DoJ ANTITRUST CHIEF OUTLINES ‘ANALYTICAL’ APPROACH TO MERGER REVIEW
In frank outline of his antitrust views, new Justice Dept. Antitrust Chief Charles James said he didn’t see his job as working to assure large numbers of competitors in particular industries, nor to automatically stop a company from developing market dominance. Speaking at Practising Law Institute conference in Washington, James indicated his views didn’t signal laissez-faire approach, but he believed in analyzing mergers, Sec. 271 applications and other reviews on case-by-case basis taking into account changing industries. James’s comments appeared to warm hearts of business representatives in audience. “I think I'll quote him in filings with the FCC,” one attorney joked.
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“We want this audience to know we're not going to just jump to conclusions” that mergers of companies in similar product lines automatically raise anticompetitive questions, James said. “Convergence could cause us to redefine our markets.” He said opponents sometimes complained that merger would disrupt markets but it was FCC’s job, not DoJ’s, to assure there were “large numbers of competitors.” Companies should have “opportunity to compete efficiently” as long as they “do so without hurting others’ efficiency,” he said. He also stressed that DoJ “is not an anti-tipping agency,” meaning “we do not see our role as looking for markets about to tip and throwing our bodies in the way.”
Mergers can have “beneficial effects in terms of efficiency,” he said. “We need to intervene where a particular company with market power engages in anticompetitive behavior [but] not to stop firms from developing dominant positions,” James said. In competitive market, “someone occasionally wins and that is not necessarily an anticompetitive result.” It’s not Justice’s role to “punish success,” he said: “Economics of scale and scope matter.” He said DoJ won’t be swayed by vague arguments that one’s company has to get bigger to compete. “We don’t just take you on faith on this one,” he said. “If your plans are not fleshed out, if you don’t know, you don’t get to merge on an economy of scale [basis],” he said.
On Sec. 271 applications, James said his division needed facts to substantiate claims that markets were more open. “I can’t emphasize enough the importance of substantiating these claims.”
On separate wireless panel, industry and FCC participants focused on thorny issue of how to free up more spectrum. In Nextel White Paper submitted to FCC last month on spectrum swap covering bands such as 700 MHz and 800 MHz, Peter Tenhula, senior legal adviser to FCC Chmn. Powell, said Commission “will examine all options.” Interference has been issue between commercial wireless operators and public safety users in 800 MHz band for quite some time, he said. “Nextel has proposed one approach,” he said. White Paper has drawn criticism from private wireless users, including electric utilities, because it would compensate public safety users for moving to different band, but private users wouldn’t be protected. “Since Sept. 11, the value of public safety spectrum has definitely gone up,” he said. He said Nextel plan would leave private business/industry land mobile users to figure out their own payment options. Nextel had asked for expedited, 6-month consideration of its plan at FCC. While Tenhula didn’t elaborate on precise timing, he said Commission would seek comment on options in those bands and “we will probably do it pretty quickly.” Of Nextel spectrum plan, Brian Fontes, Cingular Wireless vp-federal relations, said: “They bought a Volkswagon and they want to trade it on a Cadillac.” Nextel proposal would bring public safety bands closer at 700 MHz in exchange for Nextel’s receiving spectrum in bands such as 2.1 GHz, where New ICO owns mobile satellite service licenses. Fontes said that at FCC “a variety of different Craig McCaw proposals” are pending.
FCC Wireless Bureau Chief Thomas Sugrue said Commission’s Chief Economist David Sappington was heading task force that involved Wireless Bureau, Office of Gen. Counsel and Office of Plans & Policy on process for evaluating wireless license transfers at agency after spectrum cap sunsets. Commission voted last month to repeal wireless spectrum cap by Jan. 1, 2003, while raising it to 55 MHz in all markets during transition period. At time, FCC said it would consider guidelines required to move from bright-line approach of cap to case-by-case review of wireless license transfers. Tenhula said FCC staffers were working “very, very closely” with Dept. of Justice on procedural and substantive guidelines for evaluating wireless license transfers. Point of guidelines is to have “transparency and certainty” when such transactions come before Commission for review, he said. In response to question about post-spectrum cap policies, Tenhula cited testimony that Powell gave before House panel several years ago on merger reviews as providing guidance on where Commission was heading. Idea was to “keep the ball rolling on these transactions,” including midlevel review of whether there were substantial issues that would require subsequent investigation.
James joined others at conference in questioning long- term value of competitive resale and use of unbundled network elements (UNEs), saying competitive use of incumbent facilities for long term was “not going to get the industry where it should be.” Earlier in day, FCC Comr. Abernathy referred to UNE platform approach by saying “I have to ask myself is it real competition or not.” FCC Common Carrier Bureau Chief Dorothy Attwood emphasized that notice of proposed rulemaking approved Wed. to initiate UNE review “doesn’t reach conclusions,” simply asks questions at this point.