This DC Turf War Goes in Reverse

Hmm, just why would the FTC cede oversight of high-profile media mergers to Ashcroft's Justice Dept.?

Rule No. 1 in the arcane ways of Washington is that no federal agency ever surrenders turf voluntarily. No how, no way. So, on Jan. 17, news of the Federal Trade Commission's decision to quietly cede its antitrust review of media mergers to the Justice Dept. raised more than a few eyebrows.

"Who gives up stuff in this town?" asks Gene Kimmelman, co-director of advocacy group Consumers Union. Especially over something as important as high-stakes consolidation in the media industry, such as the upcoming regulatory review of the proposed multibillion dollar merger between Comcast and AT&T Broadband.

Even more curious: Republican FTC Chairman Timothy Muris failed to consult with the FTC's Democratic members until the last minute, complains Mozelle Thompson, a Democratic FTC commissioner, a point the agency confirms. What's more, Muris neglected to inform Senate Commerce Committee Chairman Ernest F. Hollings (D-S.C.), the FTC's congressional overseer. Hollings says he has "strong concern why the authorizing and appropriating committees were never consulted." The upshot? The plan lies in limbo, and the agencies abruptly called off the announcement of the jurisdictional shift, even as reporters were assembling in anticipation of the joint press conference.


  The plan may still be resurrected if Hollings gets on board. But that raises new questions: Some critics charge that media mergers might get an easier pass at the Justice Dept. Consumer groups contend the Cabinet agency can be subject to greater political pressure from the Administration than the five-member independent FTC.

The groups further charge that Justice, led by Attorney General John Ashcroft, has already been soft on Microsoft. "The biggest New Year's gift the Bush Administration could give media conglomerates would be to ice out the FTC from the regulatory process," says Jeff Chester, executive director of the Center for Digital Democracy.

Defenders say the agencies were only trying to streamline what everyone agrees is a lengthy review process and that they tripped by forgetting to consult Congress. Perhaps. But a lot is clearly at stake in the midst of a media-merger frenzy. According to Thomson Financial, the industry announced pure-media deals of $100 billion in 2001, more than any other industry.


  Under the plan devised by Justice and the FTC, Justice would monitor media, telecom, and software mergers, while the FTC would have primary jurisdiction over health-care, energy, and defense cases. That doesn't suit Democratic FTC Commissioner Thompson: "We give up all the hot stuff," he complains. "We get the Old Economy, they get the New Economy."

Private antitrust lawyers who helped Justice and the FTC on their plan insist that nothing nefarious is afoot. They say companies across the board -- not just in media -- complain about the pokey merger-review process. The plan, they say, was intended to speed things up.

If the feds can shorten the time it takes to determine which agency will review which cases, that would help a lot. "To infer a political agenda is just wrong," says Steve Sunshine, an antitrust attorney with Shearman & Sterling and a top Justice antitrust official in the Clinton Administration. Adds former GOP Justice antitrust official Joe Sims, now a partner at Jones, Day, Reavis & Pogue: "The motivation was to make the process work better." Sims represents AOL Time Warner, but he says he had no conversations with any client about the matter.


  Historically, the FTC and Justice have divvied up merger reviews according to their respective industry expertise. And the agencies had not yet decided which would review the AT&T Broadband-Comcast deal, which would involve the merger of the nation's first- and third-biggest cable operators. The FTC has traditionally handled cable cases and Justice telecom.

Under former Democratic Chairman Robert Pitofsky, the FTC did rigorous reviews of the AOL Time Warner merger, and before that, the Time Warner-Turner Broadcasting combo. Indeed, even under GOP Chairman Muris, the FTC could still come up with a three-vote majority -- comprising Democratic Commissioners Thompson and Sheila Anthony and GOP Commissioner Thomas Leary -- to take a tough stance on a merger such as AT&T-Comcast. AT&T says it did not participate in any discussions with Justice or the FTC about their new turf plan. Comcast declined to comment.

Muris also declined to comment. And Justice, for now, has no comment other than to express hope that the plan gets back on-track after a hastily scheduled meeting with Hollings set for Jan. 23. If the agencies prevail, media companies may have cause to celebrate -- if only because it's easier to deal with one antitrust chief at Justice than five at the FTC.

By Catherine Yang in Washington and Tom Lowry in New York

Edited by Beth Belton

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