AMC Seeks End to Duplicative FCC Antitrust Merger Reviews

April 3, 2007. The Antitrust Modernization Commission (AMC) released its report titled "Antitrust Modernization Commission: Report and Recommendations: April 2007". The report argues that there should not be duplicative antitrust merger reviews at sectoral regulatory agencies. See, entire report [540 pages in PDF, 2.1 MB] and AMC release [3 pages in PDF].

The report does not single out the Federal Communications Commission (FCC), or its antitrust merger reviews, which often duplicate reviews conducted by the FTC or DOJ, impose substantial delays, and allow the FCC to pursue a wide variety of policy objectives.

Financial regulators have merger authority with respect to banks, the Federal Energy Regulatory Commission has merger authority with respect to electricity, and the Surface Transportation Board has merger authority with respect to rails. However, the history of recent FCC merger reviews presents the strongest case for limiting duplication of reviews. Also, the reports' emphasis on new technologies suggests that the AMC had FCC mergers more in mind than railroad mergers.

The report recommends that "For mergers in regulated industries, the relevant antitrust agency should perform the competition analysis. The relevant regulatory authority should not re-do the competition analysis of the antitrust agency." (See, page 23.)

The report explains that "Merger review by two federal agencies can impose significant and duplicative costs on both the merging parties and the agencies", and that "The antitrust agencies have unique expertise in evaluating the likely competitive effects of mergers. Therefore, the antitrust agencies should be responsible for analysis of the likely competitive effects of mergers in regulated industries." (See, pages 364-5.)

The report argues that "The recommended approach would ensure competition policy and enforcement consistency, limit inefficiencies and delays associated with overlapping enforcement, align competition policy assessments across industries regardless of the existence of different regulatory agencies, facilitate transparency in decision-making, and allow the antitrust agencies to act where they have a comparative advantage. It would also limit duplicative expenditure of resources and an inefficient allocation of scarce government resources, particularly where an industry regulator disregards the antitrust agency’s analysis." (Footnote omitted.)

The report also recommends that the "Congress should periodically review all instances in which a regulatory agency reviews proposed mergers or acquisitions under the agency’s ``public interest´´ standard to determine whether in fact such regulatory review is necessary." (See, page 23.)

The report also states that "In its reevaluation, Congress should consider whether particular, identified interests exist that an antitrust agency’s review of the proposed transaction's likely competitive effects under Section 7 of the Clayton Act would not adequately protect. Such ``particular, identified interests´´ would be interests other than those consumers' interests -- such as lower prices, higher quality, and desired product choices -- served by maintaining competition."

The Congress is unlikely to stop the FCC from conducting duplicative antitrust merger reviews. First, shortly after the FCC invented its antitrust merger review process after enactment of the Telecommunications Act of 1996, there were efforts in the Congress to limit this activity. The efforts gained no traction, and no legislation was enacted.

Secondly, many in Congress find it in their self-interest for there to be antitrust merger reviews at the FCC. The Congress has more influence over the actions of the FCC than over the antitrust activities of the FTC and DOJ. The FCC is a more political and manipulable entity. The FCC's merger reviews enhance the ability of members of Congress to pursue their goals.

For example, at the March 14, 2007, hearing of the House Commerce Committee's (HCC) Subcommittee on Telecommunications and the Internet Rep. John Dingell (D-MI), the Chairman of the HCC, stated that the FCC is an arm of the Congress. Commissioner Jonathan Adelstein affirmatively stated that the FCC is an arm of the Congress.

The FCC's invention of antitrust merger review authority also worked a shift of power within the Congress. It increased the power of the FCC's oversight committees, the HCC and the Senate Commerce Committee (SCC). Many HCC and SCC members would be opponents of any legislative proposals to end FCC antitrust merger review authority.

The AMC's report does not stop at duplicative antitrust merger reviews. It addresses all industry specific economic regulation. The report recommends that "Public policy should favor free-market competition over industry-specific regulation of prices, costs, and entry. Such economic regulation should be reserved for the relatively rare cases of market failure, such as the existence of natural monopoly characteristics in certain segments of an industry, or where economic regulation can address an important societal interest that competition cannot address."

The AMC states that "In general, Congress should be skeptical of claims that economic regulation can achieve an important societal interest that competition cannot achieve."

The AMC's recommendations do not use the words "network neutrality regulation".