Wednesday, March 16, 2016

Any Volunteers? – Part XX

Almost 16 years ago to the day, on March 6, 2000, Legal Times published my commentary, “Any Volunteers?” The essay bemoaned the Federal Communications Commission’s then-increasingly common practice of accepting supposedly “volunteered” conditions by merger applicants, almost always late in the day, in order to get the Commission – finally – to approve a long-pending proposed merger.

I referred to this phenomenon of supposedly “volunteered” action as “regulation by condition.” And I explained how the indeterminate “public interest” standard makes it easier for the Commission to spur such volunteerism in the context of reviewing transactions that need agency approval. I offered reforms of the merger review process, so merger applicants would not need “to continue playing the FCC’s version of ‘Let’s make a deal.’”

Well, in the 16 years since, I have written several dozen other pieces, and testified before Congress at least twice, urging reform of the merger review process, either by Congress or the FCC itself. Rather than go back and count them all, I’ll just call this one, “Any Volunteers? – Part XX.”

Without rehashing the more complete discussions contained in many of those pieces, I just want to make one particular point about the current review process involving the proposed Charter – Time Warner Cable – Bright House Networks merger. As my colleague FSF Senior Fellow Seth Cooper explained in a blog last week, several parties, which, not surprisingly include competitors, are urging the FCC to impose various conditions on the proposed merger if the agency approves it at all. These conditions relate to claims that a merged Charter/TWC/BHN would adversely affect the availability of online video distributor (OVD) services and that the merged company would stop making its video services accessible to independently manufactured and supplied set-top box navigation devices.

In his blog, Seth explains why, in light of marketplace developments, the proposed Charter/TWC/BHN merger poses only a remote potential for the claimed harms to occur. And we explained why this is so at much greater length in the comments we filed with the Commission in connection with its review.

The point I wish to make here is the same one I made 16 years ago: When the Commission indulges in “regulation by condition,” inevitably, its action is “characterized by a whiff of regulatory extortion” that necessarily implicates accepted rule of law norms.

It need not be this way if the FCC would exercise a modicum of regulatory self-restraint. And if it would simply adhere to its own injunctions. For example, the Commission often says, as it did in the order approving the AT&T/DIRECTV merger, words to this effect: “To the extent that there potentially is an industry-wide public interest harm…., it would be beyond the scope of this proceeding in any event as it is not transaction specific.” Or: The Commission “does not impose conditions to remedy pre-existing disputes between parties that are unrelated to the transaction at issue….” Or: The Commission “will not impose conditions to remedy pre-existing harms or harms unrelated to the transactions.”

For better or worse – quite arguably worse, from the perspective of whether any new regulatory action is needed – the Commission already has initiated generic industry-wide proceedings concerning the online video distributor and video device issues raised in connection with the proposed merger. Despite any suggestions to the contrary by the condition-seekers, there is no good reason, given the existence of the generic proceedings, to single out Charter-TWC-BHN for special or unique treatment.

There is a time and place for volunteerism outside the realm of official government proceedings. Over the last 16 years, at various times the Commission has been more or less inclined to extract so-called “voluntary” conditions in merger proceedings. On those occasions when it has exercised a proper degree of regulatory restraint, I’ve gladly commended the agency.

The Commission should use the Charter merger to move away from “regulation by condition.”