TLJ News from September 21-25, 2013

Bill Baer Addresses Antitrust Remedies

9/25. Bill Baer, Assistant Attorney General in charge of the Department of Justice's (DOJ) Antitrust Division, gave a speech [13 pages in PDF] in Washington DC titled "Remedies Matter: The Importance of Achieving Effective Antitrust Outcomes".

It was his first public speech since taking office on January 3, 2013. However, he testified at a Senate Judiciary Committee (SJC) hearing on April 16, 2013. See, prepared testimony [10 pages in PDF] and SJC web page for that hearing. Before that, he testified at his confirmation hearing before the SJC on July 26, 2012. See, SJC web page for that hearing.

Bill BaerBaer (at right) began with this statement. "Antitrust's touchstone should be the preservation or restoration of competition in the affected market. Nothing less."

Notably, he did not state "Nothing more".

He said that the DOJ will seek appointment of independent corporate monitors in both civil and criminal cases.

He discussed several cases related to information and communications technology, including the DOJ's Clayton Act merger block against case AT&T and T-Mobile USA, its Sherman Act e-book price fixing case against Apple and book publishers, and its Sherman Act criminal price fixing cases against LCD makers and executives.

See, full story.

FCC Grants Bloomberg Channel Placement Relief

9/25. The Federal Communications Commission (FCC) adopted a Memorandum Opinion and Order (MOO) [25 pages in PDF] in Bloomberg v. Comcast granting channel placement relief sought by Bloomberg. Comcast must place Bloomberg Television in a cluster of news channels, or neighborhood.

FCC Chairman Mignon Clyburn wrote in her statement [PDF] that neighborhooding is "the practice of grouping similarly themed TV channels together, such as sports, children’s programming, or news."

Mignon ClyburnClyburn (at left) offered this explanation of the problem that the FCC is trying to redress with this MOO. "Comcast overwhelmingly includes affiliated programming in neighborhoods of four news channels in five adjacent channel positions. CNBC is included in a news neighborhood in 99 percent of lineups that have news neighborhoods. For MSNBC, it's 98 percent. This is for good reason: the record also reflects that consumers tend to ``flip´´ between channels, particularly during breaking news events. Consumers' tendency to ``flip´´ also explains why a grouping of four news channels in five adjacent channel positions is so significant. Once a viewer finds a channel grouping like that, she is unlikely to hunt around the dial for other news channels. So, to sum up, if you are a news channel, you'd better be located in the ``news neighborhood,´´ or viewers are going to be significantly less likely to find you. And Comcast now has an incentive to keep its competitors, like Bloomberg Television, out of those news neighborhoods to deter viewers from flipping to them." (Footnotes omitted.)

She wrote that this MOO ensures "that Comcast treats Bloomberg Television comparably to its affiliated news channels", and "protects independent news channels from anticompetitive harms".

See also, Bloomberg story by Todd Shields titled "FCC Tells Comcast to Put Bloomberg TV Among News Channels".

The FCC adopted this MOO on September 25, 2013, and released it on September 26. It is FCC 13-124 in MB Docket No. 11-104.

Procedural History. Bloomberg filed a complaint with the FCC on June 13, 2011 against Comcast alleging violation of the FCC's January 20, 2011 Memorandum Opinion & Order (MOO) [279 pages in PDF] that approved, subject to conditions, the Comcast NBCU transaction. That MOO was FCC 11-4 in MB Docket No. 10-56.

The FCC often regulates by imposing mandates upon merging companies as a condition for merger approval. Such merger specific rules apply only to the parties to the transaction.

In the January 2011 MOO, in Appendix A, at page 121, the FCC ordered this: "If Comcast now or in the future carries news and/or business news channels in a neighborhood, defined as placing a significant number or percentage of news and/or business news channels substantially adjacent to one another in a system's channel lineup, Comcast must carry all independent news and business news channels in that neighborhood."

That 2011 MOO also defined "independent news channel" as "a video programming network that is (i) unaffiliated with Comcast-NBCU or any of its affiliates or subsidiaries, (ii) unaffiliated with one of the top 15 programming networks, as measured by annual revenues, and (iii) whose programming is focused on public affairs, business, or local news reporting and analysis during the hours from 6:00 a.m. through 4:00 p.m. in the U.S. Eastern Time Zone." (Footnote omitted.)

The just released MOO enforces this language, which is often referred to as the "neighborhooding condition".

Bloomberg wrote in its complaint that "Despite a clear requirement in the FCC Order that Comcast include independent news channels, such as Bloomberg Television (``BTV´´), in Comcast's existing news neighborhoods, Comcast refuses to implement the Commission's express direction."

