By David Zvirman, Staff Writer
The news of the $85.4 billion purchase of Time Warner by AT&T has brought considerable speculation of how the deal will impact consumers and whether it should be approved by federal regulators.[1] There are also other important questions to ask, however. Who are these federal regulators? How do they have the authority to review this deal? To answer these questions, we need to better understand the two entities that will be reviewing this deal: the Department of Justice (DOJ) and the Federal Communications Commission (FCC).[1]
The DOJ is the first entity that will review it.[1] The DOJ derives much of its authority to review this deal through two key acts of Congress.[2] The first is the Sherman Antitrust Act of 1890, which made every contract, conspiracy, or trust that tried to restrain free commerce illegal.[2][3] The second is the Clayton Act of 1903, which expanded on the Sherman Act by making specific acts like discrimination in pricing, advertising, and rebates illegal.[2][4] It also set up methods by which injured parties, including the U.S., can file suit against offenders of antitrust laws.[4]
To allow for more efficient enforcement of these laws, the Antitrust division of the DOJ was created in 1933.[2] When the DOJ reviews large mergers or acquisitions, parties have to file for pre-approval, as AT&T and Time Warner will certainly have to.[5] The DOJ will then review the facts to determine if the action would violate the Clayton Act and negatively impact competition.[5]
If it does find evidence that an action will harm competition, the DOJ can negotiate with parties to lessen its impact on competition to acceptable levels.[5] This can include things such as the selling off of assets by parties or any other action that the DOJ feels would restore balance to the marketplace.[5] In their application to the DOJ, AT&T and Time Warner will have to show that their acquisition will not harm competition or violate the Clayton Act if they hope for a relatively easy approval.
The second entity that may review the purchase is the FCC.[1] The FCC was created through the Communications Act of 1934.[6] It was made to regulate interstate commerce in communication by wire and radio and to make sure these industries did not fall prey to monopolies.[6][7] This policy was expanded on with the passage of the Telecommunications Act of 1996.[6] This act continued the FCC’s regulation of telecommunication industries but was also meant to encourage competition and ease entry into markets.[6]
The FCC’s ability to regulate comes through its issuing of licenses in the telecommunication industry, which AT&T and Time Warner both hold.[5][8] Through theses licenses, the FCC is able to control who has them, who can transfer them, and how many parties have.[5] By controlling these licenses, the FCC can help encourage competition in the marketplace.[5][9]
Like the DOJ, parties must submit an application to the FCC for review of any larger merger or acquisition involving their licenses.[5] Where the DOJ focuses on both Clayton Act violations and competition, the FCC focuses on whether an action will negatively impact current and future competition in the market.[5] The FCC will also look to see if a merger, acquisition, or transfer of a license will impact its ability to regulate an industry.[5]
AT&T and Time Warner will likely have to face FCC review. They could try to circumvent that by having Time Warner transfer its only FCC license to a third party.[10] This action, however, will bring FCC review itself — so it seems unlikely that this deal will be able to fully escape the purview of the FCC.
In conclusion, the FCC and the DOJ will be very busy in the coming months as AT&T and Time Warner try to get their deal approved. Both entities will be looking to see if the deal negatively impacts current and future competition, if it violates the Clayton Act, and if it will affect the FCC’s ability to regulate. Only time will tell if this deal will be approved, but I hope this blog post helps clear up what federal regulators will be looking for when they make their review and how they have the authority to do this.
Sources
[1] http://www.npr.org/sections/alltechconsidered/2016/10/25/499185907/the-at-t-time-warner-merger-what-are-the-pros-and-cons-for-consumers
[2] https://www.justice.gov/atr/history-antitrust-division
[3] 15 U.S.C.A §§ 1-7
[4] 15 U.S.C.A §§ 12-27
[5] Rachel E. Barkow & Peter W. Huber, A Tale of Two Agencies: A Comparative Analysis of Fcc and Doj Review of Telecommunications Mergers, 2000 U. Chi. Leg. Forum 29 (2000).
[6] http://www.allgov.com/departments/independent-agencies/federal-communications-commission-fcc?agencyid=7325
[7] 47 U.S.C.A § 151
[8] 47 U.S.C.A § 214(a)
[9] 47 U.S.C.A § 310(d)
[10] http://fortune.com/2016/10/24/att-time-warner-fcc-oversight/
