Sen. Ernest "Fritz" Hollings (D-S.C.) scored a victory last week when the Justice Department and the Federal Trade Commission killed a merger review agreement unveiled a little more than two months ago.
Hollings blasted the agreement because it called for Justice to handle all future mergers involving media companies. Hollings, chairman of a key spending committee, threatened to slash budgets and personnel if the two agencies failed to back down.
The senator, who is supported by suspicious consumer groups, feared that a Justice Department stocked with Bush Administration appointees would rubber-stamp media mergers, while the FTC, which includes two Democrats, would give them a tougher scrubbing.
Though threats from Hollings forced the agencies to relent, big media mergers have already been allocated to Justice, and nothing prevents the FTC from ceding future media deals to Justice on an informal basis.
The DOJ is reviewing AT&T Broadband's merger with Comcast Corp., as well as EchoStar Communications Corp.'s deal to acquire DirecTV Inc.'s parent, Hughes Electronics Corp.
Charles James, chief of Justice's antitrust division, acknowledged that Hollings's threats to cut the DOJ budget prompted his decision to back out of the agreement he reached with FTC chairman Timothy Muris in early March.
"In view of the opposition expressed by Sen. Hollings, chairman of the Commerce, Justice and State Appropriations Subcommittee, to the agreement, and the prospect of budgetary consequences for the entire Justice Department if we stood by the agreement, the department will no longer be adhering to the agreement," James said in May 20 statement.
Hollings spokesman Andy Davis said the lawmaker dropped his threats against both the DOJ and the FTC after receiving word from the agencies.
"I think it's appropriate that they abandoned this agreement," Hollings said after receiving letters from James and Muris. "The FTC has broad discretion to protect consumers in merger reviews, whereas the Justice Department is looking for crime. The FTC protects the public interest."
On March 5, James and Muris reached the merger review deal in part to put an end to the bickering that goes on between the two agencies when deciding which one will take on a merger. The agencies engage in a so-called "clearance process" and the allocation of mergers is decided based on agency experience and expertise over a particular sector of the economy.
"The clearance problem is a serious one. The agreement that the agencies had reached, while not perfect, was clearly a big improvement over the status quo and clearly was in the public interest," said Washington attorney A. Douglas Melamed, who headed Justice's antitrust division during the Clinton administration.
FTC member Mozelle Thompson, a Democrat, said he was troubled by the agreement because he opposed seeing the FTC blocked from reviewing any media merger.
"I thought we were put in a position where it looked like they were getting the new economy and we were left with the old economy," Thompson said.