Senate Antitrust Subcommittee Discusses Media Mergers

(March 23, 2000) The Senate Antitrust Subcommittee held a hearing on antitrust issues handled by the FTC and Justice Department. Senators expressed concern about consolidation of media companies. FTC Chairman Pitofsky responded that he is not sure that there is more concentration now, due to technological developments such as the Internet.

The Senate Judiciary Committee's Subcommittee on Antitrust, Business Rights, and Competition held an oversight hearing on Wednesday, March 22, on a wide variety of antitrust issues.

Joel Klein, Assistant Attorney General for the Antitrust Division, and Robert Pitofsky, Chairman of the Federal Trade Commission, testified. No one from the Federal Communications Commission testified.

Sen. Mike DeWine (R-OH), Chairman of the Antitrust Subcommittee, presided. The other members of the subcommittee who participated included Herb Kohl (D-WI), Patrick Leahy (D-VT), and Charles Grassley (R-IA).

"This is an unusually interesting time to be engaged in antitrust enforcement," Pitofsky said. He cited "rapid changes in the high tech sector of the economy".

"The challenge is to take this 19th Century discipline, that has served us so well, and apply it to the 21st Century economy."

Sen. Mike DeWine (R-OH)

Sen. DeWine and Sen. Kohl both raised the subject of consolidation of media companies. Sen. DeWine had this to say in his opening statement: "I think it is important to discuss one particular aspect of the merger wave -- the increasing consolidation in the entertainment, news and media industries. I have repeatedly expressed my concern that increased consolidation in these industries will decrease the number of information and entertainment providers, and may eventually erode competition in the so-called "marketplace of ideas." I know that this type of discussion is not part of the traditional antitrust analysis, but I believe that such mergers raise important public policy and competition issues, and I would like to discuss those issues today."

Sen. Kohl took up the matter during the question and answer session. "[T]hese media companies affect competition in the marketplace for ideas ..." He asked, "Are you worried, Mr. Chairman, that the levels of consolidation in the media are beginning to threaten these values by reducing the number major sources of information available to the American public?"

	Robert Pitofsky

"I am concerned about concentration in the media," said Pitofsky.

He did not address the current merger between AOL and Time Warner. However, he did stated that "we reviewed Time Warner Turner about four or five years ago, and we insisted upon an order in that case designed to preserve access of smaller companies ..."

Pitofsky continued: "There are some major mergers going on in this industry, but there are also innovations in the form of the Internet ..." and cable.

"Whether there is more concentration right now, or less concentration, I am not sure. I do look at each of these mergers," said Pitofsky, "with heightened concern."

Sen. Kohl then asked Joel Klein, "Are you concerned that we are in danger of a very few companies controlling the broadband delivery of the Internet?"

Klein responded that "We have got some investigations ongoing into those issues right now."

"It is very early in the process of broadband rollout," said Klein. He continued that he is encouraged by developments in deployment of multiple pipes into homes, capable of carrying multiple types of content.

Sen. DeWine's first set of questions for Pitofsky and Klein dealt with whether many of the recent mergers made economic sense. He cited a recent Washington Post article which stated that most mergers have not increased shareholder value.

Both Pitofsky and Klein stated that their concern competition. Klein stated that our "focus is on anti-competitive effect."

Pitofsky stated that "I do sometimes wonder about some of the deals that we see go by." He quoted Alan Greenspan's famous line regarding "irrational exuberance." But, he concluded, "I do not think that the government should be blocking mergers that are a bad idea."

Sen. Kohl attempted to question Joel Klein about the status of settlement talks, and possible remedies, in the Microsoft case. Klein declined to provide any specifics.

The Federal Communications Commission's role in antitrust merger reviews was not addressed in detail at the hearing. The FCC does not have a general antitrust merger review authority, but in recent years it has been acting as though it does have such authority in mergers involving telephone, cable and Internet companies.

Sen. Kohl (like Sen. DeWine) praised the work of the FTC and Antitrust Division. Sen. Kohl added: "Unfortunately, Senator DeWine and I do not have as much confidence in the FCC's ability to get the job done. So we intend to move our legislation to put strict time limits on the FCC's merger review process."

The subcommittee hearing also spent considerable time discussing agriculture, the airline industry, pharmaceuticals, ILEC entry into long distance, flat glass exports to Japan, and whether OPEC members are subject to U.S. antitrust enforcement.