Optimizing dual agency review of telecommunications mergers

Yale Law Journal

Volumn 118, Issue 7, 2009, Pages 1571-1583

  Rinner, William J ^a  

^a NONE

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EID: 70349238782     PISSN: 00440094     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Note

References (76)

1. See Applications for Consent to the Transfer of Control of Licenses, XM Satellite Radio Holdings Inc., Transferor, to Sirius Satellite Radio Inc., Transferee, Memorandum Opinion and Order (Aug. 5, 2008), http://hraunfoss.fcc. gov/edocs-public/attachmatch/FCC-08-178A1.pdf [hereinafter XM-Sirius Order] ;
2. Satellite Radio Firms' Merger Wins Approval From FCC, WALL ST. J., July 26, 2008, at B5.
3. The public interest inquiry includes, among other factors, the impact of any merger on competition under a markedly different standard than the Horizontal Merger Guidelines. The inquiry involves a holistic consideration of whether any benefits outweigh the (presumed) anticompetitive harm of consolidation.
4. See infra text accompanying note 19.
5. See, e.g., James R. Weiss & Martin L. Stern, Serving Two Masters: The Dual Jurisdiction of the FCC and the Justice Department over Telecommunications Transactions, 6 COMMLAW CONSPECTUS 195, 206 (1998) ("The unique characteristics of the telecommunications industry require a specialized agency to regulate competition.").
6. Id. at 205-06 (discussing the most common criticisms of dual agency review of telecommunications mergers).
7. 122 CONG. REC. 30, 877 (1976) (statement of Rep. Rodino) (noting that "the prospect of protracted delays of many months" prompted Congress to remove an "automatic stay" provision from the bill).
8. Though the Federal Trade Commission (FTC) and DOJ possess concurrent authority to review mergers under the Horizontal Guidelines generally, the FTC's authority does not extend to telecommunications-it cannot review mergers of common carriers under the Clayton At. 15 U.S.C. S 21(a) (2000).
9. Id. § 18.
10. Hart-Scott-Rodino Antitrust Improvements Act of 1976, Pub. L. No.94-435, 90 Stat. 1383 (codified at is U.S.C. § 18a).
11. 15 U.S.C. § 18a(a)(1).
12. See Kathryn J. Sedo, Cooperative Mergers and Consolidations: A Consideration of the Legal and Tax Issues, 63 N.D. L. REV. 377, 390 n.68 (1987).
13. 15 U.S.C. § 18a(b)(1)(B).
14. Id. § 18a(a), (b)(2).
15. Id. § 18a(e)(1)(B)(1)(II).
16. Id. § 18a(e) ; see Matthew S. Bailey, Note, The Hart-Scott-Rodino Act: Needing a Second Opinion About Second Requests, 67 OHIO ST. L.J. 433, 443 (2006). In practice, DOJ or FTC review often extends beyond the initial thirty-day period, but the effect of agency failure to seek further extensions remains: once the waiting period expires, the parties may consummate the proposed merger. 15 U.S.C. § 18a(a).
17. If, during the review period, the DOJ concludes that the merger will tend to "substantially lessen competition," it may file suit to enjoin the merger. Id. §§ 18, i8a(f). Merging parties typically will reach settlement through a consent decree with the Department rather than risk their transaction being permanently enjoined. See Bailey, supra, at 443.
18. 15 U.S.C. § 18; United States v. Citizens & S. Nat'l Bank, 422 U.S. 86, 120 (1975). Importandy, the DOJ or FTC may still challenge a merger after the termination of this waiting period, though the HSR Act's preclearance mechanism largely obviated the need for post-merger review.
19. See Scott A. Sher, Closed but Not Forgotten: Government Review of Consummated Mergers Under Section 7 of the Clayton Act, 45 SANTA CLARA L. REV. 41 (2004).
20. Announcement, Deborah Platt Majoras, Reforms to the Merger Review Process i (Feb. 16, 2006), http://www.ftc.gov/os/2006/02/mergerreviewprocess.pdf ("Each year, more than 95% of all HSR-reported transactions are 'cleared' during the initial 30-day waiting period, as the [DOJ or FTC] determines that the transaction is unlikely to lessen competition substantially.").
21. See 47 U.S.C. §§ 214, 310. The FCC also has authority, under sections 7 and 11 of the Clayton Act, to reject mergers of "common carriers engaged in wire or radio communication" under the same standard as the DOJ. 15 U.S.C. §§18, 21(a).
22. Due to the more restrictive scope of inquiry, the FCC chooses not to exercise its merger review authority under the Clayton Act. See infra text accompanying note 46.
23. 47 U.S.C. § 310(d).
24. Applications of Ameritech Corp., Transferor, and SBC Communications, Transferee, 14 F.C.C.R. 14, 712, 14, 737-738 (1999) (emphasis added) [hereinafter Ameritech-SBC Order].
25. See Weiss & Stern, supra note 3, at 197 n.23 ("Section 308 of the Communications Act... requires the Commission to consider the same factors in reviewing a license transfer as in granting a license in the first place.").
