FCC Merger Review Practices Highly Questionable

Aug 15, 2014 by AFP

By Kuper Jones

In an era driven by technology, we have seen investments by both private and public sectors to ensure that America continues to be a leader in technological advancements. In part, many of these investments consist of well-established technology leaders either buying or merging with other companies so they can offer consumers and society better products and services. Standard procedure requires federal agencies –the Federal Communications Commission (FCC) and the Department of Justice (DoJ)–to review mergers and acquisitions for potential antitrust law violations. The DoJ antitrust reviews are beyond sufficient, however, the FCC’s secondary review has the tendency to extort the merging companies by having them agree to additional terms.

Reviews by the DoJ are comprehensive and investigate any potential effects on competition, antitrust violations, and harm that could occur as a result of the merger. When the FCC conducts their “public interest” review, they rely on comments filed by the public during a commenting period. While the DoJ already reviews effects on competition, the FCC redundantly investigates the same issue. Indeed, the FCC review is required by law and is the expert government agency in telecom, however, they have historically conducted reviews full of errors and have abused their power by giving companies an ultimatum –agree to the FCC’s terms or the merger fails.

Over the past decade there have been a number of large telecom and tech mergers approved by DoJ and FCC. Many of these mergers, despite DoJ finding they were compliant with antitrust law, came with additional post-merger requirements for companies pending approval –questionably named “voluntary commitments”. The FCC uses their stature to force companies to abide by a policy agenda they may not otherwise follow. For example, in the NBC/Comcast case FCC required the participating parties to expand broadband deployment and to follow the FCC’s controversial Open Internet Order (also known as net neutrality). In reality, the parties pending approval know that if they do not agree to the “voluntary” terms laid out by the FCC the merger will not be approved.

Imposing such requirements is undoubtedly an overreach by the FCC and very concerning. In adding such stipulations to merger deals, the FCC puts mergers at stake in order to advance their agenda. While the FCC has the authority to review mergers, the “voluntary commitments” should not be a part of the review at all. Despite courts agreeing that the FCC cannot put “equalizing competition among competitors” before public interest, the trend has continued.

With some potential mergers looming today, it is important that the FCC’s review process be scrutinized. Major internet providers such as AT&T and Direct TV, as well as Comcast and Time Warner Cable have potential mergers on the horizon. The FCC’s historically questionable review methods could threaten the internet as a whole. Given current FCC Chairman Tom Wheeler’s agenda of pushing net neutrality and supporting government owned broadband networks, bad policies may become requirements for pending merger deals and would ultimately have a huge impact on the internet as a whole.