Category Archives: Latest Firm News

Crossing the Rubicon: Why the Comcast/Time Warner merger should be blocked. Global Competition Review, 25 February 2014

Posted on by

http://globalcompetitionreview.com/news/article/35322/crossing-rubicon-why-comcasttime-warner-merger-blocked/

Comcast and Time Warner Cable say their proposed $45 billion merger would not raise prices – and would lead instead to real benefits – for cable customers across the country. But the deal raises serious concerns of a creeping monopolist and the ability of a powerful media buyer to harm rivals, write University of Tennessee professor and GeyerGorey of counsel Maurice E Stucke and GeyerGorey partner Allen P Grunes.

 

It seems fair to ask: Is this merger a done deal?

 

Quite a few financial analysts and some antitrust lawyers think so. They have publicly suggested that the Department of Justice and the Federal Communications Commission likely will approve Comcast’s acquisition of Time Warner Cable (TWC), subject to a few conditions, such as the extension of the Comcast/NBC Universal modified final judgment.

 

In a press call, both Comcast and TWC CEOs voiced confidence that the transaction would receive the necessary approvals, pointing to the absence of any break-up fee (or reverse break-up fee) as evidence of their confidence. Comcast has also argued that the combination would not reduce competition because the two cable providers do not compete in local markets. So is the only unanswered question what, if any, modifications will there be to Comcast’s obligations under the existing NBC Universal Final Judgment?

 

One thought experiment is to suppose that the predictions are correct. Suppose the merger, while not sailing through the regulatory process, is likely to remain relatively intact. If true, ask the following question: if Comcast can acquire TWC, what prevents Comcast from extending its footprint across America by acquiring all the remaining cable companies?

 

That was our initial query. And it seems difficult to discern a limiting principle, since the same justification for the Comcast/TWC transaction could easily be offered for a Comcast/TWC/Charter deal. Cable companies tend not to compete with one another for customers.

 

But upon closer examination, we wonder whether Comcast even would need to acquire other cable companies after acquiring TWC, which Comcast’s CEO described as the “premier pure play cable company in the US”. In acquiring TWC, according to one analysis, Comcast’s services would become available to 70 per cent of the US population (up from its current potential reach of 42 per cent of the US population). After TWC, Comcast’s remaining conquests are Nevada and even-less-populated regions, like North Dakota. With due respect to those states’ citizens, why bother? But suppose Comcast later seeks to acquire a local cable company. After letting this merger through, can the DoJ seriously argue that Comcast’s expansion into Iowa may somehow “substantially lessen competition or tend to create a monopoly?” Hardly. Thus this deal with TWC is critical. Comcast is crossing the regulatory Rubicon.

As noted, Comcast principally argues that it does not compete with TWC in the same geographic markets. Without any competitive overlap, according to Comcast, the acquisition does not really change anything. But this is wrong for several reasons.

 

First, a merger can violate section 7 of the Clayton Act without the parties competing in the same geographic market. Suppose each state had its own cable monopoly. Comcast, under its logic, could legally acquire every cable company in the US. Even if New York consumers were unaffected when Comcast acquires other Midwest cable monopolies, Comcast’s acquisition of local monopolies affects the overall competitive landscape. Moreover, if Comcast’s rivals compete throughout the US, and if Comcast can disadvantage its rivals by raising their costs, then consumers can be adversely affected far beyond Comcast’s local cable monopolies.

 

The intent under section 7, as in other parts of the Clayton Act, is as courts recognised to cope with monopolistic tendencies in their incipiency – well before they have attained such effects as would justify a Sherman Act proceeding. Congress sought to prevent situations where “several large enterprises [were] extending their power by successive small acquisitions”.  Here Comcast is extending its power through a significant acquisition – one that expands its reach to most of the US population.

