Thursday, March 03, 2011

FCC Merger Review Reform: The Case for Regulatory Modesty

You probably have seen the trade press reports on FCC Commissioner Meredith Baker's Wednesday speech concerning reform of the FCC's merger review process. Even if you have, it is well worth taking the time to read the entire speech here.

Entitled "Toward a More Targeted and Predictable Merger Review Process," Commissioner Baker sets forth a number of specific ideas for addressing what she aptly calls the "long-term structural issues" bedeviling the agency's merger review process.

The speech is concise, and I am not going to repeat what Commissioner Baker says. The merger review process, as carried out by the FCC, has been subject to criticism for well more than a decade. Suffice it to say that her reform suggestions fall into the following three categories: (1) eliminate or at least reduce the duplication of effort – and the attendant expenditure of resources – that result from dual review of the proposed transaction by the antitrust authorities and the FCC; (2) reduce substantially the time the FCC takes to complete its review; and (3) constrain the FCC's practice of imposing wide-ranging merger conditions that do not pose clearly merger-specific harms.

As noted in Commission Baker's speech, I first wrote about the problems attendant to the FCC's merger review process in Legal Times in March 2000 in a piece entitled "Any Volunteers?" ("Volunteers" was used purely in the ironic sense.) Another article entitled "Reform the Process" appeared in the National Law Journal in May 2005. I have written on the subject many times since.

Rather than rearguing here what should be done – and Commissioner Baker has certainly done a good job of laying out her own proposals – I want to emphasize a different point: The timing may be – ought to be -- right now for the FCC to adopt many of the reforms that Commissioner Baker and others have suggested.

Of course, as a practical matter, the Commission will only act to adopt merger reforms if FCC Chairman Julius Genachowski gets behind the effort – and provides the crucial third vote.

He should want to do so.

Commissioner Baker generously credits Chairman Genachowski with devoting agency resources to institutional agency reform. I am not aware of all he may have done in this regard. But I am sure that nothing Chairman Genachowski has done thus far would be as significant or meaningful with respect to institutional reform as changing the FCC's merger review policies along the lines suggested by Commissioner Baker.

There is widespread agreement that the way the Commission conducts the process now -- with the inevitable year-long reviews, the incontrovertible duplication of effort of the Department of Justice and the FTC on the one hand and the FCC on the other, and the unseemly extraction of so-called "voluntary" conditions – has contributed mightily to the FCC's reputation as an agency that does not function very well much of the time.

With the nation's economy and job creation prospects still fragile, and with intense focus on our massive budget deficit, the timing ought to be right for Chairman Genachowski to lead a serious effort to achieve merger review reform. After all, President Obama has made a point in the past few weeks of saying government agencies should ensure their rules and processes are not unnecessarily delaying or making more costly new investments and job creation by businesses. See, for example, the President's widely-publicized Wall Street Journal op-ed, "Toward a 21st Century Regulatory System." And earlier this week the Government Accountability Office released its widely-commended report, "Opportunities to Reduce Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue," highlighting areas where the government can achieve cost savings by eliminating duplicative functions and increasing the efficiency of operations.

Nothing more is needed for the FCC to succeed in a merger review reform effort than a healthy dose of self-restraint and regulatory modesty. I understand that, consistent with the relevant Communications Act provisions, the agency must find that license or authorization transfers are in the "public interest." There is no doubt that within the context of that vague standard, the Commission has the discretion, for example, to adopt each of the process reform proposals Commissioner Baker proposes.

In 2008, I published an article in the Administrative Law Review entitled, "A Modest Plea for FCC Modesty Regarding the Public Interest Standard," in which I suggested that in carrying out its public interest responsibilities, "the FCC itself should act more modestly." With respect to the merger review process and other agency policies, I said that, short of congressional action, "regulatory constraint under the public interest standard must come from the agency itself."

While unusual, it is not unprecedented for an administrative agency, on its own, to implement institutional reforms. Over the past few decades, despite the remarkable marketplace and technological changes that have occurred, the FCC, unfortunately, has been especially resistant to institutional change.

Chairman Genachowski should seize the opportunity presented by Commissioner Baker's thoughtful merger review proposals to demonstrate that the FCC is still capable, in an exercise of regulatory modesty, of reforming itself – at least in this important respect.