Curbing the FCC’s Ability to Impose “Voluntary” Merger Commitments…

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Over my eighteen years in the telecommunications business, one of my biggest pet peeves has been the politicization of the Federal Communication Commission’s merger review process.  As I noted in a paper entitled Separating Politics from Policy in FCC Merger Reviews: A Basic Legal Primer of the “Public Interest” Standard I authored with my former colleague Tom Koutsky back in 2007 and subsequently published in an academic journal in 2010, my issue is not that the concept of the “public interest” is vague (it is not), but that both sides of the aisle conveniently ignore the relevant caselaw when it is politically expedient (that is, pretty much all the time).  As Tom and I recognized, the FCC’s merger review process can serve an important and useful function when performed correctly.

While the FCC’s analytical approach to merger analysis has often left much to be desired, from a procedural standpoint perhaps the biggest issue of concern for lawmakers has been the massive proliferation of so-called “voluntary” commitments that are often wholly unrelated to the transaction under consideration.  These coerced “commitments” over the years have ranged from the shamelessly political (e.g., backroom deals to provide heavily subsidized Internet service or new buildout requirements to high cost areas) to “big ticket” policy items (e.g., a “de facto” spectrum cap in the Harbinger Order; special access and other wholesale commitments in the Qwest/CenturyLink merger; commitments made by Comcast in its acquisition to buy NBCUniversal to abide by the FCC’s Open Internet Rules even if such rules are thrown out in court).

Now, let me be quite clear here:  if there is a merger-related harm, then the Communications Act makes it clear that the Commission has the authority to impose a narrowly-tailored condition to remedy this harm so long as those conditions are consistent with applicable law.  However, if a “voluntary” commitment has absolutely no nexus to any merger-related harm and is instead nothing more than an attempt by the Commission to achieve a policy objective by adjudication that it could not otherwise implement by rulemaking, then that is a different animal altogether.  Indeed, as Tom and I argued, given the complexity and economic impact of the type of “voluntary” merger commitments we have seen over the last few years, fundamental due process demands that these issues deserve to be vetted in an industry-wide rulemaking with public notice and comment rather than negotiated behind closed doors with a few select parties—particularly when you are talking about “big ticket” generic policy items like net neutrality, spectrum caps, or special access regulation.

This is why I am so pleased to see the House Energy and Commerce Committee make an effort to put a stop to this nonsense.  Today, the Committee is marking up H.R. 3309, the “Federal Communications Commission Process Reform Act.”  Under Section 13(j)(1) of the proposed bill entitled ‘‘Transaction Review Standards”, the “Commission shall condition its approval of a transfer of lines, a transfer of licenses, or any other transaction under section 214, 309, or 310 or any other provision of this Act only if”—

(A)     the imposed condition is narrowly tailored to remedy a harm that arises as a direct result of the specific transfer or specific transaction that this Act empowers the Commission to review; and

(B)     the Commission could impose a similar requirement under the authority of a specific provision of law other than a provision empowering the Commission to review a transfer of lines, a transfer of licenses, or other transaction.

While regulatory reform is far more complex than most people realize and is always fraught with the specter of unintended consequences, these simple provisions designed to minimize the (unfortunate) politicization of the FCC’s merger review process is a welcome start.  As such, regardless of what you may think of the overall FCC process reform bill, this common sense solution to ensure procedural due process and “good government” deserves bi-partisan support.