 

As the DoJ found, Comcast and TWC already have market power for both video and broadband services in numerous local geographic markets. Comcast is the nation’s largest provider of video services (22 million residential customers at the end of 2012), internet services (19.4 million customers), and voice services (10 million customers). At the end of 2012, 41 per cent of the homes and businesses in the geographic areas Comcast served subscribed to Comcast’s video services; 36 per cent of the homes and businesses subscribed to Comcast’s internet services. As the largest video content distributor in many areas of the country, Comcast controls the pipes. But it also creates content through its national cable networks (including CNBC, MSNBC, and USA Network), regional sports networks, broadcast television (including NBC and Telemundo broadcast networks) and movie studio Universal Pictures, which produces, acquires, markets and distributes filmed entertainment worldwide.

 

In acquiring TWC, the second-largest cable provider of video, high-speed data and voice services in the US, Comcast extends its market power in five geographic areas: New York State (including New York City), the Carolinas, the Midwest (including Ohio, Kentucky and Wisconsin), Southern California (including Los Angeles), and Texas. This aggregation of important local markets, we submit, has antitrust significance.

 

Second, the Congressional command for section 7 is to “preserve competition among many small businesses by arresting a trend toward concentration in its incipiency before the trend developed to the point that a market was left in the grip of a few big companies”, as the Supreme Court said in Von’s Grocery. It was fashionable before the economic crisis for antitrust technocrats to scoff at Von’s, and at considering any trend toward concentration and the incipiency standard in merger review.

 

But after the havoc caused by financial institutions too big to fail (or to criminally prosecute), the incipiency standard has reappeared in the DoJ and FTC’s horizontal merger guidelines. One potential consequence of this merger is to accelerate the trend toward concentration among content providers and cable companies. Indeed, the chairman of DISH Network reportedly commented that this deal, if approved, “certainly doesn’t hurt the case for consolidation” of satellite TV providers, notwithstanding the fact that the US blocked a deal between Dish and DirecTV in 2002.

 

Third, one reason Congress sought to thwart a market dominated by a few firms is to prevent coordination or collusion. With fewer competitors, coordination, either express or tacit, becomes easier. We are already beyond that point. The DoJ and New York recently charged Comcast, TWC, Cox, and Bright House Networks of agreeing to restrain competition with Verizon.

 

Basically the cable companies sought to extend their “triple play” of voice, video, and broadband services into a “quad play” that included Verizon’s wireless services. Verizon, however, offered its competing “triple play” of voice, video, and broadband FiOS services. Under their agreement, in regions where Verizon’s FiOS competed with the defendant cable companies, Verizon would have sold two “quad play” products – its own and its competitors.  Verizon further agreed not to offer consumers a better price for its own quad play product. Not surprisingly the competitors’ agreement, the DoJ alleged, would have diminished Verizon’s incentives and ability to compete against Comcast, TWC, and the other cable providers. Why did Verizon hamstring itself? The cable companies agreed not to partner with a competing wireless company. And Verizon received a commission from selling its competitors’ products. This recent enforcement action shows how highly concentrated markets are susceptible to coordination.

 

Fourth, Comcast’s “no-competitive-overlap” argument considers only cable and internet subscribers. It ignores how the competition laws were also enacted to protect sellers from powerful buyers. One concern that arose in the recent joint hearings between the DoJ and Department of Agriculture is anti-competitive buyer power, namely monopsony. The complaint was that tepid antitrust enforcement over the past 30 years has left farmers and ranchers at the whim of powerful buyers. The emerging academic scholarship suggests that monopsony power can occur at lower market shares than monopoly power. Thus another concern is how the acquisition increases Comcast’s power to disadvantage sellers of television content (and raise the costs of Comcast’s rivals).

