Six weeks after the FCC completed its high profile review of the Comcast/NBCU transaction, Commissioner Meredith Baker (no relation) suggested that the agency’s transaction review process should be overhauled. I have been involved in merger reviews on both sides of the table for most of my career — working with private parties advocating or questioning deals, and at the Federal Trade Commission and Department of Justice as well as the FCC — putting me in a unique position to address some of the issues that Commissioner Baker raised.
To provide context, I want to begin with what the FCC accomplished in terms of process during its Comcast/NBCU review:
- Fact-based and data driven analysis. As the Commission’s order shows, its conclusions were based upon a well-developed record about the industry, the applicants, and the potential implications of the transaction.
- Development of a model legal and economic analysis. The FCC set forth a roadmap for antitrust tribunals reviewing the exclusionary impacts of vertical integration in future cases.
- Detailed findings and reasons. The Commission provided a detailed opinion explaining the reasons for the order’s provisions.
- Close coordination with the Department of Justice. The FCC and DOJ worked together to share insights and to assure an efficient process and consistent outcomes. By most accounts, this was the most successful transaction-related collaboration ever between these agencies.
- Avoided unnecessary burdens. The FCC worked with the applicants and other parties to craft an order that protects the public interest without restricting the applicants’ ability to accomplish their legitimate business objectives. Comcast Executive Vice President David Cohen concurred, saying publicly after the FCC issued its order, “I don’t think any of the conditions is particularly restrictive.”
The success of the FCC’s review process is particularly striking given that the transaction presented a wide range of important and complex issues, including novel and difficult competitive questions raised by the deal’s potential impact on nascent competition in online video distribution.
Against this backdrop, let’s look at Commissioner Baker’s concerns. The first is with the statutory mandate for the FCC and the antitrust enforcement agencies to review competition concurrently. Comcast/NBCU highlights the advantages of Congress’ design. Working together, the FCC and DOJ are often more effective in addressing competition issues than either would be working alone. The FCC brings industry expertise and a greater practical ability to review and address concerns about a merger’s impact on potential competition. Through collaboration, moreover, both agencies were able to conduct an extensive, careful, and cooperative review of that transaction without delaying the process. Not surprisingly, the two agencies addressed competition problems by imposing similar conditions.
In addition, Commissioner Baker raises concerns with the costs of a long merger review process. Yet she also recognizes the need for careful review. The FCC should not hold up the consummation of mergers that are in the public interest or allow merger reviews to languish, but, equally, it cannot cut corners when undertaking those reviews. No responsible agency can simply assume that every communications merger proposed in the free market is in all respects beneficial to the public. Nor can the FCC compromise on the procedural protections that administrative law confers on interested parties. Based on my experience working at both antitrust agencies as well as the FCC, I would say that the length of a merger review is determined primarily by the complexity of the competitive issues, not whether the reviewing agency is the FCC, FTC or DOJ. (Other major vertical mergers reviewed recently by DOJ, such as Ticketmaster/Live Nation, have taken as long as Comcast/NBCU to reach a consent settlement.)
Commissioner Baker also questions whether the FCC at times goes too far afield when imposing conditions to assure that mergers serve the public interest, leading it to impose some conditions that may be unrelated to the transaction. The wide range of conditions in the typical merger order is easy to explain: it is the natural and foreseeable result of the statutory “public interest” charge to the agency. In furtherance of that mandate, the FCC takes on competition concerns — in the Comcast/NBCU order, two-thirds of the pages on conditions sought to protect or foster competition — but it also addresses other public interest issues that Congress has put front and center in the Communications Act, such as diversity of viewpoints, localism, and deployment of advanced telecommunications services. My sense is that most disputes over whether specific conditions are “transaction-related” are not mainly about the integrity of the merger review process but are really about a basic policy question — whether the Commission should continue to pursue the longstanding public interest goals identified by Congress in the Act. If so, process reforms are unlikely to stop the criticism.
Even a successful process can be improved. It is possible, for example, that the FCC could do better in developing and testing evidence by introducing more adversarial elements into its administrative merger review process. (A similar issue comes up in comparing the antitrust review of mergers in the US and Europe.) The FCC experimented with one such procedural innovation in Comcast/NBCU: the staff conducted an economic workshop, bringing together economists for the parties to the transaction and third parties for a structured discussion placed on the adjudicative record. In future reviews, the FCC staff could also consider deposing merging firm executives as the antitrust agencies often do; this process may, for example, help the FCC staff evaluate merging firm documents.
In Comcast/NBCU, Chairman Genachowski was determined to ensure a model transaction review process — and through the dedicated effort of the transaction team led by John Flynn and staffed from throughout the agency, particularly the Media Bureau, the Office of General Counsel, and the Office of Strategic Planning and Policy Analysis, he succeeded. I had little exposure to FCC merger review in the past. But after working on Comcast/NBCU and other transactions during my time at the FCC, I think of the agency’s merger review process more as a source of pride than as a source of concern.