“This deal can be enjoined if it gives too much clout to Comcast-Time Warner as a purchasing entity even though consumers may be unaffected,” Stucke said.
“”The FCC is going to be the wild card,” said Maurice Stucke, antitrust law professor at the University of Tennessee and an attorney at law firm GeyerGorey. “This is the opportunity for the new chief to take a stance and become a vocal regulator.””
“Allen Grunes, an antitrust lawyer with GeyerGorey LLP, told the Wall Street Journal: ‘There’s very little political will right now in the U.S. to keep pipes and content separate, or to limit the national reach of a cable company like Comcast. My guess is that if Comcast is able to make some serious and enforceable commitments to the FCC, the deal will go through.'”
The FTC is unlikely to play a greater role in overseeing net neutrality after last month’s U.S. Court of Appeals for the D.C. Circuit decision against the FCC’s rules (WID Jan 15 p1), said lawyers, a former FCC official, a former Department of Justice official and consumer advocates in interviews last week. Nor should they, most agreed. Three FTC commissioners have said it would be able to handle net neutrality issues under both the commission’s antitrust and consumer protection jurisdictions. Open Internet advocate Electronic Frontier Foundation and Richard Bennett, a visiting fellow at the American Enterprise Institute’s Center for Internet, Communications and Technology Policy, said the FTC’s narrow, issues-based focus and general jurisdiction might even be better suited to overseeing net neutrality. Several people expressed sympathy for that argument, but said it’s improbable — or even impossible after the D.C. Circuit reaffirmed some FCC authority in the area — that the FTC will play a larger net neutrality role in the near future.
“It’s basically the end of that, I would hope,” said former DOJ attorney Allen Grunes, an antitrust lawyer at GeyerGorey. Former FCC Wireless Bureau Chief Fred Campbell, now executive director of free-market advocate Center for Boundless Innovation in Technology, agreed. “I don’t think it’s highly likely,” he said.
Only Congress could change things for the FTC and net neutrality, Bennett said. And he said he hopes lawmakers do that, restructuring the FCC and FTC in the process: “Congress needs to clarify the role of the FCC vis-a-vis consumer protection and competition, and the way to clarify that is to make it clear the FTC is responsible for that.” Lawmakers have said they plan to hold hearings and issue white papers in 2014 to reassess the 1996 Telecom Act, aiming for new legislation in 2015 (WID Dec 4 p3), and comments from AEI and others were received by the House Commerce Committee Friday. (See separate report below in this issue). Many interviewed predict — while some hope — the rewrite will reaffirm and clarify the FCC’s jurisdiction over net neutrality and ISPs. “I’m skeptical that the Congress is going to ultimately take away the FCC’s authority over broadband providers and hand it to the FTC,” said Free State Foundation President Randolph May.
The FTC and FCC “have concurrent jurisdiction over net neutrality issues,” FTC Commissioner Julie Brill told us. Because it’s a law enforcement agency, the FTC works in conjunction with the FCC’s regulatory authority in the area, said the Democrat. The FTC’s two Republican commissioners, Maureen Ohlhausen and Joshua Wright, have said net neutrality touches on both consumer protection and antitrust issues, making the FTC capable of overseeing it (WID July 19 p9). Wright has said the FTC’s antitrust and consumer harm expertise could make it more capable than the FCC of handling net neutrality (WID Aug 20 p1). Ohlhausen has said the FTC would be ready to assert this authority if the FCC net neutrality rules were struck down.
So when the D.C. Circuit struck down FCC authority to impose net neutrality rules on broadband ISPs, it ostensibly opened a door for the FTC. But the decision left intact the FCC’s “general authority to regulate in this area,” just not to regulate broadband providers since the FCC hadn’t classified them as common carriers and so they were protected from certain regulations under the Communications Act. “Basically, what they said was, ‘Listen, you guys have all sorts of authority to regulate broadband,’” said Consumer Watchdog Privacy Project Director John Simpson. “The court said the FCC has jurisdiction,” Campbell said. The court affirmed this jurisdiction by upholding the FCC’s interpretation that Telecom Act Section 706 gives the FCC authority over the Internet space. “The court’s opinion regarding section 706 seemingly grants the FCC what might be construed as pretty broad authority,” said May. By reclassifying broadband Internet as a telecom service under Title II, the FCC could claim statutory authority over ISPs and institute net neutrality rules, citing Section 706. Verizon, which brought the case against the FCC, “picks this fight and they win the battle but in the process seem like they’ve lost the war,” said Grunes.
To some, the decision renders irrelevant the question of whether the FTC will increase its net neutrality role. “In the absence of clear jurisdiction, I think it would be odd for [the FTC] to try to insert jurisdiction at this point,” Campbell said. There was nothing in the decision that would make the FCC “have a sudden revelation” and decide “well, since we can’t impose common carrier-like obligations on the ISPs, we’re going to throw up our hands and just leave all of this to the FTC,” May said. “It puts it back pretty squarely in the FCC’s camp,” Grunes said.