 

Fifth, in investigating Comcast’s deal with General Electric that ultimately enabled Comcast to control NBC Universal, the DoJ discussed various ways Comcast could disadvantage its traditional competitors (direct broadcast satellite and telephone companies) plus the emerging online video programming distributors (OVDs). Netflix and other OVDs rely on internet service providers like Comcast and TWC to deliver their television shows and movies to subscribers. Thus the growth of OVDs, as the DoJ found, “depends, in part, on how quickly [internet service providers] expand and upgrade their broadband facilities and the preservation of their incentives to innovate and invest”. In acquiring TWC, Comcast will have even more power to thwart Netflix or other emerging OVD rivals by impairing or delaying the delivery of their content. (Although Netflix recently sought to contractually resolve this issue with Comcast, other OVDs may lack the clout.)

 

Comcast might respond that whatever these concerns’ validity, its current Final Judgments with the DoJ ameliorate them. Comcast will likely extend net neutrality to TWC subscribers, promise to increase its broadband speed, and expand in rural and low-income areas. Comcast has also expressed a willingness to divest certain systems serving approximately three million managed cable subscribers, to be below 30 per cent of nationwide multichannel video subscribers. Why is that not good enough?

 

The FCC’s 30 per cent limit on nationwide multichannel video subscribers that any single cable provider can serve was vacated in 2009 by the US Court of Appeals for the DC Circuit; in its recent 10-K, TWC “is unable to predict when the FCC will take action to set new limits, if any”. So that is hardly a barrier. At what point does the DoJ become concerned and wonder whether its NBCU Final Judgment will protect suppliers and consumers? The judgment, for example, requires Comcast to maintain its internet access speed above a certain level. But the DoJ cannot know what a competitive market could bring.

 

That is a fatal flaw of behavioural remedies. Comcast continues to deliver expensive and (according to some critics) inferior broadband. In the US, it lags Google Fibre and other internet service providers. And there is less incentive for Comcast, after acquiring TWC, to innovate and compete.

 

AT&T, like Comcast, described its proposed acquisition of T-Mobile as somehow pro-consumer, pro-innovation, and pro-investment. AT&T apocryphally predicted that if its merger in a highly concentrated industry were blocked, consumers would suffer from lower output, worse quality, and higher prices. But AT&T and T-Mobile abandoned their merger after the DoJ’s challenge, and consumers now benefit from the competition by T-Mobile. Generally, antitrust views competition, not its reduction, as the remedy for allocating scarce resources. This deal is by no means done.

 

Copyright 2014 Global Competition Review

 

Law360: Court Split Likely To Lead To More FCPA Whistleblowing; contributing authors Joan E. Marshall and Phillip C. Zane

