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FCC Transaction Review: Competition and the Public Interest

by: Jon Sallet, General Counsel

August 12, 2014

The Federal Communications Commission has long played a unique and pivotal role in reviewing communications transactions. Our review is prescribed by the Communications Act and is separate from (though complementary to) the analysis conducted by our sister, antitrust agencies under Section 7 of the Clayton Act.

Three points about the Commission's review of transactions are important to understand: First, the nature of the substantive review that Congress has instructed the Commission to apply. Second, the process that the Commission has instituted, consistent with that statutory standard, to provide an open and fair means of reviewing transactions. Third, the manner in which the complementary approaches of the Commission and the antitrust agencies work harmoniously to serve the public interest in a sector that has traditionally been the subject of careful governmental scrutiny.

The starting point of our mission—and therefore, our substantive review—is the language of the Communications Act itself.

Congress has directed the Commission to review transactions involving licenses and authorizations under the Communications Act and to determine whether the proposed transaction would serve "the public interest, convenience, and necessity."1 The breadth and importance of the public-interest standard to the review of transactions involving our nation's communications networks logically flows from the Commission's statutory mission, since the conduct of buying other licensees can be as important to the public as the way a licensed company conducts itself in the absence of a transaction. This standard complements, but is different from the antitrust agencies' standard set forth Section 7 of the Clayton Act, which instructs them to challenge transactions that would "substantially lessen competition".

I believe, as the Commission has consistently recognized,2 that the FCC's actions should be informed by competition principles. These principles look to the impact of practices on consumers and the public interest, not just on competitors. They are designed to be fact-based and data-driven. They reflect a common-law belief that the experiences of the present are, to paraphrase Justice Holmes, as important as the logic of the past. They should be applied in a rigorous manner.

But, the "public interest" standard is not limited to purely economic outcomes. It necessarily encompasses the "broad aims of the Communications Act,"3 which include, among other things, a deeply rooted preference for preserving and enhancing competition in relevant markets, accelerating private-sector deployment of advanced services, ensuring a diversity of information sources and services to the public,4 and generally managing spectrum in the public interest. Our public interest analysis may also entail assessing whether the transaction will affect the quality of communications services or will result in the provision of new or additional services to consumers. The leading examples may come from broadcast transactions, where the Commission has long applied the congressional admonition to promote localism in programming, and especially news programming, available to communities.5 Consider also Justice Breyer's concurring opinion in Turner Broadcasting v. FCC.6 That case concerned a challenge to the "must carry" rules that require cable systems to carry local broadcast signals. In agreeing that the statute should be upheld, Justice Breyer expressly relied on Congress' goal of "promoting the widespread dissemination of information from a multiplicity of sources."7

The second important principle of the Commission's transaction-review is the process by which it carries out its congressionally-mandated functions. Fundamental is the fact that applicants have the burden of demonstrating on the public record that their proposed transaction is in the public interest. Oftentimes, the popular understanding seems to be that the Commission is called upon in the first instance to give a thumbs up or thumbs down. That is wrong.

As the Transactions Team Webpage explains in detail, the Commission can approve a transaction or it can approve a transaction with conditions designed to ensure the public interest is served. But, if after a thorough review the FCC is unable to find that the proposed transaction serves the public interest or if the record presents a substantial and material question of fact, it must designate that transaction for an administrative hearing. Such an administrative hearing examines the facts of the transaction in the traditional adversary process that is the hallmark of our common-law jurisprudence. Following that hearing, the Commission would render a decision on the merits after which, of course, judicial review is available. Although such hearings have been rare, the Commission has been ready to use them as the statute requires. For example, at the time that the applicants in the AT&T/T-Mobile merger withdrew their applications, the Commission's staff had prepared a report recommending that the transaction be designated for hearing.

Understanding the process also illuminates the role of conditions. Conditions can be very important because, appropriately constructed and effectively applied, they can remedy public-interest harms that would otherwise occur. This relationship to the remedy of harm is fundamental and it means that not all conditions can serve that role. As I have said before, I am aware of the reputation that some attribute to the FCC — that the answer is always "yes," and the path to "yes" is by bargaining with the agency. It is hard to imagine that such a view can be squared with the manner in which the Commission assiduously applied the law to the facts of the proposed AT&T/T-Mobile transaction, among others.

The third principle concerns the manner in which we work with the antitrust agencies.

The ability of both the Commission and antitrust agencies to apply their specialized, and complementary, skills is working well. The Commission and the Antitrust Division of the Department of Justice cooperated closely to harmonize their approaches (always consistent with their respective statutory commands) in the Comcast-NBCU and AT&T/T-Mobile transactions and that continues to be the way we work together today.

Fidelity to Congressional intent, rigor in the application of facts to law through an open and fair process, and strong working relationships with the sister antitrust agencies — those are the principles that have worked well for the Commission in the past and, as the Transactions Team Webpage and its materials help explain, will continue to serve the public interest, convenience and necessity.

 


1. 47 U.S.C. §§ 214(a) & 310(d).



2. See, e.g., Applications of Comcast Corp., Gen. Elec. Co., and NBC Universal, Inc. for Consent to Assign Licenses and Transfer Control of Licenses, Memorandum Opinion and Order, 26 FCC Rcd. 4238, 4248, ¶23 (2011) ("Comcast/NBCU Order").

3. Applications for Consent to the Transfer of Control of Licenses, XM Satellite Radio Holdings Inc., Transferor, to Sirius Satellite Radio Inc., Transferee, Memorandum Opinion and Order and Report and Order, 23 FCC Rcd 12348,12364, ¶31 (2008); News Corp. and DIRECTV Group, Inc. and Liberty Media Corp. for Authority to Transfer Control, Memorandum Opinion and Order, 23 FCC Rcd 3265, 3277-78, ¶23 (2008); Applications of AT&T Wireless Services, Inc. and Cingular Wireless Corp. for Consent to Transfer Control of Licenses and Authorizations, Memorandum Opinion and Order, 19 FCC Rcd 21522, 21544, ¶41 (2004).

4. 47 U.S.C. § 521(4); see also 47 U.S.C. § 532(a).

5. Comcast/NBCU Order, 26 FCC Rcd. at 4249-50, ¶26-27.

6. 520 U.S. 180 (1997).

7. Id. at 226.

 

 

 

 

 

 

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