FCC Officials Meet with Bar about Antitrust Merger Reviews

(January 24, 2000) The FCC's Christopher Wright and James Bird met with lawyers specializing in antitrust and telecommunications law on Friday, January 21, to discuss the FCC's handling of merger reviews involving telecom and Internet companies.

The meeting took place at the law offices of Howrey and Simon, and was attended by about 70 people, most of whom are attorneys with law firms with Washington DC offices, or telecommunications or Internet companies. General Counsel Christopher Wright and Senior Counsel James Bird represented the Office of General Counsel at the Federal Communications Commission at the event. A majority of the time was devoted to comments and questions from the audience. (See, agenda at bottom of page.)

The FCC has no rules which guide its conduct of merger reviews. The FCC released a statement on January 12 that James Bird would prepare "internal procedures." This meeting served as a hearing for the attorneys who represent the telecommunications and Internet companies which are affected by the FCC's antitrust merger reviews.

The event was arranged by the Federal Communications Bar Association Ad Hoc Committee on Telecommunications Competition Issues and the American Bar Association Antitrust Section. The organizers and moderators were James Olson of Howrey and Simon and Karen Brinkman of Latham & Watkins.

One class of comment was that the FCC has no standards which it follows in its merger reviews. "There ought to be some thresholds that ought to be published," said Lawrence Sarjeant, VP and General Counsel for Legal and Regulatory Affairs of the United States Telephone Association. Companies need "some sense of what the agency is looking for." Sarjeant manages Congressional and FCC relations for the USTA, a group which represents the interests of the RBOCs and other companies.

An Air Touch representative said that the FCC should also "clarify those areas in which they are not interested in receiving comment."

Richard Zaragoza, a partner in the law firm of Fisher Wayland Cooper Leader & Zaragoza, put it bluntly. "I am still trying to learn what your mission is. What is your mandate?"

FCC General Counsel Christopher Wright offered this: "Any transaction which involves transfer of a license."

Doug Jarrett, of the law firm of Keller and Heckman, raised the subject of "non jurisdictional" matters in license transfer proceedings. He asked: "are you going to consider the jurisdictional business only?"

Jarrett continued that this is an issue "when the merger is a multi media company." He added that the "Internet, I would say, is non jurisdictional." He received no answer or guidance from the FCC lawyers.

Several people commented on the Department of Justice's antitrust merger review process.

David Saylor, a partner in the law firm of Hogan & Hartson, said that however the FCC describes its merger review process, the issues which it examines "are still fundamentally competition issues." This duplicates the competition analysis of the Department of Justice, and causes delay. The FCC, says Saylor, does not need to look into the Hart Scott record.

Saylor also said that "the Commission simply has to bite the bullet," and defer to other agencies. No one from the FCC expressed agreement.

David Frolio of Bell South commented that there is a rumor that the FCC does not begin to seriously consider applications until after the Department of Justice completes its process.

Christopher Wright responded, but said nothing to dispel the rumor. He made the point that because of Department of Justice actions, "the facts change in mid course." He cited the example of the DoJ's requirement of Internet backbone asset divestment in the MCI WorldCom merger review.

"There are some things where the Commission really ought to wait and see what the Department of Justice does," Wright concluded.

Several people also commented on the FCC's goal of completing merger reviews in 180 days. An AOL representative commented on determining when the time period would begin.

An attorney from Leventhal, Senter & Lerman suggested that the 180 day time period should apply across the board to all applications. Otherwise, "you are incentivizing big deals." Christopher Wright commented in response that "most of the less complicated transactions are being done in a timely fashion."

One commenter suggested that the FCC "take it upon itself to recommend to Congress to rationalize the review process." Christopher Wright responded: "As you may know, that is controversial within the Commission."

FCC Commissioner Harold Furchtgott-Roth has stated the FCC is improperly using its very limited authority to approve license transfers as though it were a grant of authority to conduct antitrust merger reviews. Some members of Congress, particularly on the House Commerce Committee, share this view, and would prefer to stop the FCC from conducting antitrust merger reviews.

There were also many questions and comments about communications between the FCC and the bar, including ex parte communications, publication of ex parte communications, en banc hearings, and opinion writing.

Richard Zaragoza said that it is a problem that the FCC issues grants without any explanation. Later nobody remembers why. "Issue an opinion on all grants that have been flagged." Zaragoza said that attorneys just need "the factual  predicate."

On the other hand, Gregory Vogt of the law firm of Wiley Rein & Fielding said that many FCC opinions are too long, and contain too much explanation. He joked that there is a rumor that "the bureaus are in competition to see who can write an opinion with the most footnotes." He added that "eighty pages might do."

Vogt also conceded that he might have started the rumor when he worked at the FCC.

The meeting was friendly. Many of the private practitioners who attended are former FCC attorneys. Conversely, most of the top officials at the FCC come from law firms where they had handled telecommunications matters.

Moreover, while the FCC's entrance into the antitrust merger review process may be detrimental to the clients of many of the practitioners in the room, it is good for the business of their law firms.