Posted on by

Court Split Likely To Lead To More FCPA Whistleblowing

Law360, New York (February 13, 2014,  1:42 PM ET) — Two burgeoning —  and seemingly disparate — legal trends affecting Foreign Corrupt  Practices Act enforcement have emerged recently. These forces may  presage a marked increase in whistleblower-driven FCPA investigations as well as the shareholder suits such corporate fraud investigations tend  to inspire.
First, federal regulators and prosecutors continue their high-profile  expansion of FCPA enforcement. Federal authorities began to prioritize  such actions in the early 2000s, and the heightened whistleblower  protections afforded FCPA informants under the Dodd-Frank Wall Street  Reform and Consumer Protection Act have contributed to the program’s  ongoing growth in more recent years. Second, a recent divide among  federal courts suggests an erosion of the protections these  whistleblowers can expect to receive under federal law, but  paradoxically, may result in more violations reported within the United  States.
These dual realities suggest that federal authorities will continue to  process FCPA tips at a growing rate, and that this growth may accelerate as more employees report FCPA violations directly to the government.
The FCPA holds liable any company that is based and/or publicly traded  in the United States whose employees or agents engage in acts of bribery with foreign government officials.[1] The act is remarkably broad in  its scope, effectively covering the conduct of all individuals working  for or on behalf of any company based or traded in the United States.  This allows prosecutors to hold companies accountable for, among other  things, acts committed by foreign employees of attenuated subsidiaries  and contractors of the company.
For example, the U.S. Securities and Exchange Commission successfully prosecuted Dow Chemical Company after a fifth-tier Dow subsidiary bribed Indian officials to expedite  the approval of pesticide products in that country.[2] The FCPA also  covers payments to agents of foreign governmental entities — including  employees of companies that are owned or controlled by the foreign  state. This point is particularly salient for companies doing business  in countries like China, where state-controlled companies dominate the  economy.
While Congress enacted the FCPA in 1977, federal enforcement of the act  increased sharply in 2004. In the act’s first 23 years — from 1977 to  2000 — the SEC brought a total of nine FCPA enforcement actions.[3] In  the next three years, that total doubled.[4] In 2010, the SEC created a  new subdivision dedicated exclusively to FCPA prosecution,[5] and  between that year and 2013, the commission averaged almost a dozen new  FCPA actions a year.[6]
These prosecutions have yielded enormous government recoveries. The prosecution of the German manufacturing conglomerate Siemens AG, for example, produced a 2008 settlement under which Siemens agreed to  pay some $800 million in disgorgement and fines to the SEC and the U.S. Department of Justice in addition to more than $850 million to German authorities for bribing government officials on five continents.[7]
This marked increase in FCPA enforcement dovetails with the recent  federal priority of aggressively promoting whistleblowing through the  enforcement of the Dodd-Frank Act. Under Section 922 of Dodd-Frank, the  federal government rewards whistleblowers who report high-stakes[8]  corporate malfeasance implicating America’s securities laws with between 10 to 30 percent[9] of the amount recovered.[10]
In addition to establishing financial incentives, the Dodd-Frank Act  affords whistleblowers certain protections, including the promise of job reinstatement, compensation for legal fees, and the payment of twice  the amount of back pay owed to any whistleblower who has suffered  retaliation from an employer for reporting violations that qualify for  Dodd-Frank protection.[11]
A number of recent federal rulings, however, have conflicted in their  interpretations of the reach of Dodd-Frank’s whistleblower protections  and cast doubt on the certainty of protection for certain types of  whistleblower reports. In mid-October 2013, for example, a Massachusetts district court affirmed that Dodd-Frank protected whistleblowers  regardless of whether they reported the qualifying crime to the SEC, to  any other federal agency, or to their employer.[12]
Less than a week later, however, a Manhattan federal judge rejected this reasoning in Liu v. Siemens AG, and denied whistleblower protections to a Siemens employee who had reported alleged FCPA violations  internally.[13] Four days thereafter, a different judge in the same  court rejected her colleague’s logic and extended whistleblower status  to a different employee who had reported an alleged qualifying  securities crime only to his employer, and not to the government.[14]
