Antitrust Lawyer Blog Commentary on Current Developments

Articles Posted in FCC Antitrust Highlights

On November 10, 2014, President Obama forcefully stated his position on net neutrality.  While acknowledging that the FCC is the agency that has the authority to create new rules protecting net neutrality, President Obama stated that the FCC should create “the strongest possible rules” to stop “paid prioritization” and other actions that favor the transmission of certain content.  President Obama believes all content providers should be treated equally.  Therefore, he is not in favor of the deals that Netflix cut with Comcast, Verizon, AT&T and Time Warner Cable earlier this year.  Indeed, President Obama does not believe that the cable company or phone company should act as a gatekeeper.

President Obama lists four bright-line rules:

  • No blocking. If a consumer requests access to a website or service, and the content is legal, your ISP should not be permitted to block it. That way, every player — not just those commercially affiliated with an ISP — gets a fair shot at your business.

On September 17, the Senate Judiciary Committee held a hearing — “Why Net Neutrality Matters: Protecting Consumers and Competition Through Meaningful Open Internet Rules.”  The witnesses were:

·            Brad Burnham – Managing Partner, Union Square Ventures

·            Ruth Livier – Writer, Independent Producer, and Actress

In a September 4, 2014 speech, Federal Communications Commission (“FCC”) Chairman Tom Wheeler expressed concerns about the lack of broadband competition in the United States.

Chairman Wheeler explained that access to a 25 Mbps connection is becoming essential (or “table stakes”) to consumers with a majority of Americans having access to 100 Mbps or higher connections. However, “just because most Americans have access to next-generation broadband doesn’t mean they have competitive choices.”  Indeed, Chairman Wheeler believes that most Americans really have no competitive choices.  Chairman Wheeler applauded Google and AT&T’s introductions and plans to introduce gigabit broadband to markets around the country, but worried that characterizing competition in many markets as a duopoly “overstates the case” because of the lack of competitive opportunities open to consumers.

To address these concerns, Chairman Wheeler explained the FCC’s Agenda for Broadband Competition, which includes four broad principles: (i) protect existing competition; (ii) encourage greater competition where possible; (ii) create competition where it does not exist in a meaningful way; and (iv) promote broadband deployment where competition cannot be expected to exist.  Through the application of these principles, Chairman Wheeler hopes to improve broadband performance, promote competition, and encourage innovation.

On September 3, 2014, the FCC announced it reached a settlement with Verizon for $7.4 million.

The settlement ending an investigating into Verizon’s alleged misuse of customer information. The FCC’s Enforcement Bureau was investigating Verizon’s alleged failure to notify approximately two million new customers of their privacy rights.  Specifically, Verizon allegedly failed to provide to  new customers instructions for how to opt-out from alleged Verizon’s use of their personal information for marketing purposes.  As part of the settlement, Verizon must inform all new customers of their opt-out rights on every bill for three years.

The $7.4 million settlement is the largest in FCC history for a settlement of an investigation related solely to the privacy of telephone customers’ personal information.

In June and July of 2013, the Department of Justice's (“DOJ”) Antitrust Division, at the request of the Federal Trade Commission (“FTC”), filed two civil suits against alleged violators of pre-merger notification filing requirements under the Hart-Scott-Rodino (“HSR”) Act of 1976.

HSR Act

Currently, the HSR Act imposes notification and waiting period requirements on individuals and companies over a certain size before they can consummate acquisitions of stock or assets valued at more than $70.9 million. The purpose of the HSR Act is to provide federal antitrust enforcement agencies an opportunity to investigate proposed transactions and determine whether the transactions would violate the antitrust laws. If the reviewing agency determines that a transaction violates the antitrust laws, it may seek to block that transaction before the waiting period expires. Therefore, the antitrust agencies take HSR violations very seriously; even ones where no competition overlaps exist. Indeed, a party is subject to a maximum civil penalty of $16,000 a day for each day it is in violation of the HSR Act.

In light of the Department of Justice's attempt to block telecom giant, AT&T from acquiring T-Mobile, the Hudson Institute recently released a report discussing antitrust policy as it applies to the growth of innovation. See Irwin Stelzer, Antitrust Policy in an Age of Rapid Innovation, BRIEFING PAPER (Hudson Inst., Washington, D.C.) Oct. 2011.

