IP: doc. on FTC/DOJ media merger issue

[David Farber <dave@farber.net>]

I assume written by Chester et al

>Date: Wed, 23 Jan 2002 10:29:19 -0500
>To: farber@cis.upenn.edu
>From: Jeff Chester <jchester@starpower.net>
>
>
>Dave--my best to you and family.
>
>This document has been given to the Hill, as background for today's
>meeting between Sen. Hollings staff and FTC/DOJ.  It shows real
>differences in the role which the FTC plays when reviewing mergers. It
>underscores why the FTC must continue reviewing media/communications
>mergers.   It also illustrates how the debate around the need to make the
>clearance process more expeditious is a fallacious one.   Best
>
>
>Procedural Improvements for Clearance.  The bulk of the proposed clearance
>improvements involve process and timing; industry allocations are a
>separate issue.  According to the FTC Chairman, the changes will improve
>the clearance process and ensure that clearance disputes are resolved
>within 10 days.  The agencies may enact these process changes without
>allocating industries between the two agencies.
>
>Clearance Statistics.  The press release to announce the abandoned
>clearance agreement stated that, over the past two years, 32 disputed
>clearance matters took 15 days or longer to resolve.  Several statistics
>may help put this number in context:
>
>*       What the statistic encompasses is not clear, but some number -
>perhaps as many as half of the 32 cited - may represent conduct
>investigations that do not involve mergers reported under
>Hart-Scott-Rodino.  Those disputes not involving such mergers, of course,
>do not delay mergers and acquisitions, and the disputes generally do not
>hinder any other business activity.
>
>*       32 matters in two years is only a fraction of the perhaps 600
>cleared investigations and approximate 7,000 merger filings reviewed by
>the agencies over the last two years.  (Probably around 500 of the cleared
>investigations were merger investigations and 100 or so non-merger
>investigations.)
>
>*       Chairman Muris states that the procedural and timing improvements
>would establish 10 days as the maximum delay period due to clearance
>disputes.  These timing improvements could be effectuated whether or not
>the FTC and DOJ allocate the industries.
>
>*       Despite some press accounts of at least one antitrust practitioner
>claiming that the agencies have issued unnecessary second requests at
>great expense to the parties because of clearance disputes, no one has
>identified a specific transaction where such a thing has happened. Indeed,
>as a practical matter, whenever merging parties' counsel believes that
>they can provide quick evidence that shows a second request should not
>issue (or should not have issued) they may provide such evidence to both
>agencies' staff during any clearance period.  (Or to the agency staff
>issuing the second request after the request has issued and before the
>merging parties choose to undertake a full search for documents.)
>
>FY01: HSR statistics not public yet.  (Likely around 2200 merger filings.)
>
>FY00: 4749 Transactions 339 Investigations cleared      98 2d Requests  80
>Challenges
>
>FY99: 4340 Transactions 391 Investigations cleared      113 2d
>Req.             77 Challenges
>
>FTC Act Section 5.  Section 5 encompasses a greater scope of
>anticompetitive conduct than does the Sherman Act, so it allows the FTC to
>remedy conduct that can not be reached by DOJ under the Sherman Act. For
>example, the Commission can reach facilitating practices under Section
>5.  Facilitating practices (practices that facilitate horizontal
>collusion) are more typically a problem in oligopolistic industries such
>as media markets.  The facilitating practice count was a critical aspect
>of the CD MAP case involving the five major music companies.  Because of
>the legal parameters of a Sherman Act case, DOJ's bringing such a case
>might have proved problematic.
>
>Administrative Litigation.  Congress established the FTC as an expert
>antitrust body with its own administrative litigation process to handle
>novel, cutting-edge antitrust cases.  For example, administrative
>litigation has helped develop the law in such novel areas as antitrust
>immunities (Ticor Title Insurance; Superior Court Trial Lawyers).  This
>ability could be critical when litigating deregulating markets such as
>cable and when involving complex conduct cases.
>
>Independent Agency.
>*       Congress provided that the FTC would be comprised of five members
>with staggered seven-year terms.  By law, only three Commissioners may be
>from the same political party.  The structure allows for more diverse
>views, greater independence, and greater continuity in decision-making.
>
>Policy-Making Agency.
>*       The FTC has power to conduct industry studies and prepare reports
>to Congress (and post-enforcement evaluations) under Section 6.  Unlike
>the DOJ, Congress gave the FTC authority to use compulsory process to
>evaluate public policy issues, conduct industry studies, and perform
>retrospectives on past enforcement actions.  This power is especially
>important in emerging, dynamic, and deregulating markets, such as cable,
>media, and software.  Examples of recent Commission workshop and report
>subjects include:
>
>         *               Business-to-Business (B2B) Electronic
> Marketplaces (2000)
>         *               Competition Policy in the World of E-Commerce (2001)
>         *               Electronic Signatures in Global and National
> Commerce Act (2001)
>         *               Internet Retailers, Marketers and Suppliers (2001)
>         *               Mobile Wireless Web, Data Services and
> Beyond:  Emerging
>                 Technologies (2000)
>         *               Marketing Violent Entertainment to Children (2000
> and 2001 Reports on Movies, Video Games, and Pre-Recorded Music)
>         *               Divestiture Study (1999 Policy Report)
>
>Synergies with Consumer Protection Activities.  The Commission's consumer
>protection mandate has provided the agency growing expertise in high-tech
>industries.  For example, consumer fraud cases involving Hewlett Packard
>and Microsoft (PDAs); AOL, CompuServe, and Prodigy (ISP services); and
>Sharp Electronics (Mobile/Hand-held PCs).
>
>
>The Commission's Recent Media, Entertainment and High Tech
>Investigations/Cases
>*       Sony et al. (compact disc cooperative pricing policies)
>*       Warner Communications and Vivendi Universal (price fixing and
>advertising restraint)
>*       Time Warner/EMI (pre-recorded music merger)
>*       Time Warner/Sony (acquisition of CDNow)
>*       AOL/Time Warner (broadband merger)
>*       Random House (book publishing and resale price maintenance)
>*       MSC.Software (computer-aided engineering software merger)
>*       Hearst (pharmaceutical database merger)
>*       Automatic Data Processing (salvage yards parts trading database
>merger)
>*       Cablevision/TCI (New Jersey cable television systems merger)
>*       Barnes & Noble/Amazon (publishing and Internet retailing merger)
>*       Time Warner/TCI (cable and cable programming merger)
>*       VNU N.V./Nielsen Media Research (advertisement media service merger)
>*       Solution 6 Holdings/Elite Information Group (billing software merger)
>*       Cooperative Computing (computer management information systems
>merger)
>*       Autodesk./Softdesk (computer-aided design engines merger)
>*       Cadence Design (software layout environment for chip design merger)
>*       Adobe Systems (computer programming and software merger)
>*       Boulder Ridge Cable TV (cable television restraint)
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