HOLLINGS THREATENS FTC FUNDING OVER MERGER REVIEW AGREEMENT

Sen. Hollings (D-S.C.) directly threatened funding for FTC in tense appropriations hearing with FTC Chmn. Timothy Muris Tues. that focused on recent merger review agreement between FTC and Justice Dept. (DoJ). Hollings, Senate Appropriations Commerce Subcommittee chmn., expressed concern with agreement because DoJ would be given authority to review all media, cable and Internet mergers. Muris argued that DoJ already had significantly more experience than FTC in such mergers and under current “clearance” agreements Justice already would be granted authority to review media mergers. But Hollings questioned authority of FTC to make change and said he would use budget request as leverage. By law, agencies are required to have any budget restructuring approved by Appropriations Committee under process called “reprogramming,” Hollings said, and he would use that vehicle to influence change. He said if budget cuts didn’t get FTC’s attention, pay cuts would. However, Muris said change wouldn’t require reprogramming by FTC. Hollings spokesman said Appropriations Committee could decide whether reprogramming had taken place and act accordingly, despite agency’s representation to committee.

Muris said FTC was requesting $176.5 million, up $20.5 million from last year. He highlighted agency initiatives, including its focus on privacy issues, Internet fraud cases and media violence.

Hollings also criticized FTC and DoJ for involving former DoJ attorney, who now represented industry interests, in behind-scenes drafting of agreement. Hollings said Joseph Sims, now with Jones, Day, Reavis & Pogue in Washington, shouldn’t have been involved in drafting agreement because of his involvement with AOL-Time Warner merger. (Three other former FTC and DoJ attorneys worked with Sims on draft of agreement.) Hollings cited news articles in which Sims publicly criticized conditions FTC required in that merger. Hollings said Sims’s involvement in drafting was “outrageous” and “totally improper.” Muris said Sims might have had some “sour grapes” over AOL-TW review, but said it would be in Sims’s best interest to steer reviews to FTC because they generally took longer than Justice reviews. Senate Commerce Committee, of which Hollings is chmn., is reviewing merger agreement, including behind-scenes communications. Sims told us he didn’t understand Hollings’ point: “I haven’t understood it since first time he made it. I was one of a group of people who were asked to help solve a good government problem. We made some recommendations that helped lead to a program that will help make government better.”

Hollings emphasized importance of FTC’s involvement in media merger reviews, particularly for issues that fell outside of DoJ’s jurisdiction. He said that while Justice would evaluate mergers under narrow definition of criminal antitrust conditions, FTC could view broader issues, such as unfair competitive behavior, that weren’t in violation of antitrust laws. Muris thanked Hollings for his confidence in FTC but said current law allowed only one agency to conduct merger review. Because of their concurrent jurisdiction, FTC and DoJ negotiate to determine which agency is better suited to handle case. Muris cited 1993 agreement between agencies that set forth rules to steer those negotiations. In negotiating “clearance,” agencies rely on number of significant cases each has handled in last 5 years, Muris said. Under those criteria, DoJ has reviewed 6 major cases (including AT&T-Media One, AT&T-TCI, Primestar-DirecTV and current EchoStar-DirecTV), he said, while FTC has reviewed none. FTC did review AOL-TW merger, but only after it struck deal with DoJ that it wouldn’t count in merger negotiations. Muris also highlighted Justice’s experience with common carriers, specifically citing AT&T breakup.

Hollings challenged Muris’s statement that current law prevented FTC from reviewing media mergers because DoJ had more experience in that area. “We can change the law, but we can’t abandon the FTC’s authority in this area,” Hollings said. Sen. Reed (D-R.I.) also expressed concerns about agreement and questioned Muris on discounting FTC’s experience in merger reviews. “The fact that you don’t count AOL-TW is irrelevant,” Reed said. “It’s one of the largest media mergers ever. The FTC is not without experience. And if you don’t have the experience, you could get it.”

Hearing included tense exchanges between Hollings and Muris. When Hollings cited his 35 years of experience in Congress monitoring FTC, Muris said he had 28 years of experience in FTC and had “watched the deterioration of the clearance process.” Hollings responded that in his 35 years, he never had heard clearance process concerns raised until now, “and I'm on the authorizing committee.” He also chastised Muris for involving outside attorneys in developing agreement, but not consumer protection groups or Congress. At hearing’s conclusion, Muris approached Hollings, who continued to express his doubts about merger agreement and manner in which it was negotiated.