26. See, e.g., Ameritech-SBC Order, supra note 19, at 14, 733.
27. Id.
28. See Federal Communications Commission, Informal Timeline for Consideration of Applications for Transfers or Asignments of Licenses or Authorizations Relating to Complex Mergers, http://www.fcc.gov/transaction/ timeline.html (last visited Apr. 24, 2009).
29. See Rachel E. Barkow & Peter W. Huber, A Tale of Two Agencies: A Comparative Analysis of FCC and DOJ Review of Telecommunications Mergers, 2000 U. CHI. LEGAL F. 29, 31-32 ("The average merger takes two to four months to conclude. Telecommunications mergers, however, take between nine and twelve months to conclude.").
30. Id. at 33.
31. Id. at 64.
32. Id. at 78 (noting that the Commission's merger conditions are often "broad[] statements of agency policy that evade judicial review").
33. Id. at 44-45 (internal quotation marks omitted).
34. See XM-Sirius Order, supra note 1, at 32.
35. United States v. FCC, 652 F.2d 72, 82 (D.C. Cir. 1980) (internal quotation marks omitted) (quoting N. Natural Gas Co. v. Fed. Power Comm'n, 399 F.2d 953, 961 (D.C. Cir. 1968)).
36. Lawrence M. Frankel, The Flawed Institutional Design of U.S. Merger Review: Stacking the Deck Against Enforcement, 2008 UTAH L. REV. 159, 201 n.142 ("[T] he 'public interest' evaluation tends to be more amorphous and wide-ranging than Section 7 [of the Clayton At].").
37. Id. at 201; see XM-Sirius Order, supra note 1, at 19 ("[O]ur public interest authority enables us to rely upon our extensive regulatory and enforcement experience to impose and enforce conditions to ensure that a transaction will yield overall public interest benefits.").
38. The 1996 At sought to "promote competition and reduce regulation... and encourage the rapid deployment of new telecommunications technologies." Telecommunications At of 1996, Pub. L. No. 104-104, pmbl., 110 Stat. 56 (codified as amended in scattered sections of 47 U.S.C).
39. See 15 U.S.C. § 18a(a), (b)(2) (2000); 16 C.F.R. § 803.10 (2009).
40. 15 U.S.C. § 18a(e)(B)(i)(iii) (requiring internal review by the FTC and the Assistant Attorney General "to eliminate unnecessary burden, remove costly duplication, and eliminate undue delay, in order to achieve a more effective and more efficient merger review process").
41. Telecommunications Act S 601(b)(3), 110 Stat, at 143.
42. See, e.g., Lili Levi, Reflections on the FCCs Recent Approach to Structural Regulation of the Electronic Mass Media, 52 FED. COMM. L.J. 581 (2000). This Comment only briefly addresses these extensive public interest benefits. I suggest that the FCC can fcetter protect these interests if it structures its merger review to avoid duplication of existing DOJ review.
43. The HSR Act inquires into whether the merged entity would be able to sustain a "small but significant and nontransitory" increase in price over a short timespan. U.S. DEP'T OF JUSTICE & FED. TRADE COMM'N, HORIZONTAL MERGER GUIDELINES § 1.11 at 6 (1997 rev. ed.) [hereinafter GUIDELINES].
44. This one-size-fits-all analysis is arguably insufficient for the FCC's task of taking a "more expansive view of potential and future competition and its impact on the relevant market." XM-Sirius Order, supra note 1, at 19.
45. Under the Horizontal Merger Guidelines, agencies first utilize the Herfindahl-Hirschman Index to calculate the impact of merger on the relevant product and geographic markets to determine market concentration before and after the proposed merger. GUIDELINES, supra note 38, at 15.
46. Barkow & Huber, supra note 24, at 54 ("Although DOJ gave the Bell Atlantic/NYNEX and SBC/Ameritech mergers the green light with few or no strings attached, the Commission required the companies to commit to a multitude of conditions.").
47. Id. at 41.
48. See Donald J. Russell & Sherri Lynn Wolson, Dual Antitrust Review of Telecommunications Mergers by the Department of Justice and the Federal Communications Commbsion, 11 GEO. MASON L. REV. 143, 151 (2002) ("[T] he FCCs practice of deferring final action until the antitrust review has been completed has the practical effect of insulating DOJ from the constraints imposed by the HSR Act.").
49. Investing excess cash flows in a merger or acquisition, by definition, limits other opportunities either company might pursue in order to build share value. These opportunity costs are likely to be sizable as companies seeking to merge must "defer investments or important strategic decisions,"
50. Russell & Wolson, supra note 42, at 151, which might place them at a competitive disadvantage in an "industr[y] undergoing rapid economic and technological change," Turner Broad. Sys., Inc. v. FCC, 520 U.S. 180, 196 (1997).