Bloomberg continued that it "has asked Comcast to place BTV in Comcast's existing news neighborhoods on all Comcast systems in the 35 most populous DMAs. Comcast, however, has refused, claiming that it does not currently have any news neighborhoods and, in any event, that the Commission's news neighborhooding condition applies only to neighborhoods that will be created in the future. Neither of these assertions has any merit."

Comcast filed an answer [206 pages in PDF] with the FCC on July 27, 2011. It wrote that Bloomberg is attempting to "extract preferential channel placement on Comcast's cable systems through regulatory gamesmanship", that it has not violated the January 2011 MOO, and that the complaint should be denied.

On May 2, 2012, the FCC's Media Bureau (MB) issued a MOO [14 pages in PDF]. It states "(i) that the condition applies to the channel lineups existing on Comcast's systems at the time the Comcast-NBCU Order was adopted as well as future channel lineups; (ii) that four news or business news channels within any five adjacent channel positions qualifies as a ``significant number or percentage of news and/or business news channels´´ and therefore constitutes a neighborhood for purposes of the news neighborhooding condition; (iii) that the term ``news channel´´ refers to a channel carrying general interest news programming; and (iv) that, if a Comcast system has more than one news neighborhood, the condition obligates Comcast to carry independent news and business news channels in at least one such neighborhood, but not in all news neighborhoods, in a particular neighborhood, or in one consolidated news neighborhood."

Both Bloomberg and Comcast sought review of that 2012 MOO by the full Commission. That MB MOO, which is sometimes referred to as the "News Neighborhood Order", is DA 12-694 in MB Docket No. 11-104.

On August 14, 2012 the MB issued another MOO [7 pages in PDF] which is sometimes referred to as the "Clarification Order". It is DA 12-1338 in MB Docket No. 11-104.

FCC's Final Order. The just released MOO largely follows the determinations of the MB.

It states that "four news or business news channels within any five adjacent channel positions qualifies as a news neighborhood, regardless of whether the channel grouping existed before or was created after the" January 2011 MOO.

It also rejects Comcast's First Amendment arguments. It states that FCC enforcement of the neighborhooding condition is "fully consistent with constitutional requirements".

It cites a seventeen year old court opinion (written before cable companies faced the array of competition that they do now) for the proposition that "intermediate scrutiny test" applies in this case. That is, enforcement of the condition is permissible under the First Amendment "if the government's interest is important or substantial and the means chosen to promote that interest do not burden substantially more speech than necessary to achieve the aim". See, Time Warner Entertainment v. FCC, 93 F.3d 957.

The MOO applies this test to reach the conclusion that restriction of Comcast's free speech interests is outweighed by the FCC's interests in "promoting diversity, competition, and independence in the news programming marketplace".

This MOO also rejects "Bloomberg's argument that, if Comcast’s channel lineup has more than one news neighborhood, the condition obligates Comcast to carry independent news and business news channels in all of those neighborhoods".

The MOO also states that "we affirm the Bureau's determination that its initial Order dealt with the issue of carriage of the standard definition (“SD”) version of Bloomberg Television in SD neighborhoods and we clarify that the condition generally applies separately to SD and high definition (“HD”) networks; that is, if Comcast carries both an SD and HD version of an independent news network, each is treated as a different channel and is independently entitled to carriage in an SD or HD news neighborhood respectively, where an SD or HD news neighborhood exists."

Since this MOO is based upon enforcement of a MOO that affects only Comcast, other multichannel video programming distributors (MVPDs) are unaffected. However, this MOO will serve as precedent for other complaints filed with the FCC that allege violation by Comcast of this neighborhooding condition.

Commission Pai's Partial Dissent. FCC Commissioner Ajit Pai dissented from one part of the MOO. He wrote in his statement [PDF] that he disagrees with "the determination that any ``four news or business news channels within any five adjacent channel positions´´ constitute a news neighborhood. In my view, this interpretation expands the condition beyond its terms, to the detriment of Comcast, cable programmers, and ultimately consumers. It would not do much for the supposed beneficiary (Bloomberg). And it would simply underscore that the Commission's authority to enforce the condition is questionable at best." (Footnote omitted. Parentheses in original.)

Ajit PaiPai (at right) also commented that while Bloomberg "is now guaranteed placement in a four-channel neighborhood on every Comcast system", "the cure may be worse than the disease".

"Comcast may create news neighborhoods consisting entirely of independent news channels -- clustering Bloomberg next to CSPAN, C-SPAN2, and C-SPAN3 -- and still comply with the condition. As such, the news-neighborhood condition is unlikely to ``protect unaffiliated news channels´´ in any meaningful way", said Pai.