Key Takeaways:

Policy Lessons from AT&T: Antitrust law remains powerful and relevant in combating anti-competitive activity and for preserving macroeconomic efficiency. Despite powerful lobbying efforts by large tech companies such as AT&T, the DOJ Antitrust Division remains relatively independent from political pressure. Moreover, Stelzer maintains that government regulation in a high-tech economy remains relevant, contrary to some critics of antitrust policy who say that “what was good for the days of steel-making and a brawn-driven economy is bad for a high-tech, brain-driven economy.”

On October 13, 2009, the Department of Justice (“DOJ”) settled with AT&T Inc. (“AT&T”) regarding its $944 million acquisition of Centennial Communications Corp. (“Centennial”).

Specifically, AT&T is required to divest its assets in eight Cellular Marketing Areas (“CMA”), as defined by the Federal Communications Commission (“FCC”), in southwestern and central Louisiana and southwestern Mississippi in order for the transaction to be consummated. According to the DOJ, AT&T and Centennial are each other’s closest competitors in various markets. Therefore, the transaction would have reduced competition for mobile wireless telecommunications services in the eight CMAs.

The proposed transaction is still under review by the FCC.

On September 22, the Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) announced that they will solicit public comment and hold joint public workshops to explore the possibility of updating the Horizontal Merger Guidelines that are used by both agencies to evaluate the potential competitive effects of mergers and acquisitions.

The Merger Guidelines describe the analytical framework and specific standards normally used by the agencies in analyzing mergers. The Guidelines are intended to reduce the uncertainty associated with enforcement of the antitrust laws in the merger area. The last significant revision of the Guidelines was in 1992, however, the agencies issued a detailed Commentary on the Guidelines in 2006.

The goal of the workshops will be to determine whether the Guidelines need to be updated. In other words, do the Guidelines accurately reflect the current practice of merger review? Do the Guidelines take into account legal and economic developments that have occurred since 1992? Topics to be discussed include: the overall method of analysis used by the agencies; the use of more direct forms of evidence of competitive effects; market definition; market shares and market concentration; unilateral effects, especially in markets with differentiated products; price discrimination; geographic market definition; the relevance of large buyers; the distinction between uncommitted and committed entry; the distinction between efficiencies involving fixed and marginal cost savings; the non-price effects of mergers, especially the effects of mergers on innovation; and remedies.

On September 4, the FTC filed comments in response to the Federal Communications Commission (“FCC”) Notice of Inquiry regarding development of a National Broadband Plan that will seek to ensure that every American has access to broadband capability. In its comments, the FTC states that the FCC should take into consideration the FTC’s two primary missions – promoting competition and protecting consumers in the marketplace.

The FTC comments point out that competition and consumer protection work together to benefit consumers. If competition and consumer protection are considered in developing the National Broadband Plan, the FTC believes consumers’ access to the Internet will be improved, as will their ability to enjoy specific content and applications once they have broadband capability.

The FTC’s comments question whether there is significant competition within the broadband arena. To evaluate that competition and tailor regulatory policies, the FTC suggests that the FCC use some of the analytical tools used by the FTC and DOJ in antitrust cases. Consumer protections also are essential to help foster greater adoption of broadband. They include meaningful and timely disclosures of service terms by broadband providers and strong data security policies that will safeguard consumer information and ease potential consumer concerns aboutonline privacy. Privacy protections are particularly important, given new technologies that allow broadband providers to track consumers’ online activities, to identify the source and content of much of the data they handle, and to manage that data in increasingly sophisticated ways, such as delivering targeted advertising online.

On July 6, a number of news sources reported that the DOJ has begun looking into whether large U.S. telecommunications companies such as AT&T Inc. and Verizon Communications Inc. are abusing their market power they have amassed in recent years.

The review is an indication of the Obama administration’s aggressive stance on antitrust enforcement. Christine Varney, the new antitrust chief of the Antitrust Division, clearly wants to reassert the government’s role in scrutinizing potential monopolistic and anticompetitive practices by powerful companies.

This investigation follows her speech in May where she withdrew the DOJ’s Section 2 Report. Section 2 of the Sherman Act is used in monopolization cases. The DOJ did not bring a major Section 2 case during the Bush years.