‘Appeal’ of FTC Overseeing Net Neutrality
The court’s decision to uphold the FCC’s transparency requirement — which requires ISPs to disclose their network management practices — potentially “opens the door” for the FTC to file more complaints under Section 5 of the FTC Act against companies the FTC believes are deceptive with their disclosures, Simpson said. “That seems to me to be not as effective as simply having the regulatory agency [FCC] coming out with a clear set of rules about what you can and can’t do,” he said. “I’d much rather have the FCC take the action and just reclassify broadband as a telecom service.”
Free Press has organized a coalition of almost 100 organizations pushing the FCC to do that. “Right now there is no one protecting Internet users from ISPs that block or discriminate against online content,” the coalition wrote in an open letter sent Thursday to the FCC and signed by organizations including the Center for Democracy & Technology and Public Knowledge (PK). “Reclassification as a Title II is the best choice for consumers,” said a PK spokesman by email. “It’s great that the FCC will maintain authority in creating regulation for the Internet, however there has to be a balance of power. We think Title II creates that balance.”
May and others understand the “appeal,” as he put it, behind the desire to put net neutrality under the FTC’s watch. It would eliminate the longstanding special exemptions granted the communications industry, he said. May said there is an argument to be made — and “I’m not unsympathetic to it — that all of the FCC’s current regulatory authority over broadband should be transferred over to the FTC in this day and age, so that broadband regulation could be treated just generally as any other industry’s segment or marketplace are under the FTC’s general jurisdiction.” If ISPs are reclassified as common carriers, “that would indicate [the FTC has] some jurisdiction there potentially,” Campbell said. But if the FCC reclassifies and then create rules for ISPs, it “arguably means the FTC doesn’t have jurisdiction, or as a matter of comity shouldn’t exercise it,” he said.
There’s a “basic problem” in the current separation, AEI’s Bennett said. “The premise in the Communications Act is each one of these communications industries is a monopoly and because it’s a monopoly it needs to be regulated in a different way,” he said. “That was the case in 1934, but it’s no longer the case today.”
The broadband industry is best served by “the lightest touch possible” and the FCC’s touch outweighs that of the FTC, said EFF Intellectual Property Director Corynne McSherry. “No one should be in the position to issue broad regulations,” she said. “Our experience with the FTC is it’s a little less likely to take that approach.” Regulating the Internet is complex, she said, and “any government action needs to be specifically focused on a specific problem.” The FTC is “dedicated to alleviating specific consumer problems … as opposed to the FCC approach, which was to claim it has broad authority to regulate the Internet,” she said. McSherry cautioned it “really makes us nervous” to allow any government agency “to be the boss of the Internet.”
FTC Lacks Net Neutrality Expertise
The FTC has neither the size nor expertise to take on net neutrality, several experts agreed. “They’re fighting the good fight, but they’re understaffed and underfinanced,” Simpson said, which makes him “very skeptical” it should oversee net neutrality issues. The FCC and DOJ have longstanding expertise in broadband antitrust issues, said Grunes. “Learning on the job in doing antitrust investigations does not bode well,” he said. “These are difficult issues and they require, in my mind, an institutional capability and depth of industry knowledge that DOJ has, that the FCC has — the FTC not really nearly as much.” Splitting jurisdictions rarely benefits industry or government, Campbell said. “It’s generally not a good idea for multiple agencies to have concurrent jurisdiction.”
Congress could solve these problems, Bennett said. A Communications Act rewrite could definitively give net neutrality jurisdiction to the FTC, while reorganizing the two agencies to bring the FCC’s expertise to the FTC, he said. “Some of the people who work for the FCC today would go to work for the FTC.” Bennett sees this as a three- to five-year process. “It’s necessary,” he said. “If the status quo continues, we’ve essentially saddled the communications industry with uncertainty.” Each time a broadband company offers a new service, or is looking to merge with another company, it has “to get independent permission” from two agencies — either DOJ or FTC, and the FCC, he said. “There’s too much uncertainty and the costs of obtaining all those permissions are really too high.”
Campbell agreed: “It’s most appropriate for the FCC and the FTC to defer to Congress on these issues.” But he doesn’t envision the FCC losing its net neutrality authority, although it may wait until Congress acts to make its next move, he said. “It makes the most sense for them to look to Congress before enacting another round of prophylactic rules,” Campbell said. The agency’s Section 706 authority is still relatively vague, and “it would be odd for an agency to write us a whole set of rules based on relatively vague statutory authority,” he said.
“The reality is that after the decision, the FCC is going to continue to play an important role in overseeing the practices of Internet broadband providers,” May said. “But that doesn’t mean that there’s not also a role that the FTC should play,” he said, referring to the agencies’ overlapping jurisdictions. While Campbell may see the FTC increasing that role only in a “worst-case scenario” where no other agency has any net neutrality authority, and Simpson sees the FTC as a “last resort” on net neutrality, Brill maintains the commission is ready should it be needed. “Of course, the D.C. Circuit’s opinion is complex, and the FCC is understandably considering its options,” Brill said. “The FTC should stand ready to play our appropriate role on law enforcement and policy issues relating to net neutrality.” — Cory Bennett (firstname.lastname@example.org)
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How the FTC’s Hertz Antitrust Fix Went Flat
Wall Street Journal
December 8, 2013
Maurice Stucke, a University of Tennessee professor and lawyer with GeyerGorey LLP, said the latest Advantage bankruptcy ought to prompt some soul-searching by the FTC and the Justice Department.