Commentary on Process. One can advance policy arguments that Comcast should be required to relocate Bloomberg Television, or that certain MVPDs should be subject to a neighborhooding regulatory regime. However, there is also the matter of how the government goes about establishing and enforcing such a legal regime. The gist of this commentary is that, whatever the policy merits of the just released order, the FCC has reached its conclusion after layer upon layer of disregard for basic processes that underlie government in the US.

The FCC is a creation of Congressional statute -- the Communications Act. The FCC has only those powers that are granted to it by this Act, and which do not violate the Constitution. First, the Congress has never enacted a channel neighborhooding law for the FCC to enforce. The FCC often promulgates rules without underlying statutory authority. But, it has not even written neighborhooding rules. Any such final rules would be subject to judicial review.

Instead, in this proceeding, the FCC relies upon a condition imposed by it in an antitrust merger review proceeding. Since just after enactment of the Telecommunications Act of 1996, the FCC has reviewed certain mergers of companies that hold FCC licenses as if it also held the Section 7 of the Clayton Act authority held by the Department of Justice (DOJ) and the Federal Trade Commission (FTC). But, it does not. Nor is there anything in the Clayton Act or Sherman Act about the FCC imposing and enforcing conditions against regulated entities.

The DOJ and FTC can and do block mergers. The FCC does not. For example, while the DOJ blocked the AT&T T-Mobile USA transaction in 2011 by filing a complaint in the U.S. District Court, the FCC issued no final order. The reason is that if the FCC were to issue a final order blocking a merger, for example, because the parties did not consent to a neighborhooding condition, that would be a final order subject to judicial review. In such a review, the FCC would risk a court ruling not only that it could not impose that condition, but that it impermissibly attempted to exercise antitrust merger review authority.

However, the FCC does possess statutory authority to review license transfers. For fifteen years it has leveraged this authority to exercise antitrust merger review authority. This provides it an opportunity for endless delay. Time is of the essence for merging companies, but not for the FCC, so the merging parties eventually agree to conditions. Since they have consented, they forego judicial review. Every such condition that the FCC has imposed has not only escaped judicial review, but has been imposed by regulators who know that their actions will not be subject to judicial review. It is the anticipation of possible judicial review that constrains many regulators to adhere to their statutory mandate and the Constitution.

Moreover, the FCC imposes conditions that often have nothing to do with the license transfers involved in the merger (such as in the case of cable channel neighborhooding in the Comcast NBCU transaction), and often have nothing to do with competition law principles.

Finally, there is the matter of the Constitution. Many Constitutional provisions, whether actually in the Constitution, or implied by the Courts, are subject to weighing and balancing. For example, only unreasonable searches and seizures are prohibited. In contrast, the First Amendment free speech clause is a complete and unequivocal ban on a range of government activity -- "no law".

Nevertheless, the FCC, Congress and Courts interpret the word "no" to mean except for manners of speech developed long after the drafting and ratification of the Constitution and Bill of Rights. The plain language of the First Amendment still applies in large part to publishers and printing presses, politicians and pamphleteering, and preachers and pulpits, which all existed when the First Amendment was written. For these long standing institutions, there is no neighborhooding requirement, or indeed, must carry or ownership limits (except for newspapers).

More News

9/25. The Federal Communications Commission (FCC) released a Public Notice (DA 13-1983) directed at broadcasters, cable operators, satellite television services, and other distributors of video programming. It states that such distributors must make accessible to persons with hearing or vision disabilities their emergency information. This notice does not purport to create, announce, or propose any new rules or rulings. Rather, it states that it reminds regulated entities of their pre-existing obligations under 47 C.F.R. § 79.2, which is titled "Accessibility of programming providing emergency information".

9/25. The Federal Communications Commission's (FCC) Wireline Competition Bureau (WCB) adopted and released an Order [8 pages in PDF] that grants the application of Verizon New Jersey Inc. and Verizon New York Inc. to discontinue three copper based special access services -- Metallic Service, Program Audio Service and Telegraph Grade Service -- in certain parts of New Jersey and New York, pursuant to 47 U.S.C. § 214. This order is DA 13-1971 in WC Docket No. 13-149.

Sen. Rockefeller Queries Consumer Facing Web Sites About Their Data Collection and Sharing Practices

9/24. Sen. John Rockefeller (D-WV) sent a letter to twelve companies that "operate websites that gather information directly from consumers". It propounds interrogatories regarding their collection, and sale or sharing, of "personally identifiable information", or PII.