The only federal appellate court to address this question has ruled that Dodd-Frank’s whistleblower protections apply narrowly. In July 2013,  the U.S. Fifth Circuit Court of Appeals denied whistleblower status to  the former Iraq country director for GE Energy in Asadi v. GE  Energy.[15] In that decision, the Fifth Circuit scrutinized a perceived  inconsistency between the two definitions of “whistleblower” within  Dodd-Frank’s Section 922 — one defining the term for incentives  purposes, the other to establish protections — and held that the act  provides whistleblower protections only to those who report a violation  to the SEC itself.[16]
Accordingly, the court concluded that the plaintiff — who had reported  potential FCPA violations only to his supervisors — was not a  “whistleblower” entitled to Dodd-Frank retaliation protections.[17] This holding rejected a string of trial-level federal decisions[18] and  dismissed an SEC-promulgated rule specifically designed to harmonize  Section 922’s inconsistent definitions.[19]
Importantly, the Fifth Circuit also declined to reverse the underlying  district court’s ruling that reports of FCPA violations made outside the United States did not qualify for Dodd-Frank whistleblower  protection.[20] Three months thereafter, the Southern District of New  York’s Liu ruling, which drew great inspiration from Asadi, stated  expressly what the Fifth Circuit had implied — that Dodd-Frank protects  only whistleblowers who make their reports while within the United  States.[21]
Together, Liu and Asadi hold that Dodd-Frank protects only those who  report qualifying FCPA violations (1) to the SEC (2) while within the  United States. The Liu court also emphasized the fact that the plaintiff in that case was a “Taiwanese resident,” seemingly suggesting that the  court believes the act protects only whistleblowers residing in  America.[22]
This is a critical shift in the law for FCPA whistleblowers and, where  applicable, their legal representatives. (Whistleblowers who wish to  report violations to the commission anonymously must retain a lawyer in  order to do so.[23])
According to the “2013 Annual Report to Congress on the Dodd-Frank  Whistleblower Program,” which the SEC’s Office of the Whistleblower  released in November 2013, the commission received 30 percent more FCPA  tips during fiscal year 2013 than in 2012.[24] Moreover, the SEC  received more foreign-based whistleblower tips from China than from any  country other than the United Kingdom and Canada.[25] Finally,  California generated the most domestic-based whistleblower tips of any  state by far: 375 whistleblower reports originated in the Golden State,  with the next-highest state — New York — registering only 215.[26]
Considering that the recent federal rulings call into question the  application of Dodd-Frank’s whistleblower protections to FCPA violations reported from outside the United States, one can expect more of these  tips to come from whistleblowers located in America — and particularly  in states like California that enjoy extensive and longstanding ties  with Chinese business interests.[27] One can also expect to see an  increase in employee whistleblowers who report FCPA violations directly  to the SEC in order to ensure their protection under Dodd-Frank. Both  factors should accelerate the growth[28] of the SEC’s whistleblower  program under Dodd-Frank.[29]
Although lawyers should not expect this to automatically translate to an increase in whistleblower representations — again, informants who do  not wish to report violations anonymously are free to proceed without an attorney — the plaintiffs bar should find cause for optimism in one of  the likely collateral effects of increased FCPA enforcement: the  shareholder class suits that will inevitably follow.
—By Fabrice Vincent and Kevin Budner, Lieff Cabraser Heimann and Bernstein LLP, Joan E. Marshall and Phillip C. Zane, GeyerGorey LLP, Archie Grubb, Beasley Allen Crow Methvin Portis & Miles PC, and Ben Fuchs
Fabrice Vincent is a partner and Kevin Budner is an associate in Lieff Cabraser’s San Francisco office.
Joan Marshall is a partner in GeyerGorey’s Dallas office. Phillip Zane is of counsel in the firm’s Washington, D.C., office.
Archie Grubb is a partner with Beasley Allen in Montgomery, Ala.
Ben Fuchs is a third-year law student at Tulane University Law School  and a former print and new media journalist who can be reached at  [email protected].
The opinions expressed are those of the author(s) and do not necessarily reflect the views of their firms, their clients, or Portfolio Media  Inc., or any of its or their respective affiliates. This article is for  general information purposes and is not intended to be and should not be taken as legal advice.
[1] 15 U.S.C. § 78dd-1 et seq. The Act creates an exception, however,  for payments made “to expedite or secure the performance of a routine  governmental action by a foreign official, party, or party official.” 15 U.S.C. § 78dd-1(b) (emphasis added).
[2] Press Release, “SEC Files Settled Enforcement Action Against the Dow Chemical Company for Foreign Corrupt Practices Act Violations,” U.S.  Securities and Exchange Commission (February 13, 2007) (available here:  http://www.sec.gov/litigation/litreleases/2007/lr20000.htm) (last  accessed February 10, 2014).