51. 44. See United States v. FCC, 652 F.2d 72 (D.C. Cir. 1980).
52. See, e.g., Telecommunications Merger Review At of 2000, H.R. 4019, 106th Cong. (2000).
53. Applications of AirTouch Communications, Inc. Transferor, and Vodafone Group, PLC. Transferee, for Consent to Transfer of Control of Licenses and Authorizations, Memorandum Opinion and Order, 14 F.C.C.R. 9430, 9434 n.21 (1999).
54. 47 U.S.C. §§ 214(a), 310(d) (2000).
55. Section 310(d) of the Communications At provides that license transfers are governed by the standard applicable to granting new licenses. 47 U.S.C. S 310(d). The relevant section provides no time limit on the FCCs review period. Id. § 308.
56. See 15 U.S.C. § 18a.
57. See, e.g., Barkow & Huber, supra note 24, at 69 ("The option of 'voluntary conditions' is especially likely to shield the agencies [sic] policies from judicial review. That is, the imposition of policies via conditions on a particular merger is unlikely to get to the judicial review stage because the parties themselves are frequendy in no position to challenge the Commission's order.").
58. Russell & Wolson, supra note 42, at 154.
59. See 5 U.S.C. § 706(2)(A).
60. Cf. SBC Commc'ns Inc. v. FCC, 56 F.3d 1484, 1496-1497 (D.C. Cir. 1995) (upholding the FCCs "procedural discretion in implementing the Communications At" and resisting the appellants' challenge to merger review procedures as requiring an "unwarranted intrusion into the agency's ability to conduct its own business").
61. Cf. Verizon Tel. Cos. v. FCC, 269 F.3d 1098, 1103 (D.C. Cir. 2001) ("A a general proposition, an FCC order is final if it (1) represents a terminal, complete resolution of the case before the agency, and (2) determines rights or obligations, or has some legal consequence." (internal quotation marks omitted)).
62. FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 143 (2000) (second and third alterations in original) (quoting United States v. Estate of Romani, 523 U.S. 517, 530-531 (1998)).
63. Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 445 (1987) (quoting Radzanower v. Touche Ross & Co., 426 U.S. 148, 153 (1976)).
64. 435 U.S. 519 (1978).
65. See, e.g., Am. Radio Relay League, Inc. v. FCC, 524 F.3d 227, 239 (D.C. Cir. 2008).
66. The D.C. Circuit in SBC Communications Inc. v. FCC upheld the FCCs procedural discretion in reviewing mergers. 56 F.3d 1484, 1496 (D.C. Cir. 1995) (citing Vermont Yankee, 435 U.S. at 549). The appellants' challenge, however, focused on the FCCs method of review, not its duration. The judicial solution this Comment advocates would leave the FCCs discretion over mode of procedure intact, but would impose a limit that preserves the HSR Act's statutory deadline.
67. See Jim Chen, The Echoes of Forgotten Footfalls: Telecommunications Mergers at the Dawn of the Digital Millenium, 43 Hous. L. REV. 1311, 1337 n.172 (2007) (recounting multiple legislative attempts to curb the FCCs merger review authority).
68. See, e.g., Bob Jones Univ. v. United States, 461 U.S. 574, 601 (1983) (finding that Congress's failure to act on proposed bills seeking to overturn an IRS ruling "provide [d] added support for concluding that Congress acquiesced" to the agency's interpretation).
69. See, e.g., Faragher v. City of Boca Raton, 524 U.S. 775, 804 n.4 (1998).
70. See, e.g., Watters v. Wachovia Bank, NA, 550 U.S. 1, 17 n.9 (2007);
71. see also William N. Eskridge, Jr. & Lauren E. Baer, The Continuum of Deference: Supreme Court Treatment of Agency Statutory Interpretations from Chevron to Hamdan, 96 GEO. L.J. 1083, 1188 (2008) ("[A] longstanding agency interpretation that regulated parties have internalized and that Congress has acquiesced in should rarely be overturned....").
72. The broad reach of the 1996 Telecommunications At overhauled a number of provisions of the original 1934 Communications At. Even defining "ratification" loosely, this subsequent statute only spoke to merger review by clarifying that the Clayton At, and thus the DOJ's review authority, applies to telecommunications mergers.
73. See supra note 36 and accompanying text. Arguing that this amendment ratified the FCCs procedure is tenuous, because this provision ensures that the DOJ's procedural framework accompanies its review.
74. See Applications of NYNEX Corp., Transferor, and Bell Atlantic Corp., Transferee, for Consent To Transfer Control of NYNEX Corp. and Its Subsidiaries, Memorandum Opinion and Order, 12 F.C.C.R. 19,985, 19,987 (1997).
75. See supra text accompanying notes 33-36.
76. 47 U.S.C. § 257(b) (2000) (affirming the FCCs national policy of encouraging "vigorous economic competition, technological enhancement, and promotion of the public interest, convenience, and necessity").