DOJ — “Antitrust? What's That?”

The U.S. Department of Justice Antitrust Division approved the AT&T/BellSouth mereger without imposing any conditions. By law, the DOJ Antitrust division has no obligation to explain its decision to take no action. Nevertheless, Assistant Attorney General Thomas Barnett did issue a statement explaining the decision to take no action. Apparently, the market has gotten so much more competitive since the DOJ imposed (albeit wussy) conditions last year on the Verizon/MCI merger and SBC/AT&T merger last year that DOJ can’t imagine why this merger might be anticompetitive.

We now bounce over to the FCC, where Kevin Martin has placed approval of the AT&T/BellSouth on the agenda for tomorrow’s FCC meeting. But will the meeting take place? Can Martin get the merger through without conditions? And why didn’t DOJ at least pretend to care and enter into some wussy conditions — rather than just roll over like a good little industry lap dog begging for treats?

Some guesses below . . . .

Curiously, recent amendments of the Tunney Act, forcing DOJ to justify its previous wussy conditions to a federal court may have perversly contributed to DOJ’s failure to impose even a fig leaf of conditions. The way the law works, if DOJ or the Federal Trade Commission think a merger will have anticompetitive effects, they have to file a complaint in federal court seeking an injunction against the merger. If the merging parties agree to conditions, then the DOJ and the parties enter a consent decree/settlement simultaneously with the complaint.

Under the Tunney Act, the public can comment on whether they think the settlement is fair or not, and the court is supposed to review the consent decree to ensure it serves the public interest. This used to be a joke, but Congress amended the Tunney Act in 2004 to require the federal court to do a real review of the consent decree.

Comptel, a trade association of competing phone companies (CLECs, in industry parlance) challenged the DOJ consent decree on last year’s big bell mergers. Judge Sullivan of the Federal District Court for the District of Columbia has been conducting a searching review, and there is considerable speculation that Sullivan may force the parties to revisit the conditions to toughen them up some. At the very least, DOJ is finding it very uncomfortable to find its secret negotiations with the Bells over conditions brought out into the light and its commitment to the public good questioned.

You would think that DOJ would therefore want to clean up its act. Wrong. They went the other way. By taking no action and imposing no conditions, DOJ avoids any Tunney Act review. By it terms, the Tunney Act applies only to a consent decree. No one can challenge a decision any DOJ to take no action and impose no conditions. As we say in the agency law biz, a decision on whether or not to act is “wholly committed to agency discretion.”

So, ironicly enough, an effort to make the agency more accountable and force it to serve the public good has the effect of driving the agency to drop even the fig leaf of conditions. Better to be a naked industry whore not subject to public review, appears to be the DOJ’s logic, than to pretend we care and open the door for real public oversight.

We now bounce over to the Federal Communications Commission, which must also approve the merger. Unhappily for AT&T/BS, the FCC does not work quite the same way as DOJ. At DOJ, one political appointee makes a decision on whether or not to take action. Further, the DOJ has to decide to take a positive step to block or condition a merger.

The Communications Act imposes a different set of rules on the FCC. Merging parties at the FCC must prove affirmatively that the merger will serve the public interest. The FCC must issue an order approving the merger, subject to judicial review, and voted upon by a majority of sitting Commissioners.

So AT&T needs three Commissioners to vote to approve the merger. That could split 3-2 along party lines, but Commissioner Robert McDowell, the third Republican, has recused himself. McDowell used to work at Comptel, which has opposed the AT&T/BellSouth merger. So even though, if he participated, he would likely vote against his old firm, it still would give the appearance of a conflict of interest. While McDowell could unrecuse himself to break a tie, it is clear he doesn’t want to be in that position.

So that leaves Kevin Martin with a 2-2 party line split. This gives the Democrats, Copps and Adelstien, considerable leverage to demand conditions. To give him additional time to negotiate a deal, Martin has moved the FCC AT&T/BellSouth Order and the accompanying inquiry on net neutrality from tomorrow’s (10/12) open meeting to a special open meeting on Friday (10/13). Given the public statements by Copps and Adelstien chastising the DOJ for abandoning its responsibility to protect the American people from anticompetitive harms, I suspect it may take Martin more than a day to work out a deal.

Still, as I observed on my blog over on Public Knowledge, the FCC still has one heck of a meeting set for tomorrow. The FCC has the annual cable competition report/industry white wash teed up, as well as an important next step on opening up the broadcast “white spaces” for unlicensed use. It’ll be an exciting time at FCC HQ, with the prospect of even more negotiated fun to come. As always —

Stay tuned . . . . .

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