[3] “SEC Enforcement Actions: FCPA Cases,” U.S. Securities and Exchange  Commission (available here:  http://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml) (last accessed  February 10, 2014).
[4] Id.
[5] Press Release, “SEC Names New Specialized Unit Chiefs and Head of  New Office of Market Intelligence,” U.S. Securities and Exchange  Commission (January 13, 2010) (available here:  http://www.sec.gov/news/press/2010/2010-5.htm) (last accessed February  10, 2014).
[6] “SEC Enforcement Actions: FCPA Cases,” supra, n.3.
[7] See Press Release, “SEC Charges Siemens AG for Engaging in Worldwide Bribery,” U.S. Securities and Exchange Commission (December 15, 2008)  (available here: http://www.sec.gov/news/press/2008/2008-294.htm) (last  accessed February 10, 2014).
[8] The program provides such payments to whistleblowers only when the  government’s total recovery exceeds $1 million. This requirement is  mitigated, however, by the fact that the “total recovery” reflects  recoveries secured through all actions related to the whistleblower’s  provided information. In contrast, the anti-retaliation provision of the Sarbanes-Oxley Act of 2002 only provides for back pay. Compare 15  U.S.C. § 78u-6(h)(1)(C) with 18 U.S.C. § 1514A(c)(2).
[9] The SEC assesses three factors in determining how much to reward  whistleblowers: (1) the significance of the whistleblower-provided  information; (2) the level of assistance the whistleblower has provided  during the investigation and prosecution; and (3) the level of  importance the Commission places on deterring the sort of conduct under  scrutiny in the particular case. 15 U.S.C. § 78u-6.
[10] 15 U.S.C. § 78u-6.
[11] Id.
[12] Ellington v. Giacoumakis, CIV.A. 13-11791-RGS, 2013 WL 5631046, at  *9–10 (D. Mass. Oct. 16, 2013) (holding that a financial planner’s  internal reporting of his employer’s violation of securities laws  covered under the Dodd-Frank whistleblower section constituted a  protected act of whistleblowing).
[13] Liu v. Siemens A.G., 13 CIV. 317 WHP, 2013 WL 5692504, at *4 (S.D.N.Y. Oct. 21, 2013).
[14] Rosenblum v. Thomson Reuters (Mkts.) LLC, 13 CIV. 2219 SAS, 2013 WL 5780775 (S.D.N.Y. Oct. 25,  2013). As with the Ellington whistleblower, the plaintiff in Rosenblum  alleged retaliation for accusing the employer of violating the  Sarbanes-Oxley Act of 2002 rather than the FCPA. Whistleblowers who  report violations of either of these laws, among other securities laws,  qualify for protection under the Dodd-Frank Act so long as the alleged  violator is a publicly held company and the alleged violation meets the  other requirements outlined in Section 922 of the Dodd-Frank Act.
[15] Asadi v. GE Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013).
[16] Id. at 629.
[17] Id.
[18] Id. at 625.
[19] Id. at 630 (justifying its decision to deny Chevron deference to the SEC rule on grounds that since Section 922 “clearly  expresses Congress’s intention to require individuals to report  information to the SEC to qualify as a whistleblower under Dodd-Frank . . . we must reject the SEC’s expansive interpretation of the term  ‘whistleblower’ for purposes of the whistleblower-protection provision”) (emphasis added).
[20] Id. at 621.
[21] Liu v. Siemens A.G., 13 CIV. 317 WHP, 2013 WL 5692504, at *10  (S.D.N.Y. Oct. 21, 2013) (concluding that “[t]here is simply no  indication that Congress intended the Anti–Retaliation Provision to  apply extraterritorially” and warning that “an intrusion into the  employment law of a foreign nation could disrupt the “delicate field of  international relations,” an interest protected by the presumption  against extraterritoriality”).
[22] Id. at *9–10.
[23] 15 U.S.C. § 78u-6.
[24] The Commission received 149 FCPA tips during fiscal year 2013, as  opposed to 115 during fiscal year 2012. “2013 Annual Report to Congress  on the Dodd-Frank Whistleblower Program,” U.S. Securities and Exchange  Commission, pg. 20 (November 2013) (available here:  http://www.sec.gov/about/offices/owb/annual-report-2013.pdf) (last  accessed February, 2014).
[25] Id. at 22. The SEC did not indicate how many of these China-based tips invoked the FCPA.
[26] Id. at 21.
[27] Although the SEC did not provide data on FCPA tips by source  country, one can reasonably expect that a portion of reports originating in nations like China and Russia, where conditions create an inherently high risk of FCPA violations, allege FCPA violations. See, e.g., David  Voreacos, “China’s Bribery Culture Poses Risks for Multinationals,”  Bloomberg (November 21, 2013) (available here:  http://www.businessweek.com/news/2013-11-21/china-s-culture-of-bribery-poses-risk-to-multinational-companies) (last accessed February 10, 2014).
[28] The SEC’s Dodd-Frank whistleblower program reportedly received  3,001 tips in fiscal year 2012—the program’s first full year in  existence—and 3,238 in fiscal year 2013. The tips arrived from all 50  states as well as from 55 countries. “2013 Dodd-Frank Whistleblower  Report,” supra, n.24, at 1.
[29] Id. at 1–2.

