The myth of the irrational Murdoch
By Maureen Tkacik
The opinions expressed are her own.
No recent episode more vividly demonstrates the debasement the media has suffered in the ascent of Rupert Murdoch as its collective tsk-tsking over comedian Jonnie Marbles’ interruption of Murdoch’s Hackgate testimony. The outrage has generally echoed this New Republic missive:
I can’t find anyone who approves of what happened yesterday, when news titan Rupert Murdoch suffered a near-shaving-cream-pie in the face during a hearing before members of Parliament in London. Everyone seems to agree that the pie-thrower, “activist” Jonnie Marbles, is a dumbass. We even seem to agree that Rupert Murdoch’s wife, Wendi Deng, is a badass.
If Rupert Murdoch doesn’t deserve a pie in the face, who does? This is a media baron whose free-market fundamentalism has effectively robbed journalists of their livelihoods, most vividly in the shuttering of News of the World. Perhaps more perniciously, he’s robbed the media industry of its sense of self-worth, not for the first time; it’s no surprise a trove of former Murdoch editors have decided stepped into the light and hurl a stone or two at the News Corp. castle walls.
But the stone throwers have largely been of the éminence grise variety. Working journalists, even if they’d rather work at Starbucks than the New York Post, invariably seem to wind up defending the old baron, on the grounds that he is, after all, still plunking hard-earned cash into (of all lousy businesses) newspapers. In this charitable myth about Murdoch, his fondness for (pornographic, fact-resistant, inane) newspapers is a virtuous personality quirk that offsets the less acceptable eccentricity that is his rabid conservatism. What they like best is that Murdoch answers to no one when he decides to snap up another newspaper and bend its journalism to his views, despite such moves making zero business sense. At least that’s Michael Wolff measure of him in “The Man Who Owns The News”
Murdoch, say what you want about him, is one of the few Fortune 100 CEOs empowered to not act rationally — for instance, pouring a lot of money into newspapers simply because he likes newspapers. What, after all, does GE or private equity or Ron Burkle, for God’s sake, care about newspapers?
Maybe Wolff should have called up Burkle on this, since his supermarkets actually have to do business with Murdoch. And I don’t mean “have to” in the sense that Burkle had much of a choice in the matter: News Corp.’s most profitable subsidiary runs the grocery coupon business. And I mean that precisely: they run the business, because they have cornered the market.
News Corp.’s industry may ostensibly be media, but really, it’s monopolies. It owes its entire existence to a general amnesty it has secured from public officials across the universe from any and all previously enacted law barring monopolistic enterprises from owning and/or controlling too much.
Burkle would know about this, since his old Ralph’s chain was the site of one of Murdoch’s competitors’ many attempts to catch the media predator doing illegal stuff to keep them out of the business. According to Murdoch, a fledgling coupon company called Insignia set up a hidden camera sting at Ralph’s in an attempt to nab Murdoch employees in the act of pulling Insignia’s coupon-dispensers off the shelves.
The operation never got very far, though, because Insignia’s investigators never saw Murdoch’s people pulling down their dispensers. News Corp. settled with Insignia for $125 million early enough to preclude anyone figuring out whether or how the operation had been exposed. News Corp. was alleged by another coupon competitor, Floorgraphics, to have hacked into their computer systems on at least eleven separate occasions between October 2003 and January 2004. Floorgraphics filed a civil suit against News Corp., but within days sold out to Murdoch for $29 million, ending the suit. Perhaps Murdoch paid up because around the same time News Corp. was preoccupied driving yet another coupon competitor, Valassis, nearly into bankruptcy.
