Friday, August 20, 2010
Yesterday the Free State Foundation filed reply comments by Professor Richard Epstein, FSF's Distinguished Adjunct Senior Scholar, in the FCC's proceeding considering the proposed merger between Comcast and NBCU. If you have not seen them, the comments are here and the press release announcing the comments is here.
The comments are principally directed towards rebutting the opposition to the merger by Consumers Union and the other self-denominated consumer groups. The comments contain a detailed, but readily understandable, explanation of the fundamental analytical errors that discredit the groups' case. As Professor Epstein points out, comparing the mistakes these same groups made ten years ago in opposing the AOL-Time Warner merger to the mistakes they make today: "Errors of this magnitude do not just happen by chance. They are dependent upon systematic analytical mistakes." On this score, read the comments and decide for yourself.
Today, in light of all the ongoing special pleading for conditions not only by consumer groups, but also by various competitors of Comcast and NBCU who seek to use the merger proceeding to gain an advantage vis-a-vis the merged entity, it is worth highlighting what Professor Epstein had to say about the FCC's process:
"The FCC has some power to add conditions to any merger that it approves. That kind of power is, in general, perfectly appropriate in cases where it requires one of two companies to a merger to divest itself of assets in certain submarkets where the surviving firm might acquire undue market power. But that form of regulation should not be used to subject a single company to regulations that should be adopted, if at all, only for the entire industry, and then only after some opportunity for notice and comment on the proposed regulation. Just that position was taken by the Free State Foundation in its initial comments in this proceeding when it urged the FCC not to engage in the unseemly and unwise practice of "regulation-by-condition." In particular, I strongly endorse on grounds of administrative transparency and regulatory consistency this observation of FSF: 'Too often, 'regulation-by-condition' has been a method by which the Commission has imposed policies on merging parties that the Commission should only be imposed, if at all, through rulemaking.'
The soundness of this FSF position is confirmed during this proceeding as countless special interests have implored the FCC to impose on the applicants all manner of extraordinary and intrusive conditions. These proposals include major initiatives ranging from the adoption of a net neutrality mandate to various new program access requirements. It is critical for the FCC to exercise a strong measure of institutional self-restraint so that these collateral initiatives do not end up siphoning off all the gains that this merger might produce if allowed to go forward in its current form. There is no place in this proceeding for so-called 'voluntary' conditions that do not bear on those competitive concerns that are uniquely and specifically tied to the distinctive features of this merger. General rulemaking provisions are the only proper vehicle for setting up industry-wide rules. Any ad hoc restrictions could easily distort the competitive balance between rival firms that is so critical to the consumer welfare in this dynamic industry."
There is a right way and a wrong way for the FCC to consider mergers. Professor Epstein's comments surely should serve as a guide, both as to substance and process, if the FCC wants to pursue the right way.
Posted by Randolph J. May at 10:13 AM