. As each large media merger is announced, we wonder whether this crucial sector is becoming so concentrated that the variety of independent sources of news will be too low. The Voter News Service fiasco makes us wonder whether things have already arrived at the point where a mistake or bias will not be corrected by the normal give and take of competition among media firms. There is, however, a solution that will at least move us in the right direction. If they do not agree to dissolve it voluntarily, the government should file suit to break up the Voter News Service.

Sincerely yours,

Robert H. Lande Venable Professor of Law, University of Baltimore School of Law, and Senior Research Scholar, American Antitrust Institute

Cc: Commissioners of the Federal Trade Commission