HOLLINGS NOT CONVINCED BY DOJ/FTC NUMBERS ON MERGER REVIEW

Sen. Hollings (D-S.C.) and his staffers on Senate Commerce Committee and Commerce, Justice, State and Judiciary (CJS) Appropriations Subcommittee aren’t swayed by recently released statistics on proposed merger review agreement between Justice Dept. (DoJ) and FTC, staff member said. In CJS appropriations hearing Feb. 26, Attorney Gen. (AG) John Ashcroft gave Hollings statistics on number of merger reviews each agency had conducted in past few years, and on Feb. 27 FTC released several documents relating to merger review agreement, including more detailed statistics on number of mergers each agency had reviewed in recent years. But Hollings aide told us statistics were too recent and didn’t necessarily reflect expertise within agency. Hollings told Ashcroft he was particularly concerned about reviews of potential media and entertainment company mergers going to Justice Dept. instead of FTC. FTC release said Justice had conducted 63 enforcement actions and 154 “substantial investigations” in media sector since 1997, while FTC had conducted just 13 enforcement actions and 22 substantial investigations. DoJ also has done all 57 telecom investigations and enforcement actions and traditionally is known to be agency that reviews telecom antitrust issues.

Hollings’ staff wants to see “wider view,” aide told us: “They picked the window most beneficial to their argument. We would like to see what’s happened the past 10, 15, 20 years.” Aide also said statistics didn’t take into account types and magnitudes of media mergers. One of FTC’s most recent media reviews involved AOL and Time Warner (TW) that imposed conditions that required TW to: (1) Open its broadband network to ISP competition if it carried AOL on that line. (2) Make advanced instant messaging capabilities interoperable with other systems. Hollings aide told us that DoJ and FTC staffs had been in continuing dialog with Hollings’ staff on those issues since the 2 agencies abruptly cancelled news conference to announce agreement after Hollings learned of development and objected.

Media reviews have drawn most attention from Hollings and consumer groups that have objected to proposed policy change. However, Hollings aide told us senator generally objected to principal behind delineating jurisdictions. Congress intended that 2 agencies have concurrent jurisdiction over merger reviews -- and antitrust issues in general -- because they shared different missions and were structured differently, aide said. FTC is more independent, is more politically diverse and is more focused on public interest issues than Justice, which is arm of the Administration and focuses on antitrust from purely law enforcement angle, aide said. But aide said placing media mergers with DoJ had drawn most concern from Hollings because of potential affect on public discourse, particularly as more media outlets had merged.

Media outlets perform vital function in practice of democracy, Hollings aide said, and need to be viewed in that light and not from purely economic standpoint. Senior FTC official also questioned statistics released by agencies. “It underplays the substantial expertise we have in this area,” official said. Official said FTC took much more substantive cases, like AOL-TW, while many of DoJ cases were “cookie cutter” cases and not very complicated. Official said many DoJ cases involved billboards and radio, and while FTC imposed several conditions on AOL-TW merger, DoJ placed few restrictions on AT&T-Media One merger. FTC has developed many cross-ownership rules, he said, and conditions on TW- Turner merger 5 years ago helped enlarge satellite TV industry. FTC official said since agency could take cases to administrative law judges, it operated under administrative review process that makes it more accountable than DoJ, and merger review agreement could include conduct reviews, first step in antitrust investigation.

Release of information by FTC accompanied Freedom of Information Act (FOIA) request from Center for Digital Democracy (CDD). Jeffrey Chester, CDD exec. dir., said public release of information was only partial and merger review agreement was negotiated under “Nixonian secrecy.” Consumers Union (CU) and Consumer Federation of America (CFA) also voiced objections to merger review agreement, particularly highlighting concerns about media mergers’ going to DoJ. “We think the FTC has a proven track record with media mergers,” David Butler of CU said: “The AOL-TW review transformed a bad deal into a potentially good one for consumers.” Butler said FTC had tended to tackle larger, more complicated media mergers. Mark Cooper of CFA said number of media owners had decreased from about 1,500 25 years ago to just 650 now. “In the commercial sector, we want efficiency,” Cooper said, “but in the marketplace of ideas, we have to have diversity and antagonism. Fewer owners will eliminate diversity.”

But Cooper questioned whether there was anything consumer groups or Hollings could do to prevent change. Hollings does have oversight authority over both agencies, FTC by virtue of being Commerce Committee chmn. and DoJ as CJS Appropriations chmn. However, aide wasn’t able to give specific details on how Hollings could influence agreement. Senior FTC official said Hollings could certainly influence 2 agencies with his congressional oversight authority.

FTC Chmn. Timothy Muris has said change is administrative and effort to eliminate lengthy period of “clearance review” where 2 agencies negotiate for rights to review merger, but others said agreement was major policy change that needed public input. Muris and DoJ have come under criticism for manner in which agreement was drafted.