The thing about the coupon business is this: it keeps the supermarket supply-chain humming. Vendors can’t forgo it without completely sabotaging their numbers. It’s a captive audience for Murdoch, and he knows what to do with those: A Del Monte executive described negotiating with Murdoch’s coupon subsidiary as being “held hostage.” A Sara Lee representative emailed a colleague of her dealings with News Corp: “I feel like they are raping us and they enjoy it and there is no desire to work with us.” A Pepsi exec testified that “you were pretty much forced to go with” News Corp for coupons because they had “somewhat of a monopoly.” And News Corp employees themselves reported to superiors that a Nestle guy “flew into a tirade against [News Corp.'s] alleged punitive pricing” and a Heinz exec, “ripped [him] a new asshole” when presented with News Corp.’s new terms.
But everyone seemed to go along: when asked if the company had lost accounts over its unyielding contracts, a Murdoch minion testified “not that I am aware of.” Employees were prepared to handle “tantrums”; orientation at the coupon operation famously involved being shown a scene from the movie “The Untouchables” in which Al Capone beats a man to death with a baseball bat. As the coupon boss Paul Carlucci explained to Floorgraphics founder George Rebh, according to Rebh’s deposition, “you should know that I work for a man who wants it all and doesn’t understand anyone telling him he can’t have it all. And know this, if you ever get into any of our businesses, we will destroy you.”
Now, forget for a moment about the hacking, or the latest accusations that Fox News keeps a “black ops” room for spying on its employees, or the specious charges recently blared on the front page of the New York Post rather dubiously accusing DSK’s accuser of being a prostitute. News Corp., or at least the most profitable division of it, allegedly holds as its model an organized crime ring. It’s many other things also, but at its core, that’s what it wants to emulate. (It is hardly alone in that regard.)
Mudoch’s mission statement, as allegedly expressed by Carlucci, is explicitly against the law: to “have it all,” to compete with no one, to monopolize. Anyone who has ever reaped the cash flows from multiple real estate holdings on Boardwalk and Park Place knows the visceral appeal of running a racket. But once we enjoyed a broad consensus that real-world monopolies profited at the expense of smaller businesses, labor, customers, the long-term health of the economy, democracy itself…we outlawed it, here in the U.S. with the Sherman Antitrust Act, which passed the House of Representatives unanimously.
Meanwhile, a revolutionary school of thought began to emerge in the mid-20th century around the unlikely premise that monopolies were actually generally a good thing — and further, that the only monopolistic enterprise that needed reining in was the government, which wreaks havoc on the economy with its ceaseless regulatory interventionism. This illogical worldview, in which News Corp. has inculcated readers for the past four decades, proliferated for two reasons: it was extravagantly bankrolled by wealthy businessmen whose interests it served, and it was itself monopolized by a relatively small clique of oddballs concentrated at the University of Chicago who cast themselves as beleaguered and hopelessly unfashionable “true believers” who devoted themselves to teaching. And in perhaps their most brilliant innovation, they devoted themselves to teaching law students.
This became known as the “law and economics” movement, and its disciples would go on to revolutionize the American legal system, infesting the federal bench with such distinguished and prolific antitrust law busters as the public intellectual and federal judge Frank Easterbrook, who presided the first time News Corp. was sued for antitrust violations back in 2000. In that case, a coupon-dispensing company called Menasha Corp. had filed a complaint alleging in convincing detail that News Corp. had systematically paid off enough retailers to grant them exclusivity agreements to have secured a 90% market share in the point-of-sale business. The remaining little guys were being pushed out, Menasha claimed, because News Corp. was ripping their coupon machines off of retailers’ walls.
Easterbrook threw out the case, arguing that he simply didn’t believe News Corp.’s partners would “shoot themselves in the feet by signing (retailers) or favoring (manufacturers) exclusive contracts that entrench defendant as a monopolist” and further “when the consumers favor a product or practice, and only rivals squawk, the most natural inference is that the complained-of-practice promotes rather than undermines competition, for what helps consumers often harms other producers.”
In other words: jealous. (Sound familiar, ratings-challenged liberal media comrades?) Of course, Murdoch’s would hardly be much of a monopoly if it was exclusively beholden to right-wing ideologues — as his onetime confidante and Conservative Party “fixer” Woodrow Wyatt learned in 1995, when Murdoch began to flirt with backing Tony Blair’s New Labor, reasoning that they were probably going to win anyway. Wyatt, who kept a heartfelt diary of his eroding friendship with Murdoch, was crestfallen, telling a mutual friend that Murdoch “doesn’t seem to value what I did for him” fourteen years earlier, when he and Margaret Thatcher had secretly arranged a deal whereby his acquisition of the Times of London was fast-tracked without the approval of the Monopolies Commission, which “almost certainly” would have blocked it. But now it seemed Murdoch had finagled the selfsame “arrangement” with the other side! Wyatt:
[Murdoch’s] got Blair not to mention the way he makes his money all over the world and pays a different tax rate (which is not tax evasion but tax avoidance), and not to mention the possible reference of the BSkyB to the Monopolies Commission. You won’t be able to get any of Rupert’s programs in England through an aerial unless you pay money to Rupert up front. This is about a little black box. That is a clear monopoly. Blair had ordered his shadow trade and industry secretary not to mention it and not to refer to it, although he wanted to at first.
And to think: Murdoch was this powerful before he got around to inventing Fox News! Now “impunity corrupts” is not exactly novel. And in the annals of corporate evil, Murdoch’s offenses are still pretty abstract relative to those of some of the other free enterprises his media outlets so tirelessly defend against the liberal establishment’s ceaseless ploys to foment class warfare. News Corp, after all, didn’t kill Millie Dowler. I once worked at a place where the IT guy read everyone’s email, and probably listened to our voice mail as well. And sure, the company’s tabloids allegedly commissioned the odd burglary here and there, but never for the purpose of stealing anything innately valuable. The law and economics camp can easily brush off most of Murdoch’s media offenses for relative economic insignificance.
Which is what makes the coupon racket so important — and where Murdoch’s raw monopoly power really pays dividends. Because even in such an anemic era for antitrust law enforcement, it’s tricky for a U.S. federal prosecutor to turn a blind eye to overwhelming evidence that one of his constituents’ businesses is regularly having its computers hacked into by a bigger competitor that is stealing all its business. Moreseo when both Senators of the state the prosecutor works in are begging for a criminal investigation — unless, of course, the prosecutor in question is then-U.S. Attorney for the District of New Jersey Chris Christie and the offender is Rupert Murdoch’s News Corp., allegedly hacking into Floorgraphics’ systems. Well, the case probably wouldn’t have gone anywhere (Christie never prosecuted the case, which is perhaps why Floorgraphics filed its civil suit), since a judge in Georgia has already sent the News Corp. whistleblower to bankruptcy court by ruling he had breached his contract by outing his Murdoch’s alleged crimes.
With the legal system so corrupted, it’s worth giving the almighty market some credit for attempting to rein in News Corp. As Bnet’s tireless Jim Edwards has pointed out, News of the World and Glenn Beck’s show were both casualties of advertiser boycotts. It’s tough to imagine advertisers squeezing any further concessions from News Corp., however — especially if they happen to be plying their wares in America’s supermarkets, drugstores or large discount chains.
No other media mogul can remotely claim to approach Murdoch’s influence or wealth, and perhaps no CEO has ever proven so repeatedly defiant to conventional notions of what the market will bear. When Murdoch was breaking into business, the right-wing media consisted of little more than Pat Robertson’s “700 Club” and a money-hemorrhaging newspaper owned by the leader of a Korean cult. Today, conservative media is a cash cow rivalled only by college sports. The impact it has had on discourse is still orders of magnitude greater, albeit harder to calculate. But it all looks pretty rational from here.
Photo: News Corp Chairman and Chief Executive Rupert Murdoch is seen on television screens in an electrical store as he is questioned by a parliamentary committee on phone hacking on July 19, 2011. REUTERS/David Moir