A little-noticed article
in the Wall Street Journal over Labor
Day Weekend concerning the proposed Comcast-Time Warner Cable merger caught my
eye, not only because the article obviously concerns an important matter of
communications policy, but also because it raises questions regarding a matter
of proper administrative agency process.
In the online
version, the article is titled,
“Comcast Targeted by Entertainment Giants.” This presages the article’s
focus on the substantive communications policy matter. Along with my colleague,
Seth Cooper, I filed public
comments in the FCC’s proceeding that set forth our views concerning the proper
way for the FCC to consider the merger proposal. You can read our comments, and
I don’t intend to discuss the substance of the merger proposal here.
Instead, what I want to focus on is the matter of proper
agency process. The article’s subtitle says a lot about my process concern: “FCC Encourages Media Companies to Provide
Confidential Complaints on Time Warner Cable Purchase.” According to the
WSJ, the FCC “is encouraging
those big companies to offer feedback confidentially, people familiar with the
matter say.”
In my decades-long
experience with FCC matters, it is fairly unusual, if not unprecedented,
for the FCC to take the initiative in encouraging confidential complaints in
the context of an on-the-record merger review proceeding. The fact that it is
doing so here caught my “administrative law” eye. (As a former Chair of the
American Bar Association’s
Section of Administrative Law and Regulatory Practice, a current member of the
Administrative Conference of the United States, and a current Fellow at the
National Academy of Public Administration, I do have such an “administrative
law” eye. But, of course, I am speaking here only for myself.)
The theory
spun out in the WSJ article is that the so-called “Entertainment Giants” may be
too intimidated to put whatever concerns they may have about the merger on the
public record. Unless these companies are able to meet with Commission
officials on a confidential basis, so the story goes, they may not present their
concerns at all because they fear that they may be subject to retribution by
Comcast.
I can follow
the theory, but nevertheless I do question the use of secret meetings in the
context of the FCC’s transaction review proceedings. The practice of conducting
off-the-record meetings raises questions of fundamental fairness that go to the
integrity of the agency’s decision-making process. This is because no one –including
Comcast and Time Warner Cable, the parties most directly affected – is in a
position to rebut claims made by the parties during the confidential meetings.
In
administrative law terms, the FCC’s merger review proceeding – a proceeding in
which the FCC is considering applications to approve the transfer of specific
spectrum licenses and other specific authorizations – is an adjudicatory
proceeding affecting the legal rights of the parties to the applications. In
most cases, adjudicatory proceedings are “restricted” proceedings. This means
that ex parte, or off-the-record,
contacts between interested parties and Commission decision-making officials
are not allowed. In restricted proceedings, all communications between
interested parties and FCC officials must be on-the-record.
But in
certain adjudicatory proceedings that may have significant public policy implications
beyond the rights of the immediately affected parties, the FCC may invoke what
it calls a “permit-but-disclose” process. The agency typically designates major
merger reviews “permit-but-disclose” proceedings under Section 1.1206(b) of its
rules, and it did so in a public
notice in this case. As the name implies, in a “permit-but-disclose”
proceeding, an interested party may make an ex parte presentation to
Commission decision-making personnel, as long as the person promptly places in
the public record the substance of the presentation.
The “permit-but-disclose” process allows interested
parties to present their views to Commission officials considering the
transaction, while ensuring, at the same time, that the substance of those
views is placed in the record so that other interested parties, including the
applicants seeking approval of the transaction, have notice of the presentation
and an opportunity to respond.
If the Wall
Street Journal reporting is accurate, and in fact the FCC is deviating from
the “permit-but-disclose” practice in the case of the Comcast-TWC merger
proceeding, then I have concerns. Providing fair notice and an opportunity to
respond are fundamental elements of due process, even in a constitutional sense.
A “permit-but-non-disclose” process, which by definition lacks fair notice and
an opportunity to respond, is problematic from the perspective of proper
conduct of an adjudicatory proceeding.
Now, I understand that perhaps in this instance the
FCC may be invoking a further exception to the restricted proceeding
requirements that otherwise apply to adjudicatory matters. Section 1.1204(a)(9)
of the Commission’s rules provides that the Commission may allow a secret
presentation to be made “to protect an individual from the possibility of
reprisal, or [if] there is a reasonable expectation that disclosure would
endanger the life or physical safety of an individual.” I understand that this
provision may have a role to play as a “safety valve” in very rare situations, including
when life or limb may be threatened.
Despite some of the exaggerated and unhelpful heated
rhetoric bandied about regarding so-called “media giants” – whether they be
cable operators like Comcast and Time Warner Cable on the one hand or content
programmers on the other – no one seriously entertains the notion that anyone’s
life or physical safety is threatened by on-the-record participation in the
merger proceeding. So, perhaps agency officials are reading “reprisal” in the
sense of an interested party’s possible fears that it might not be treated as
well as it otherwise would like in a business negotiation if it expresses
concerns about the proposed merger.
Well, of course. It is understandable that one
business “giant” (or even little giant) might prefer not to tick off another by
expressing concerns in a public proceeding. But this worry, such as it is, must
be balanced by concerns about maintaining the integrity of the agency’s
administrative process. I don’t know what is said in the secret meetings –
well, that’s obvious – but, without knowing more, my sense is that here the
balance tips in favor of putting the substance of the claims on the public
record. After all, remedies are available if anticompetitive retaliatory
conduct is proven, and they will remain available whether or not the Comcast-TWC
merger is approved.
Finally, I understand that the Department of Justice,
in investigating proposed mergers, conducts secret meetings just like the FCC
apparently is conducting in this instance. I don’t know for sure, but I suspect
that DOJ is conducting confidential meetings with some of the very same parties
with whom FCC officials are meeting. To some extent this just serves to
highlight the duplication of effort, in many instances unnecessary duplication
of effort, when both DOJ and the FCC investigate the same merger.
But in a more fundamental sense, DOJ’s conduct of
confidential meetings just serves to highlight my concern about the FCC’s process.
DOJ, an executive branch antitrust enforcement agency, presumably is
investigating whatever competitive concerns it may have about the proposed
merger, including those brought to its attention by competitors of Comcast and
TWC and those who deal with them. But, ultimately, if DOJ concludes the merger
presents competitive concerns, it must either file a complaint in court seeking
to block or condition it. This would begin an on-the-record process in federal
court that will be conducted in full public view.
In the case of the FCC, ultimately it will adopt a public
order regarding the applications seeking transfer of specific licenses. But the
substance of the secret meetings will never be put on the public record before this
official action is taken. Comcast and Time Warner Cable most likely won’t even
know who met with whom, and they won’t have an opportunity to respond.
There may be more than I know as to why the FCC is
proceeding in the unusual fashion it is. But based on what I know, I think this
is a problematic way for the Commission, acting in its quasi-judicial capacity,
to proceed in an adjudicatory proceeding.
Alexander Bickel, the prominent constitutional law
scholar, wrote in his 1975 book, The Morality of Consent, that "the
highest form of morality almost always is the morality of process." I
share Professor Bickel’s view regarding the importance of process.
In this case, converting a “permit-but-disclose”
proceeding into a “permit-but-non-disclose” one raises significant process
concerns.
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