Over the past several years, there have been numerous efforts to improve the practices and procedures used at the Federal Commissions Commission. However, of all of the potential improvements bandied about, I submit that there is one improvement that has been entirely overlooked and needs immediately implementation: that is, the repeal of Section § 1.1204(6) of the FCC’s ex parte rules, which provides that the Commission and the Department of Justice (“DOJ”) can meet in secret as often as they like—without having to file anything into the record about the date of the meeting, who attended the meeting and what was discussed—just so long as “any new factual information obtained through such a presentation that is relied on by the Commission in its decision-making process will be disclosed by the Commission no later than at the time of the release of the Commission’s decision.” While I am in favor of “inter-agency” cooperation as much as the next guy, I believe allowing the FCC and DOJ to meet secretly during the course of a formal FCC proceeding raises some legitimate due process concerns.
First, as I set forth in my law review Separating Politics from Policy in FCC Merger Reviews: A Basic Legal Primer of The “Public Interest” Standard, the DOJ and FCC have very different roles and very different statutory mandates. For example, the Department of Justice is a law enforcement agency in the Executive Branch responsible for enforcing the U.S. antitrust laws. As a law enforcement agency, they are empowered with detailed and strong investigative tools, such as the Hart-Scott-Rodino Act. In contrast, the FCC is an independent regulatory agency charged with administering the Communications Act and bound by the precepts of the Administrative Procedures Act. Thus, simply put, while much of the DOJ’s information comes, by definition, from a confidential, investigative process, the FCC’s process is specifically designed to develop a public record upon which interested parties may comment and participate in the proceeding. Allowing the FCC secret access to such confidential extra-record information—even if the agency never officially relies on such information in the final rule or order—could bias the agency’s ultimate determination. Worse, as the affected parties participating in the FCC proceeding have no idea what this confidential information is, or whether this confidential information is even accurate, it is impossible for the parties to present a meaningful response.
More to the point, while both agencies certainly have their core competencies, it is important to recognize that the standard DOJ Merger Guidelines antitrust approach may not always be 100% applicable to FCC deliberations. As the D.C. Circuit stated in United States v. FCC, the “basic goal of governmental regulation through administrative bodies and the goal of indirect governmental regulation in the form of antitrust law is the same—to achieve the most efficient allocation of resources possible.” According to (now) Supreme Court Justice Stephen Breyer, these goals are “low and economically efficient prices, innovation, and efficient production methods.” However, just because antitrust and regulation share the same goals, it does not a fortiori mean that an antitrust-type of analysis should be dispositive of whether regulation is appropriate given, in the Supreme Court’s words, the “particular structure and circumstances of the industry at issue.” In fact, as we have shown here, here, here, here and here, using a textbook antitrust-type of analysis may actually improperly tip the scales in favor of regulatory intervention even when a cost/benefit analysis would dictate the opposite result. For this reason, it is black-letter administrative law that all the FCC must do, in the exercise of its responsibilities, is to “make findings related to the pertinent antitrust policies, draw conclusions from the findings, and weigh these conclusions along with other important public interest considerations.”
Second, if you allow the DOJ to be exempt from the FCC’s ex parte rules, then where do you draw the line for secret contacts from other government agencies? Under the FCC’s view of permissible secret inter-agency cooperation, that line is quite squishy. For example, under the FCC’s current ex parte rules, the Federal Trade Commission—as the other antitrust enforcement agency—is also exempt. Similarly, under Section § 1.1204(5) of the FCC’s ex parte rules, any other “agency or branch of the Federal Government” that “share[s] jurisdiction” with the FCC is exempt. (I guess this wide berth deliberately leaves out state public utility commissions or state attorneys general.) However, if “shared jurisdiction” is the litmus test, then what about direct contacts from members of Congress or from the White House? For an independent administrative agency bound by the Administrative Procedures Act’s precepts that it must make decisions based on the public record before it, the slippery slope of government abuse here is steep.
Third, by allowing such secret inter-agency cooperation, you increase the risk of politicizing the deliberative process, whereby one agency can use the “expert” imprimatur of the other agency to achieve coordinated policy goals. If you think I am kidding, let me give you two recent examples.
By the Department of Justice’s own admission (see here and here), the Department worked in “close coordination” with the FCC to block the merger between AT&T and T-Mobile. While the public (or the parties to the merger for that matter) will never know the full extent of how close this “close coordination” actually was, we do know this: While the two agencies were conducting their respective reviews of the merger, in August 2011, the DOJ filed a formal complaint to block the AT&T/T-mobile merger in federal district court. Given that the “close cooperation” between the DOJ and FCC was an open secret, AT&T took the innovative legal step to withdraw its pending application before the FCC on the thinking that it would litigate, and ultimately prevail, against the DOJ in court, and then re-file its petition at the Commission with the support of a court victory. However, rather than stand quietly on the sidelines and let the DOJ and AT&T duke it out in court, the FCC threw a curveball: although the agency had its Wireless Telecommunications Bureau issue an order granting AT&T’s request to withdraw its petition, the agency also deliberately released a staff report condemning the merger using, what staff conceded to be, a “traditional structural analysis used to apply the antitrust laws”. In so doing, while the Commission did not take any “official action,” its release of the highly-flawed (and procedurally unchallengeable) staff report nonetheless sent a clear message to the district court not to waste its time moving forward and allowed the DOJ to claim victory.
More recently, we have the DOJ filing an ex parte in the FCC’s Spectrum Screen Notice of Proposed Rulemaking docket urging the Commission to tilt the incentive auction against the nation’s two largest providers of mobile wireless services, AT&T and Verizon, in favor of the smaller mobile wireless carriers, primarily Sprint and T-Mobile. Now, by way of background, the Section 6404 of the Middle Class Tax Relief and Jobs Creation Act of 2012 (the “Spectrum Act”) specifically prohibits the FCC from excluding eligible bidders. This was a major defeat for outgoing Chairman Julius Genachowski and his allies, who had argued vociferously for the ability to impose auction participation restrictions. However, determined not to take a Congressional “no” for an answer, because the Commission remains free under Section 6404 of the Spectrum Act to “adopt and enforce rules of general applicability, including rules concerning spectrum aggregation that promote competition”, in anticipation of the upcoming auction, the Commission recently instituted a proceeding to re-evaluate, and potentially tighten, its existing “spectrum screen.” So was the DOJ’s recent filing calling for a tightened spectrum screen and, by extension, auction participation rules, a just coincidence? Probably not. In recent testimony by William J. Baer, Assistant Attorney General for Antitrust, before the Senate Judiciary Committee, Mr. Baer conceded under oath (see webcast starting around minute 1:18:45) that when it comes to the need to impose a tighter spectrum screen, “we’ve spent a fair amount of time working very cooperatively—quietly—with the Federal Communications Commission on these difficult policy issues.” (Emphasis supplied.)
As the old saying goes, “sunshine is the best disinfectant.” While I have no doubts that the FCC’s ex parte exemption for the Department of Justice was promulgated with the best of intentions, it is readily apparent—at least to me—that this inter-agency cooperation is being abused. If the Department of Justice wants to make a positive contribution to a FCC proceeding, then let them file formal comments and detailed ex partes along with everybody else. Indeed, if we are wary when it appears that stakeholders are engaging in backroom deals with Commission staff to reach particular outcomes, then we should be even more wary when multiple branches of the federal government are able to meet in secret to achieve certain outcomes. Due process deserves no less.