DOJ, FTC Merger-Review Plan Collapses

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A plan to shift review of all media mergers from the Federal Trade Commission
to the Department of Justice collapsed after protests surfaced on Capitol Hill
and within the FTC.

FTC chairman Timothy Muris and DOJ antitrust-division chief Charles James
planned to unveil the change at a press conference Thursday. But after keeping
reporters waiting for 30 minutes, they called it off without explanation.

By shifting media mergers to the DOJ, the FTC would have been shut out from
reviewing the pending cable merger between AT&T Broadband and Comcast
Corp.

In an interview, FTC commissioner Mozelle W. Thompson said his agency
reviewed past cable mergers and voiced support for FTC review of the
AT&T-Comcast deal.

'I think we have substantial expertise that will serve the public interest if
we were able to participate [in AT&T-Comcast],' Thompson said. 'We have
traditionally done cable. We did AOL [America Online Inc.]-Time Warner [Inc.]
and we did Time Warner-Turner [Broadcasting System Inc.].'

Thompson said he lamented the 'horse-trading' that went on between the DOJ
and the FTC, giving the DOJ all media deals in return for FTC review of all
healthcare, professional-services and electricity mergers.

On Capitol Hill, Sen. Ernest (Fritz) Hollings (D-S.C.), chairman of the
Appropriations Subcommittee that funds the DOJ's budget, learned of the pending
DOJ-FTC deal in the press. His staff from the subcommittee contacted DOJ
officials to raise concerns about the lack of prior consultation with
Congress.

'As a matter of process and policy, they didn't consult with the authorizing
or appropriating committees,' Hollings spokesman Andy Davis said. Because the
agreement would likely affect the DOJ's budget, the agency was obligated to
consult with Congress.

Davis said Hollings aides planned to meet Jan. 23 with DOJ and FTC officials
to discuss the issue.

'The agreement is extremely important to the heads of both agencies, and they
will work very closely with each other and Capitol Hill to reach a resolution,'
an FTC source said.

Housing cable mergers within the DOJ could have worked to the benefit of
AT&T and Comcast. The DOJ reviewed AT&T Corp.'s mergers with
Tele-Communications Inc. and MediaOne Group Inc. and declined to require
AT&T to open its cable Internet platform to competing Internet-service
providers.

In reviewing the AOL-Time Warner deal, the FTC refused to allow the companies
to launch a high-speed version of AOL's online service on Time Warner Cable
systems prior to launching an unaffiliated ISP.

Consumer advocates -- who pressed the FTC to impose Internet-access
requirements on AOL-Time Warner -- said they opposed the Muris-James agreement
on media mergers.

'This development threatens consumer and citizen interests. The FTC's
bipartisan and more independent approach has made it a more effective mechanism
to review mergers in the media industries,' said Jeff Chester, executive
director for the Center for Digital Democracy.

Although the FTC established a cable open-access precedent in the AOL-Time
Warner merger in December 2000, the agency was under Democratic control at the
time. Muris -- a Republican appointed by President Bush -- has a one-vote GOP
majority at the five-member FTC.

The move to allocate media mergers to the DOJ was designed to speed what's
called the 'clearance' process, which involves negotiations between DOJ and FTC
staff when a merger-approval request touches on the jurisdiction of both
agencies.

Thompson said the DOJ and the FTC have delayed by 15 days or more the
clearance of 32 mergers. This number, he added, was quite small considering that
the two agencies have reviewed 7,000 mergers in the past two years.

Why Muris and James decided to go public with their plan and encounter
controversy was unclear. The two antitrust officials could have made a private
agreement that the FTC would not assert jurisdiction over media and
telecommunications mergers.

Thompson said he first heard of the plan Monday morning and received a copy
of the final agreement at 10 a.m. Thursday, three hours before the press
conference.

'I believe that maybe some of these reforms are good, but I need more time,'
Thompson said. 'But there is a question of whether this is really administrative
or indeed substantive.'

Thompson said he wasn't sure whether the plan would be resurrected.

'I know the attorney general's office decided not to go forward. I don't know
where it goes from here,' Thompson said.

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