AOL ATTORNEY ATTACKS FTC’s AOL TW MERGER REVIEW
Charging that FTC strayed far from antitrust law, antitrust attorney representing AOL in its takeover of Time Warner (TW) criticized agency’s year-long merger review that led to its AOL-TW consent decree. Speaking at American Bar Assn. conference in Washington Fri., Jones, Day, Reavis & Pogue partner Joe Sims said FTC pushed for merger conditions that had nothing to do with any real antitrust violations. He also contended that agency based its open access and interactive TV (ITV) conditions on almost entirely unsupported theoretical “claims” that new AOL TW colossus already controlled high-speed data, ITV and instant messaging (IM) markets and would move quickly to quash competition in them. “I think what you see here is the antitrust equivalent of throwing deep,” Sims said, making football analogy. “When you throw deep, you end up with a lot of interceptions and incompletions.”
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Sims hastened to add that AOL had no problem with consent decree itself, just process that led up to it. While he called FTC moves “unjustified and inappropriate,” he said company accepted decree because its conditions were cheaper and easier than bruising legal fight with govt. “We're perfectly happy with the decree given the options before us,” he said. “We negotiated the best decree we could.” But, he said, “we're unhappy with how we got there… This process should have concluded with the Commission closing its doors and going home.”
FTC Comr. Mozelle Thompson defended agency’s action, putting blame squarely on companies. He stressed that FTC had “real concerns” about potential “antitrust harms,” which he said AOL and TW had avoided addressing for many months. He said concerns were so strong that it wasn’t clear agency would approve merger and consent decree until 30 minutes before commissioners met to vote. “I don’t want anyone in this room to think we weren’t ready to sue,” Thompson said. “This transaction was that close.”
Thompson assailed AOL and TW for seeking to game merger review process with big early publicity blitz and not treating FTC commissioners and staffers with honesty, candor and respect. “Part of this is an issue of credibility,” he said. “My biggest disappointment is that I'd ask questions and get answers not jibing with reality.” Expressing concerns about “moving parts” of conditions that FTC approved, he said he also “would have preferred a structural remedy had one been offered” but companies never suggested one to agency.
Center for Media Education Exec. Dir. Jeffrey Chester, one of several consumer group leaders who aggressively fought merger, praised FTC for imposing strict conditions on AOL TW. Despite Sims’s arguments about antitrust law and companies’ promises that they wouldn’t block ISP and ITV rivals, Chester said agency had to act to foster broadband and ITV competition and keep Internet open. “This was about the future of the Internet, the future of our democracy, the future of our media systems,” he said. “It’s not just a merger of giants… Architecture is destiny.”
Chester contended that FTC also had to act because FCC, in spite of its broad public interest authority, was “politically incapable of dealing with many of these issues.” Calling FCC “just hopeless,” he said only FTC had “political strength” to tackle open access and ITV issues. Chester said consumer groups would challenge AOL TW to “live up to the spirit, not just the letter, of the order” in opening up its high-speed cable lines to independent ISPs and ITV content providers. He said consumer groups also would pursue other MSOs to do same.
Attorney Marc Schildkraut, who represented Walt Disney in its fervent opposition to AOL TW merger, agreed FTC had to intervene because of TW’s huge cable system and network holdings and AOL’s dominance in online and IM service markets. Schildkraut said both companies also had track record of “exclusionary practices,” including TW’s removal of ABC and Gemstar from its cable systems in separate programming disputes and AOL’s refusal to link its IM services with rival services. He said merger shifted AOL’s economic incentives away from its previously open business model to cable industry’s closed model. “The feared result was a closed system,” he said.