If merger settlements “are going to be business as usual, the agencies need to spend more time examining how their remedies work out over the long haul,” he said. “You would think there could be more safeguards to prevent this from happening.”
Hertz Fix in Dollar Thrifty Deal Fails as Insider Warned
“‘What a screw-up,’ said Allen Grunes, an antitrust lawyer at GeyerGorey LLP in Washington who wasn’t involved in the matter. “It’s a huge embarrassment that it happened this quickly.”
The bankruptcy of Advantage shows how hard it is to recreate competition after mergers in concentrated markets, said Grunes, a former attorney with the Justice Department’s antitrust division.”
Ten years ago this spring, Zane published his definitive work on game theory which changed the way law-and-economics scholars and sophisticated prosecutors and defense counsel analyze whether, when, and how corporations and executive management teams should disclose white collar criminal conduct.
Phillip Zane be the only attorney whose colleagues and clients might expect to see an open book on games and strategy on his desk.
Ten years ago this spring, Zane published The Price Fixer’s Dilemma: Applying Game Theory to the Decision of Whether to Plead Guilty to Antitrust Crimes, 48 Antitrust Bull. 1 (2003), which changed the way law-and-economics scholars and sophisticated prosecutors and defense counsel analyze whether, and when, to settle high-stakes antitrust cases.
Zane’s article strongly suggested that in a number of common situations, pleading guilty (or even seeking the protections of the corporate leniency program) is not always justified. Zane’s article used a repeated, or iterative, version of the prisoner’s dilemma to demonstrate that pleading guilty was not always the best strategy for antitrust defendants facing criminal prosecution and civil liability in multiple proceedings or jurisdictions.
At the time, a few of the brainier Antitrust Division prosecutors breathed a sigh of relief when the defense bar did not seem to notice and they failed to incorporate Zane’s research into their negotiating strategies.
In 2007, Zane published “An Introduction to Game Theory for Antitrust Lawyers,” which he used in a unit of an antitrust class he taught at George Mason University School of Law. That paper was another milestone on the way to making game theory concepts accessible and useful to the antitrust defense bar.
Zane’s work, which now used game theory to criticize the settlement of the second Microsoft case and the Government’s approach to conscious parallelism, as well as the leniency program, was met with official grumblings within the Antitrust Division.
GeyerGorey LLP was founded on the principle that the chances for achieving the best possible outcome are maximized by having access to multiple, top-notch, cross-disciplinary legal minds that are synced together by an organizational and compensation structure that encourages sharing of ideas and information in client relationships.
As international enforcement agencies sprouted and developed criminal capabilities and as more hybrid matters included prosecutors from US enforcement agency components with sometimes overlapping jurisdictions, such as the Antitrust, Criminal, Civil and Tax Divisions of the Department of Justice, and the alphabet soup of regulatory agencies, particularly the Securities and Exchange Commission, it became apparent that Zane’s game-theoretic approach has application in almost every significant decision we could be called upon to make. Since Zane has joined us we have been working to factor in the increased risks associated with what we call hybrid conduct (conduct that violates more than a single statute). Our tools of analysis for identifying risks for violations of competition laws, anti-corruption laws, anti-money-laundering laws, and other prohibitions, include sophisticated game-theoretic techniques, as well as, of course, the noses of former seasoned prosecutors, taking into account, each particular client’s tolerance for risk.
To take one example, an internal investigation might show both possible price fixing and bribery of foreign government officials. How, given the potential for multiple prosecutions, should decisions to defend or cooperate be assessed? And how might such decisions trigger interest by the Tax Division, the SEC, the Commodities Futures Trading Commission, the Federal Energy Regulatory Commission or other regulators. When should a corporation launch an internal investigation? When should it make a mandatory disclosure? What should it disclose and to which agency, in what order? When should it seek leniency and when should it instead stand silent? These tools are valuable in the civil context as well: When should it abandon a proposed merger or instead oppose an enforcement agency’s challenge to a proposed deal?
These are truly the most difficult questions a lawyer advising large corporations is required to address. We are well positioned to help answer these questions.
Although still a distant second to monopoly, buyer power and monopsony are hot topics in the competition community. The Organisation for Economic Co-operation and Development (OECD), International Competition Network (ICN), and American Antitrust Institute (AAI) have studied monopsony and buyer power recently. The U.S. Department of Justice and Federal Trade Commission pay more attention to buyer power in their 2010 merger guidelines than they did in their earlier guidelines. With growing buyer concentration in commodities such as coffee, tea, and cocoa, and among retailers, buyer power is a human rights issue. (Continue Reading)
Allen Grunes shared his perspective with Bloomberg News regarding the proposed Publicis-Omnicom Merger. Click Below: