Monday, October 16, 2006

Unfair Allegations Against DOJ

In their October 13 letter to FCC Chairman Kevin Martin asking that the vote on the AT&T/BellSouth merger be postponed, Democratic commissioners Michael Copps and Jonathan Adelstein assert that further review is important "because the Department of Justice approved this combination with little substantive analysis...." In the next sentence, they characterize DOJ's effort as a "limited analysis."

This characterization of DOJ's work is unfair. In its official statement regarding the closing of its investigation, DOJ refers to its "extensive investigation" before it determined that the proposed merger is not likely to impair competition. It says it reviewed "extensive information" obtained from the merging parties and competitors and customers of the merging parties. It says it "thoroughly examined" all areas in which the two companies compete--residential local and long distance, telcom services provided to business customers, and Internet services, along with the impact on wireless broadband services. DOJ says it also evaluated the cost savings and efficiencies claimed on behalf of the merger, and found the documentation submitted in support of the claimed efficiencies likely to be realized. The closing statement contains a summary of DOJ's conclusions regarding each of these areas.

I happen to agree with DOJ's assessment that the merger does not appear likely to lessen competition, especially in light of the existence of competitors using alternative technological platforms and the technological dynamism that characterizes today's communications marketplace. Not to mention further potential competition lurking on the sidelines from entrants using still other technological platforms. I recognize that others, including Commissioners Copps and Adelstein, may have a different lens through which they view potential competitive impacts and the state of competition in the communications marketplace. But that is an entirely different matter from denigrating DOJ's investigation that lasted over half a year.

Commissioners Copps and Adelstein appear to wish that DOJ would have written an FCC-style 200-pager in concluding its investigation without imposing any conditions. But that misconstrues DOJ's role as chief law enforcer of the nation's antitrust laws. As DOJ says, in accordance with long-standing policy, the closing statement "is limited by the Division's obligation to protect the confidentiality of certain information obtained in its investigations." In the AT&T/BellSouth investigation, as in most, Justice says that its evaluation has been "high fact-specific," with much of the relevant information, understandably in today's competitive environment, not public.

I understand that the FCC may have broader authority under the indeterminate public interest standard than does DOJ in reviewing mergers. For reasons I have stated many times, reviewing mergers under the vague public interest stand is problematical, because it gives the FCC almost unbridled authority to extract so-called "voluntary" concessions from the merger applicants. See these Legal Times and this National Law Journal pieces for why this is so and for previous examples of abuse. In any event, whatever the FCC's approach, there is no justification for mischaracterizing or misunderstanding the effort of DOJ or the work the antitrust agency has done. Instead, the FCC should rely heavily on that work in getting on with the job of voting on the AT&T/BellSouth transaction.