While the FCC considers
pending mergers such as the application of AT&T and Atlantic Tele-Network,
Inc. (“ATN”) filed in March of this year, as well as others, it is timely to reexamine
the FCC’s review process for such transactions. On August 27, the FCC stopped the 180-day “shot clock” on Day 175 in
order to allow AT&T to submit further information, claiming that the
requested information is necessary for the Commission’s determination of whether
the transaction meets the public interest test. This delay and its somewhat ambiguous
justification are just another indication of the need to reform the
Commission’s transaction review process in order to curb inefficiency and
promote clearer standards of review.
In thinking
about the FCC’s transaction review process, perhaps a larger, more fundamental question
should be considered: Should the FCC have the authority to review mergers at
all?
In July of this
year, the House Subcommittee on Communications and Technology held a hearing
entitled “Improving FCC Process,” in which panelists and Representatives
commented on discussion drafts of the FCC Process Reform Act of 2013 and the FCC Consolidated Reporting Act of 2013 presented by Chairman Walden. During
testimony on the proposed legislation, particularly on the Process Reform Act,
panelists and Representatives alike recognized that the merger review process
is an important issue to consider in the context of FCC reform efforts overall.
The FCC Process
Reform Act recommends changes to the Commission’s transaction review process.
The provisions in the proposed act would allow the Commission to condition the
approval of a transaction only if the condition addresses “a likely harm . . .
uniquely presented by the specific transfer or other transaction.” This change
is intended to combat the Commission’s systematic abuse of the merger review process,
in which the Commission frequently withholds approval of transactions unless and
until applicants “voluntarily” agree to conditions that often do not relate
directly to the transaction at issue.
In the context
of the discussion concerning the merger review portions of the draft legislation,
Congresswoman Eshoo stated that what underlies much of this reform effort,
“driving [it] more than anything else,” are not only the problems in the review
process, but also the FCC’s very authority to review acquisitions and mergers. She stated this issue is where there is “concern,
disagreement, agitation, and aggravation.” Stuart M. Benjamin, Professor at Duke
University Law School, then pointedly raised the question of whether it is appropriate
for the FCC to be “in the business” of reviewing mergers at all.
In response, Richard
J. Pierce, Professor at George Washington Law School and member of the Free
State Foundation’s Board of Academic Advisors, stated that “it would make a lot
of sense to take the FCC completely out” of the merger review process. Professor Pierce, an expert in the administrative
law field as well as in antitrust law, elaborated that “the FCC does not know
much about antitrust law; the FTC and the Department of Justice know a lot
about antitrust law. They have the
power to impose conditions, they regularly impose conditions on mergers, and
those conditions are specifically tailored to address the competitive issues
that are raised by a proposed merger.” Professor Pierce proposed that “the far
more sensible thing” than reforming the FCC’s merger review process would be introducing
a statutory change that states “the FCC has no power over mergers. That is
exclusively the realm of the DOJ and the FTC.”
The need for
reform of the FCC’s transaction review process has been discussed by Free State
Foundation scholars for years. In his piece, “Any Volunteers?” released in 2000, FSF President Randolph
May noted how the FCC has used the license transfer review process to
essentially regulate by condition, consistently conditioning transaction
approval on concessions from communications companies. He advocated that the review
process should be reformed to prevent this type of abuse.
Moreover, in “Any
Volunteers” as well as in “Reform the Process” released in 2005, Mr. May noted that
the FCC largely duplicates the efforts taken by the DOJ and FTC in reviewing
mergers by requiring that the transaction “enhance competition” under the
public interest standard. He proposed that the Commission exercise regulatory
self-restraint by principally deferring to the DOJ’s or the FTC’s expertise
regarding competitive concerns, since both agencies are already tasked with
determining whether transactions would “substantially lessen competition.” In
an age of justified concern regarding government efficiency and the effective
use of resources, it is important that agencies neither duplicate efforts, nor
undertake processes that other agencies are better equipped to handle.
Professor
Pierce’s suggestion that the FCC merger review process should not be changed,
but that the FCC should be out of the business of reviewing mergers and
transaction applications, deserves closer consideration. Agencies like the
Antitrust Division of the DOJ or the FTC already have statutory standards based
on antitrust principles that are more easily applied to merger reviews, in
addition to greater expertise and experience in antitrust law.
In contrast, the
FCC’s ambiguous public interest standard creates opportunities for abuse and
over-regulation. Indeed, the FCC has justified the imposition of burdensome,
so-called “voluntary” conditions on many major transactions under the nebulous
public interest standard, even when those conditions were unrelated to the
specific issues presented by the pending transaction.
The reforms
proposed by Chairman Walden in the FCC Process Reform Act would require that the
FCC only impose conditions that are narrowly tailored to remedy the unique
effects of the pending transaction, and those reforms would prevent the FCC from
justifying merger conditions under the over-broad public interest standard. These
meritorious changes would go a long way to reforming the review process.
But in the
context of discussing reform of the merger review process, it is worth
considering Professor Pierce's point: Should the FCC be in the business of
merger review at all?
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