MERGER REVIEW AGREEMENT BETWEEN FTC AND DOJ NOW UNCERTAIN

Reported agreement on merger reviews by FTC and Justice Dept. (DoJ) remained uncertain Thurs. and one senior official speculated accord was “dead.” Agencies had scheduled joint news conference Thurs. for “announcement,” but it was canceled with no comment from FTC or DoJ. FTC Comr. Mozelle Thompson attacked agreement in news release issued before conference, saying FTC Chmn. Timothy Muris hadn’t invited other FTC commissioners to review agreement before he executed it. Said spokesman for House Commerce Committee: “Frankly we were a little surprised to learn the Administration was moving forward on this proposal with little if any input from Congress… Obviously, if this is resurrected we would like to put our 2 cents worth in.”

Agreement reportedly would have delineated jurisdictions between 2 agencies, giving DoJ review of media, software, publishing, entertainment and Internet-related industries. Consumer advocates expressed concern, saying consumer worries wouldn’t be as influential in DoJ review as they would in FTC review. Consumer advocates worried new merger review procedures would allow media companies to concentrate control of Internet and other media. Currently both DoJ and FTC have antitrust authority and negotiate which will handle individual cases and reviews based on level of experience in each agency. Antitrust experts told us changes would streamline merger review process.

Thompson said streamlining generally would be good for agencies, but questioned way agreements were negotiated, referring to Muris’s announcement of agreement in past tense. “While generally I favor interagency agreements that enhance the speed and efficiency of case processing, today’s announced agreement raises substantial concerns,” Thompson said in his news release. “I was not even provided a copy of the completed agreement until immediately before Chairman Muris executed the agreement on behalf of the Commission.” Although Thompson objected to how agreement was reached and some of details, he told us some form of agreement could have been good. Even though he said major disputes between agencies had been rare, he said there were “some opportunities for improvement,” although “this [agreement with Justice] is not it.” Thompson pointed out that virtually all new-economy mergers would be handled by Justice under agreement, even though “there are significant areas where we have significant expertise that could benefit consumers.” However, he said idea of jurisdiction agreement was “worthy of some further discussion,” although he said it should be done in more open manner.

Thompson said in release that “horse trading” between DoJ and FTC would cost consumers value of FTC’s recent experience in Internet, media and software mergers. Recent mergers reviewed by FTC include AOL Time Warner, Hearst (pharmaceutical databases), MSC.Software (computer-aided engineering software), Random House, Sony, Time Warner/EMI. Thompson said FTC merger review also had benefits associated with other related activities, including: (1) Law enforcement investigations in Internet fraud cases. (2) Internet privacy policy workshops and studies. (3) Advertising enforcement activity in media space. (4) Public workshops in new areas.

FTC invites input from consumer advocates and small and medium-sized enterprises, while those groups have “no clout” with DoJ, said Jeff Chester, exec. dir., Center for Digital Democracy. Consumer advocates expressed concern specifically about proposed Comcast acquisition of AT&T Broadband and review process. Decision on which agency would review that deal has yet to be made. Chester speculated that such agreement was “large wink to big media and communications companies.” DoJ doesn’t understand effect content market has on democracy and probably won’t consider such issues thoroughly when reviewing media deals, Chester said. “The Internet is at risk,” he said. “There’s a behind-the-scenes battle over whether the architecture will remain open.” Consumers Union cited DoJ’s proposal to settle Microsoft antitrust case as preview of kind of treatment other media and communications companies might receive. “If they let Microsoft off the hook, how will they treat cable monopolies,” said David Butler, Consumers Union Washington office spokesman. He suggested merger review changes “smell of a political move” designed to accompany proposed changes at FCC on media ownership.

Former FTC official said streamlining system would be likely to speed processing merger reviews. Richard Parker, former FTC Competition Bureau dir. and current O'Melveny & Myers attorney, said it was “very good idea” because it would allow each agency to develop and retain expertise in certain areas. Parker headed FTC’s review of AOL Time Warner and said FTC staffers had “tremendous” experience in media reviews, but said the staff’s experience was diverse and not centered on media issues. Both Parker and Robert Lande, former FTC Competition Bureau staffer and current American Antitrust Institute senior research fellow, said nearly all jurisdictional negotiations between FTC and DoJ were handled amicably. Thompson said FTC and Justice reportedly disagreed over which should handle more than 7,000 antitrust reviews in last few years, but only 32 of those cases have taken more than 15 days to resolve jurisdictional issues.

FCC Chmn. Powell said he didn’t think such agreement would have very big effect on FCC’s responsibilities but it could have implications for industry in how merger review process worked. FTC process is based on consensus, similar to that at FCC, he said, while Dept. of Justice operates in more “hierarchical” way. That means action could be quicker at DoJ, he said. In addition, there could be “greater emphasis on case-specific” determinations that DoJ is “famous for,” Powell said.