Wednesday, December 05, 2012

The FCC, Merger Reviews, and Job Protection Pleas

On November 26, Seth Cooper and I filed comments in the FCC's proceeding evaluating the proposed merger between T-Mobile USA and MetroPCS. In the comments we said: 
"By combining MetroPCS's spectrum, wireless infrastructure, and other resources with its own, T-Mobile seeks to speed up and expand its deployment of 4G LTE services to meet growing demands for data-rich wireless broadband services. Consumers stand to gain from a more rapid migration to next-generation wireless services resulting from the proposed merger." 
Consistent with our usual practice, we did not specifically endorse the proposed transaction as a bottom-line matter. But we did conclude that, "considered in a proper analytical framework, this proposed combination will likely improve the competitive standing of T-Mobile/MetroPCS in reaching wireless consumers across the nation and thus serve the public interest." 
The Communications Workers of America has submitted comments arguing the FCC should not approve the transaction absent imposing certain conditions to protect the jobs of its members. Specifically, CWA wants the Commission to adopt the following "enforceable" conditions: (1) No U.S. employee will lose a job as a result of the transaction; (2) Network maintenance will continue to be provided by U.S. employees; and (3) Work previously sent offshore by T-Mobile and MetroPCS will be returned to the United States. CWA is especially concerned that the merger applicants claim the combination will allow them to achieve certain "synergies" and "efficiencies," which CWA says are euphemisms for job losses. 
No one wants to see people lose jobs, especially in today's difficult economy. I certainly don't. Nevertheless, CWA's request for job protection conditions is out of place in the merger proceeding. 
It is true that FCC decisions can impact the overall economy and jobs. Regulations that are unduly costly or overly burdensome will deter investment and innovation, adversely impacting job creation, at least over time. Conversely, sound regulatory policies, if they are narrowly tailored to redress real market failures and demonstrable consumer harm, and if they are subject to rigorous cost-benefit analysis, may have a positive impact on investment and innovation, thereby promoting job creation over time. 
But acknowledging that FCC actions may have a positive or negative impact on the nation's economy and employment levels is a far cry from acknowledging the Commission should be in the business of sanctioning job protection plans in connection with its merger reviews. 
It should not be. 
We already have a Department of Labor in the government, and the FCC should not abuse its merger review process by acting as if we need another one. 
There is an increasingly broad consensus that the FCC, especially in recent years, abuses its merger review authority by extracting various "voluntary" conditions from the merging parties before it will approve the proposed transaction. Because the merger applicants, often held in limbo awaiting Commission action for up to a year, are at the Commission's mercy, it is easy for the agency, employing the indeterminate public interest standard, to extract the last-minute "voluntary" conditions. And the worst part is that the so-called voluntary conditions may have little or no relationship at all to the claimed competitive effects of the proposed merger. 
Carried out in this way, with the Commissioners or their staffs suggesting, with a wink and a nod, that it might be "helpful" if certain conditions are proffered, the merger review process has an unseemly air about it. Several years ago I called the process a "bizarre bazaar," and I didn't mean it as a compliment. Over twelve years ago, I proposed reforms to the review process in a Legal Times piece, aptly titled, "Any Volunteers?" And in 2005, this National Law Journal piece titled "Reform the Process" argued for reform of the review process. 
Ultimately, what is needed are Communications Act revisions that restrict the FCC's merger review authority so the Commission does not duplicate the work of the antitrust authorities, or that at least require the agency largely to defer to the antitrust agencies' expertise. The FCC's authority should be limited to ensuring that, if the merger is to be approved, the post-merger entity will be in compliance with all existing statutory and regulatory requirements. 
But what is needed in the short-term, indeed right now, is for the FCC to exercise regulatory self-restraint. This means the agency should reject special pleading like CWA's (or anyone else's) to hold the merger hostage to extraneous conditions. While the CWA is correct that, on at least one past occasion, the FCC succumbed to pressure (or the temptation) to include a jobs protection provision (a requirement to repatriate jobs that had been outsourced) as a merger condition, it should not do so again. 
As I said above, there is no gainsaying that the FCC's regulatory policies may impact job creation, for good or for ill. Regulatory policies that are narrowly tailored and properly limited to ensure that their costs do not exceed their benefits may, in instances of real market failure, be consistent with job creation. 
If the FCC unwisely wants to venture into the domain of considering job protection plans, for example, plans that prohibit offshoring or that require that no U.S. employee lose his or her job, the agency should do so only in the context of an industry-wide generic proceeding. I would vigorously oppose the adoption of such rules as surely harmful and most likely unlawful, but at least the FCC would not be singling out particular parties in the context of a merger proceeding. 
In my view, in the context of the current market environment, I see no reason for the FCC to stand in the way of the proposed T-Mobile-MetroPCS merger. But I readily confess I have no idea whether, in this specific instance, the efficiencies and synergies claimed by the applicants will result, ultimately, in more or less jobs for CWA workers. I suspect that, over time, if the combined entity proves to be a strong marketplace competitor – stronger than if T-Mobile and MetroPCS remain apart – more jobs will be created than lost. 
Be that as it may, the FCC has no business abusing its merger review authority by conditioning the merger on adoption of the job protection plan put forward by the CWA. Regardless of whether the Commission has abused its authority this way in the past, such a condition is simply too far afield from any legitimate view of the Commission's exercise of its merger review responsibilities.