He sent substantially identical letters to operators of information web sites, such as About.com, operators of financial web sites, such as Fool.com and Investopedia.com, and operators of health web sites, such as Health.com and Mensfitness.com. He asks for answers by October 11, 2013.

For example, he asks, "Does your company collect health, family, financial or other information from consumers" through your web site?

He also asks, if so, "does your company share with third parties the personally identifiable information and health, family, financial or other information which your company obtains from or about consumers through its website?"

Also, "Does your company allow or enable third parties to directly collect personally identifiable information from or about consumers" through your web site?

And, if so, Sen. Rockefeller asks for a list of such third parties, and information about how they collect this PII, as well as whether there are any "prohibitions or limitations".

Sen. Rockefeller sent a letter with interrogatories to companies that act as PII data brokers on October 9, 2012. He sent that letter to Acxiom, Experian, Equifax, Transunion, Epsilon, Reed Elsevier (Lexis-Nexis), Datalogix, Rapleaf and Spokeo.

He wrote in the just sent letter that the SCC learned that "hundreds of thousands of websites that gather information directly from consumers may be a source of consumer information for data brokers. Respondent companies have told the Committee they obtain information from consumer-facing website sources."

But, he added, some of these data brokers have refused to disclose their sources to the SCC.

Sen. Rockefeller also opined that before consumers "share personal information it is important that they know it may be used for purposes beyond those for which they originally provided it", but web site privacy policies do not disclose "how the company actually uses and shares consumer information it gathers".

However, the letter does not reference or describe any pending or prospective legislative proposals.

More News

9/24. The Federal Communications Commission (FCC) released an updated agenda on September 19 for its event on Thursday, September 26, 2013 titled "Open Meeting". It contains all four of the items that were listed on the tentative agenda released on September 5. These four items pertain to antenna structure registration (ASR) and birds, media ownership, Bloomberg v. Comcast and LPFM. See also, story titled story titled "FCC Announces Tentative Agenda for September 26 Meeting" in TLJ Daily E-Mail Alert No. 2,596, September 5, 2013. The updated agenda adds consideration of a notice of proposed rulemaking (NPRM) regarding "resiliency of mobile wireless networks during emergencies". FCC Chairman Mignon Clyburn described this item in a speech on September 24. She said that this NPRM "proposes to improve wireless network reliability during disasters by requiring wireless service providers to publicly disclose the percentage of cell sites within their networks that are operational after disasters. This proposal, now on the agenda for the next open meeting, could encourage competition in the wireless industry to improve network reliability by providing consumers with a yardstick for comparing wireless performance in emergencies."

9/24. Federal Communications Commission (FCC) Chairman Mignon Clyburn gave a speech [13 pages in PDF] in Washington DC. She spoke in broad and vague terms about numerous topics, including expansion of the FCC's e-rate tax and subsidy programs, the H block auction scheduled for January, upcoming incentive auctions, AWS-3, interoperability in the 700 MHz band, special services, cell phone unlocking, inmate rates, rural call completion, disability access, resiliency of wireless networks during disasters, and wireless location surveillance mandates.

9/24. The National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) released its draft SP 800-52 Rev. 1 [64 pages in PDF] titled "Guidelines for the Selection, Configuration, and Use of Transport Layer Security (TLS) Implementations". The deadline to submit comments is November 30, 2013.

FCC Seeks Comments on Reimbursable Broadcaster and MVPD Costs

9/23. The Federal Communications Commission (FCC) released a document [18 pages in PDF] titled "Public Notice" in its incentive auctions rule making proceeding. This document seeks further information previously requested in last year's incentive auctions Notice of Proposed Rulemaking [205 pages in PDF]. It also bears attributes of a further NPRM.

This item seeks comments on the "types of costs broadcasters and MVPDs are likely to incur and how to determine whether such costs are ``reasonable´´ for purposes of reimbursement under the statute".

This item also attaches, and seeks comments upon, a proposed "Catalog of Eligible Expenses". And, it asks for comments on further proposals.

The spectrum act enacted in early 2012, which authorized the FCC to conduct incentive auctions, requires the FCC to "reimburse costs reasonably incurred by" broadcast television licensees that are reassigned to new channels, and MVPDs that incur costs in order to carry the signals of such reassigned licensees. However, the act also set a $1.75 Billion limit on reimbursements.

The FCC adopted its original NPRM on September 28, 2012, and released it on October 2. See also, story titled "FCC Adopts NPRM on Incentive Auctions" in TLJ Daily E-Mail Alert No. 2,455, October 1, 2012. That NPRM is FCC 12-118 in GN Docket No. 12-268.

