DOJ Gets Media-Merger Review Power

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In a move that sparked criticism, the Justice Department and the Federal Trade Commission reached an agreement last Tuesday through which the DOJ would assume primary control over all merger reviews in the media and entertainment industry.

The move — postponed in January in the face of congressional resistance — was hailed as a necessary step in reducing delays related to interagency bargaining.

"This agreement will improve our law-enforcement efforts," assistant attorney general for antitrust Charles James said in a statement. "Allocating industry sectors in a more rational manner will enable [Justice] to investigate more efficiently possible anti-competitive conduct affecting consumers and will provide greater certainty to the business community, all of which is good for consumers."

James reached the agreement with FTC chairman Timothy Muris.

Sen. Ernest (Fritz) Hollings (D-S.C.), chairman of the committee that approves the Justice Department's budget, said the agreement violated the law because Congress was not properly notified.

"We were in the middle of discussions on how to proceed, and they just moved forward on their own. It's a tricky way to forego consultation. We have our tricks, too," Hollings said in a statement.

Plan supporters said the agreement was necessary to allow each agency to develop expertise over certain sectors of the economy.

A 'WIN-WIN'

"This plan offers a 'win-win' by assigning antitrust areas based upon the particular agency's experience and expertise," said House Judiciary Committee chairman James Sensenbrenner (R-Wis.) in a statement.

As a practical matter, the James-Muris agreement won't affect the merger between EchoStar Communications Corp. and Hughes Electronics Corp. or the merger between AT&T Broadband and Comcast Corp. Both of those deals, which have a combined value of $97.8 billion, have already been assigned to Justice.

James and Muris said the agreement would speed up what's known as the "clearance process," or the typical bureaucratic struggle between Justice and the FTC over which agency will review a given merger. Such disputes have caused delays ranging from a few weeks to several months.

Since Oct. 1, 1999, the two agencies have vied for control over 136 matters, which took an average of three and one-half weeks to resolve, and another 164 matters that took more than a week.

"On average, these 300 matters — 24 percent of all matters for which clearance requests were filed during this period — imposed delays of three weeks," a joint statement by the two agencies said.

If the new agreement had been in place while the 300 matters were pending, James and Muris said that 80 percent would have been resolved within two business days.

"Consumers will benefit from the more efficient use of taxpayer money. This agreement is a good government initiative, and good government benefits everyone," Muris said.

James and Muris said they had received a letter from 11 antitrust officials from the last four presidential administrations in support of a restructuring with clear processing guidelines.

DIVVYING UP THE TURF

In addition to media and entertainment deals, Justice will retain authority over beer brewing, cosmetics, computer software, transportation and various defense-related industries.

The FTC, which reviewed the America Online Inc.-Time Warner Inc. merger, has been assigned primary jurisdiction over the auto, trucking, computer hardware, pharmaceutical, satellite manufacturing and textile industries. The list that detailed jurisdiction for both agencies was not exhaustive.

Consumer groups questioned whether the division of authority was needed to resolve time-consuming delays in the clearance process.

"Past problems with the traditional case-by-case review process have been the exception, not the rule," said Consumers Union Washington office co-director Gene Kimmelman.

In December of 2000, Consumers Union — in concert with The Walt Disney Co. and various Internet service providers — was successful in convincing the FTC to make approval of the AOL-Time Warner contingent upon its carriage of unaffiliated ISPs, and compliance with other competitive safeguards.

"In the area of cable mergers, the FTC has been quite aggressive in promoting competition by cracking down on discrimination against programmers and Internet-service providers," Kimmelman said.

Muris insisted that the FTC's experience with cable and other media was not as broad as the DOJ's, and that the commission's merger reviews "did not present the complex vertical issues raised by media mergers in the last few years."

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