Monday, November 13, 2017

Shutting Down the Bizarre Bazaar

For many years – you can make that almost two decades! – I have advocated that Congress reform the FCC’s transaction review process to constrain the agency’s discretion, to require it to act on proposals in a timelier fashion, and to reduce the current duplication of effort that exists between the FCC and the antitrust authorities. I have testified to this effect several times at congressional hearings. Here is my testimony before the House Communications and Technology Committee in July 2013.

But until Congress gets to work on a #CommActUpdate – which it should – it’s up to the FCC to exercise self-restraint so as to carry out its merger review responsibilities in a proper manner. The Commission’s recent action approving the CenturyLink - Level 3 merger presents an opportunity for comment to highlight briefly a salient point relating to past abuse of the review process.

It is common knowledge that, in the past, the Commission often has availed itself of the “opportunity” presented by the indeterminate nature of the “public interest” review standard to impose conditions unrelated to harms supposedly arising from the transaction. This usually has been accomplished by Commission officials engaging in an unseemly bargaining process in which parties to the transaction are advised to “volunteer” certain conditions if they wish to have the transaction approved. As I explained in a Legal Times column entitled, “Any Volunteers?”, published in 2000, the proffered conditions aren’t really “volunteered” in the sense in which the term normally is understood. Moreover, the resulting “regulation by condition” is bad policy because, among other reasons, similarly situated parties are treated in a disparate fashion.

Subsequently, in 2010, after observing more instances of “regulation by condition,” I called the process of extracting “volunteered” commitments, a “Bizarre Bazaar.”  I can think of worse names for it.

This past March, I returned to the subject once again in “A Proposal for Improving the FCC’s Merger Review Process.” There I urged the Commission to consider issuing a policy statement regarding transaction reviews to include at least these two fundamental elements:

·      A commitment to review proposed mergers in a timely fashion.
·       A commitment to refrain from imposing conditions on approvals of transactions unless they are narrowly tailored to address harms uniquely presented by the specific transaction.

This brings me back to the FCC’s approval of the CenturyLink – Level 3 transaction. As to timeliness, the FCC approved the transaction just a few days after the bell rang on the Commission’s 180-day shot. But unlike most timepieces, the shot clock stops and starts at the government’s discretion, so the reasons for the stops and starts are pertinent. Hopefully, in the dynamic, fast-changing communications marketplace, the Commission will strive to beat the shot clock substantially, not just run it out.

Regarding a commitment to refrain from imposing conditions unrelated to harms allegedly arising from the transaction, the Commission deserves credit for its handling of CenturyLink – Level 3. The Commission majority stated clearly that it would impose conditions only to address transaction-specific harms which are related to its responsibilities under the Communications Act and related statues. Given past history – the “Bizarre Bazaar” – this is important because it should offer some assurance to those who come before the agency in the future, or who are contemplating doing so, that they will not be subject to the vagaries of “regulation by condition.”

 After a careful and extensive economic analysis, the Commission did impose one transaction-specific condition to address potential competitive concerns in ten specific locations where it considered the merger might decrease competition and increase prices. Commissioner Mignon Clyburn dissented because she thought the Commission should not have credited potential competition to the extent that it did and, therefore, should have imposed substantially broader conditions. But, in essence, she was using the occasion to reargue her position that did not prevail in the Business Data Services proceeding.

So, I commend the current Commission for the emphasis placed on limiting the imposition of conditions to those directly related to transaction-specific harms. For shutting down the Bizarre Bazaar.

But here’s the final point: Congress needs to amend the Communications Act to embody that constraint in law so that it will be durable. And it should adopt other reforms such as requiring the Commission to render a final appealable order regarding proposed transactions within a definite time frame, absent a showing of good cause for exceeding the deadline. Then the conception of the agency’s proper role in reviewing proposed mergers will not be determined by what three of the five commissioners happen to think on any given day, or in any given administration.
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Regarding Congress and the need to update the Communications Act, the new Free State Foundation book, #CommActUpdate - A Communications Act Fit for the Digital Age, Randolph May and Seth Cooper is now available on Amazon in paperback for $9.95 and on Kindle for $2.99! And it is available as an ebook for $2.99 from seven different bookstores here. Read more about the book here.