Paragraphs 334-354 of that NPRM seek comments on reimbursable costs.

Initial comments in response to the just released item are due by October 31, 2013. Reply comments are due by November 14, 2013. This PN or FNPRM is DA 13-1954 in GN Docket No. 12-268.

The FCC will also hold a hearing on reimbursable costs on Monday, September 30, 2013 at 10:00 AM in the FCC's Commission Meeting Room. There will be two panels of witnesses.

The first panel will be titled "Categories of Reimbursable Costs Incurred by Broadcasters". The witnesses will be Joe Davis (Chesapeake RF Consultants), Jane Mago (National Association of Broadcasters), Peter Starke (American Tower), and Joe Zuba (Dielectric). Rebecca Hansen (FCC Media Bureau) will preside.

The second panel will be titled "Strategies to Promote Transition Coordination and Cost Mitigation Among Broadcasters". The witnesses will be Mark Aitken (Sinclair Broadcast Group), David Donovan (New York State Broadcasters Association), Erin Dozier (NAB), Robert Kelly (Squire Sanders), and Lonna Thompson (Association of Public Television Stations). Bill Lake (Chief of the FCC's Media Bureau) will preside.

See, Public Notice (DA 13-1955 in GN Docket No. 12-268.)

Waxman and Eshoo Write FCC and NTIA Regarding First Responder Communications Failures

9/23. Rep. Henry Waxman (D-CA), the ranking Democrat on the House Commerce Committee (HCC), and Rep. Anna Eshoo (D-CA), the ranking Democrat on the HCC's Subcommittee on Communications and Technology, sent a letter to the Federal Communications Commission (FCC) and National Telecommunications and Information Administration (NTIA) regarding the "shooting at the Navy Yard" on September 16, 2013, when "some first responders had to resort to their personal cell phones".

They noted that the Congress enacted legislation early in 2012 to provide spectrum for a public safety broadband communications network "to address these communications failures".

They wrote that the NTIA's First Responder Network Authority, which is also known as FirstNet, should "be configured to address these failings". However, they did not explain how.

New York Takes Action Against Writers of Fake Online Reviews

9/23. The Office of the Attorney General of the State of New York announced in a release that it has reached a settlement with nineteen businesses in connection with their "practice of writing fake online reviews".

This release states that these companies "flooded the Internet with fake consumer reviews on websites such as Yelp, Google Local, and CitySearch. In the course of the investigation, the Attorney General's office found that many of these companies used techniques to hide their identities, such as creating fake online profiles on consumer review websites and paying freelance writers from as far away as the Philippines, Bangladesh and Eastern Europe for $1 to $10 per review. By producing fake reviews, these companies violated multiple state laws against false advertising and engaged in illegal and deceptive business practices."

This release alleges violation of New York Executive Law § 63(12). This section provides, in part, that "Whenever any person shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business, the attorney general may apply, in the name of the people of the state of New York, to the supreme court of the state of New York, on notice of five days, for an order enjoining the continuance of such business activity or of any fraudulent or illegal acts, directing restitution and damages and, in an appropriate case, cancelling any certificate filed under and by virtue of the provisions of section four hundred forty of the former penal law or section one hundred thirty of the general business law, and the court may award the relief applied for or so much thereof as it may deem proper."

It also alleges violation of New York General Business Law § 349 and § 350.

Section 349 provides, in part, that "Deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are hereby declared unlawful".

Section 350 provides in full that " False advertising in the conduct of any business, trade or commerce or in the furnishing of any service in this state is hereby declared unlawful."

The following nineteen companies entered into Assurances of Discontinuance:

People and Appointments

9/23. Furuno Electric Co., Ltd. and Furuno U.S.A. Inc. filed a complaint with the U.S. International Trade Commission (USITC) against various Garmin companies and others that alleges violation of Section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337) in connection with the importation into the US of certain GPS devices, mapping systems, software and related items. The deadline for public comments is October 8, 2013. See, notice in the Federal Register, Vol. 78, No. 189, September 30, 2013, at Pages 59973-59974.

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9/21. The Office of the U.S. Trade Representative (OUSTR) issued a release regarding Trans Pacific Partnership Agreement (TPPA) negotiations that took place in Washington DC the week of September 16, 2013. The release states that "progress toward conclusion was made on many issues", including telecommunications, and that e-commerce issues were discussed. It adds that TPPA talks "will take place on the margins of the APEC meetings in Bali, Indonesia, in early October", and that "Groups on intellectual property and rules of origin will be meeting intersessionally in Mexico and Canada, respectively."