Statement in Congressional Record by Sen. John McCain (R-AZ). Re: Introduction of S 1125, the Telecommunications Merger Review Act. Date: May 26, 1999. Source: Congressional Record,  May 26, 1999, Pages S6050-1. Hypertext links were added by Tech Law Journal.

TELECOMMUNICATIONS MERGER REVIEW ACT OF 1999

Mr. McCAIN. Mr. President, I rise this morning to introduce The Telecommunications Merger Review Act of 1999, which will make the government's review of telecommunications industry mergers more coherent and effective.

It seems like hardly a week goes by without the announcement of yet another precedent-setting merger in the telecommunications industry. Consumers are right to be concerned about the possible effects of these mergers, and the Congress is right to be concerned that government review of these mergers is careful and consistent in keeping consumer interests uppermost.

The urgent need for competence and clarity in reviewing telecom industry mergers highlights a glaring problem in the current system. That problem, Mr. President, arises from the fact that different agencies sequentially go over the same issues, and, after considerable delay, can make radically different decisions on the same sets of facts.

Two of these agencies, the Department of Justice and the Federal Trade Commission, have extensive expertise in analyzing the competition-related issues that are involved in mergers, and they approach the merger review process with a great deal of professionalism and efficiency. The third agency, the Federal Communications Commission, has comparatively little expertise in these issues, and only limited authority under the law.

Nevertheless, the FCC has bootstrapped itself into the unintended role of official federal dealbreaker. How? By using its authority to impose conditions on the FCC licenses that are being transferred as part and parcel of the overall merger deal. Because the FCC must pre-approve all license transfers, its ability to pass on the underlying licenses gives it a chokehold on the parties to the merger. And it uses that chokehold to prolong the process and extract concessions from the merging parties that oftentimes have very little, if anything, to do with the merger itself.

Mr. President, many people might ask, what's so bad about that? Won't the FCC's conditions make sure that consumer interests are served? The short answer is, the FCC is simply duplicating the review and that the Department of Justice performs with much more competence and efficiency. About the best you can say is that the FCC is wasting valuable resources that could more productively be spent elsewhere. But the real harm lies in the fact that the FCC is foisting needless burdens and restrictions on the merging companies that translate into higher costs for consumers.

The FCC tries to defend its efforts by arguing that its job is really different from DOJ's--that DOJ makes sure that a merger won't harm competition, while the FCC makes sure that the same merger will help competition. In other words, according to the FCC, DOJ looks at a merger's effect on business; the FCC looks at its effect on people. For example, last week FCC Chairman Kennard gave a speech in which he proclaimed that, despite the strain these merger reviews were imposing on the agency, `We will not rest until on each transaction we can articulate to the American public what are the benefits of this merger to average American consumers, because I believe that's what the public-interest review requires.'

If that's true, I have good news for Chairman Kennard--he can take a rest, because DOJ is doing exactly the same thing. In a separate speech last week Assistant Attorney General Joel Klein, DOJ's chief merger review official, said that what most people do not understand (including, evidently, the FCC), is that `everything we do in antitrust . . . is consumer driven.' He then went on to say precisely what that means:

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We are a unique federal agency. Our interest is to protect what the economists call consumer welfare. And there is one simple truth that animates everything we do, and that is competition--the more people chasing after the consumer, to serve him or her better, to get lower prices, to get new innovations, to create new opportunities--the more of that juice that goes through the system, the better.

To be accurate, there is one big difference between the way the FCC and the DOJ do merger reviews: DOJ is infinitely better at it. Two weeks ago the FCC's already-faltering merger review process hit rock-bottom when a staff member (an ostensible antitrust expert) heading up the FCC's review of the SBC-Ameritech merger (which DOJ has already approved) publicly proclaimed that, unless the FCC imposed major conditions, the proposed transaction `flunks the public interest test.' An `unnamed agency spokeswoman' then cheerfully agreed that a majority of the Commissioners shared the same view.

Can you imagine either the FTC or DOJ countenancing such happenings during the course of their merger review processes? I think not. This appallingly unprofessional behavior by the FCC staff drove the value of SBC and Ameritech stock down over $2 billion, and it confirmed that, if this is what passes for FCC merger review `expertise,' the FCC has no business being in it.

Mr. President, this bill will restore integrity and professionalism to federal review of telecommunications industry mergers. It does not touch either DOJ's or FTC's broad authority to review all mergers, including all telecommunications industry mergers. It would make sure that any FCC concerns are heard by incorporating the FCC into DOJ and FTC merger review proceedings. Nor does it touch the FCC's broad authority to adopt and enforce rules to govern the behavior of telecommunications companies. What it does do is tell the FCC that, in cases where either DOJ or FTC has reviewed a proposed telecommunications merger and stated in writing no intent to intervene, the FCC must follow the determination of these expert agencies and transfer any FCC licenses without further delay.

Under this bill the FCC may independently review proposed mergers when neither DOJ nor FTC states in writing its intent not to intervene. Nevertheless, because DOJ and FTC review all mergers and have authority to intervene in any merger, their nonintervention in any proposed merger appropriately signifies that they find the transaction at issue is unobjectionable. Therefore, any FCC review in such cases is subject to a strict 60-day deadline, and the FCC is directed to presume approval without attaching further conditions or obligations on any of the parties. Nothing (except extreme unlikelihood) would preclude the FCC from rebutting the presumption with hard facts, nor would the FCC be precluded from subsequently exercising its existing enforcement and rulemaking prerogatives to deal with any unanticipated problems.

Mr. President, we can streamline the way the federal government reviews telecom industry mergers and still safeguard the public interest. That's what this bill is intended to do by eliminating bureaucratic mismanagement while preserving essential federal review and enforcement prerogatives. I urge my colleagues to give it careful consideration and support.

This bill, the Telecom Merger Review Act of 1999, would do nothing to change the authority that the Department of Justice and the Federal Trade Commission currently have to review all telecom industry mergers.

Mr. President: I ask unanimous consent that the text of the bill be printed in the Record.