All Content © 2003-2014, Portfolio Media, Inc.

Hays Gorey quoted in Policy and Regulatory Report’s “Ford can sue Fujikura for auto parts conspiracy, judge rules”

Posted on by

“‘But Ford still carries a heavy burden of proof, said Hays Gorey, an attorney with GeyerGorey who spent many years with the DoJ’s Antitrust Division. “Ford will still have the burden at trial of showing that US commerce was affected by the conspiracy,” he said. “At some point, the connection between the unlawful conduct and the injury becomes too remote or too problematic to establish injury even if there was a conspiracy.’”

Policy and Regulatory Report

Son’s Challenge to Cable Won’t End T-Mobile Deal Scrutiny

Posted on by

Son’s Challenge to Cable Won’t End T-Mobile Deal Scrutiny

“After buying control of third-largest U.S. wireless provider Sprint Corp. (S) last year, Son wants to acquire T-Mobile, the fourth-largest. Even if the merger sparks competition with cable, the elimination of one of four major wireless carriers won’t be overlooked by antitrust regulators, said Maurice Stucke, a law professor at the University of Tennessee.

“He has to overcome the presumption that this merger is anticompetitive,” said Stucke, a former Justice Department lawyer. ‘You can’t argue we should allow this market to be more concentrated in order to better compete in a separate market.’”

Sprint wants T-Mobile, but Don’t Count on it.

Posted on by

“T-Mobile made good on its promise as an innovator. That’s why Allen Grunes, an antitrust lawyer for Geyer Gorey in Washington, D.C., said the odds are stacked against a merger this time as well.

‘That tells the DOJ they were right,’ Grunes said. ‘The decision to block was the correct decision, so why would you let another telecom take them over?'”

http://money.cnn.com/2014/03/11/technology/sprint-tmobile/

Comcast Deal: If Netflix Is Fine, Regulators Might Be Too

Posted on by

Comcast Deal: If Netflix Is Fine, Regulators Might Be Too

“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.

Maurice Stucke comments on Comcast deal to CNNMoney

Posted on by

Comcast deal to face antitrust hurdles

“”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 comments on Comcast merger in Gigaom and Wall Street Journal’

Posted on by


Everything you need to know about the proposed $45B Comcast-Time Warner merger

“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.'” 

Allen Grunes Quoted in Washington Internet Daily: Increased FTC Net Neutrality Role Seen Unlikely, Following D.C. Circuit Decision

Posted on by

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 ([email protected])

 

Reprinted with permission of Warren Communications News Inc. —

800-771-9202 or www.warren-news.com

Do not further redistribute without further permission.

Maurice Stucke: Zen Compliance Best Practices

Posted on by

No compliance officer worth her salt would argue with this statement: “We strive to maintain an ethics-based organization.” But compliance teams, with all of the internal and external scrutiny, with all the regulations and increased enforcement activities, with the ever-present mantra of “always do the right thing,” still to this day have difficulty instilling a true ethics-based culture into their compliance programs. They struggle to define it, to measure it and prove its ongoing value to the organization.

http://www.tnwinc.com/6715/zen-compliance-best-practices/