Antitrust Lawyer Blog

July 14, 2006

Competitors, Regulators, and Law Enforcement Officials Seek Halt Sale of Verizon’s Puerto Rico Telecom Assets

Also on July 14, several parties asked the FCC to deny license transfers related to the proposed sale of Verizon Communications, Inc.'s (“Verizon”) Puerto Rico telecom assets – including the incumbent local exchange carrier and its second largest wireless service operator – to America Movil S.A. de C.V. (“American Movil”). Competitors are concerned that the new operators will block the development of competition, regulators in Puerto Rico are dubious of the proposed deal's public-interest claims, and law enforcement officials want more time to examine national security and other questions.

The Telecommunications Regulatory Board of Puerto Rico petitioned the FCC to deny the license-transfer petition, under which Verizon would sell its interest in Telecommunicaciones de Puerto Rico, Inc., which is the parent of Puerto Rico Telephone Co. (“PRTC”) and PRT Larga Distancia, Inc., among other subsidiaries. In particular, the board raised concerns about how the transaction would affect service quality and was also unimpressed with pledges to “examine” wireless network upgrades, adding that competition and demand make such a “purported 'benefit' inevitable, no matter who controls PRTC.”

In addition, it dismissed claims of economies of scale that would be created by the transaction, doubting that America Movil would benefit from economies of scale not enjoyed by Verizon. “The application offers a public interest statement that is nothing but meaningless platitudes, devoid of specifics, tangible benefits, and real commitments,” the board said. It also said the transaction would create a “direct adverse effect” by giving America Movil its substantial asset in a U.S. jurisdiction, which would be a “magnet for litigation” and would put the “assets of the Puerto Rico Telephone Company in jeopardy.”

July 14, 2006

Federal Judge to Examine Internal FCC Documents Regarding SBC/AT&T and Verizon/MCI Mergers

by Doyle, Barlow & Mazard PLLC

On July 14, a federal judge said he wants to examine internal FCC documents regarding two large recent telephone company mergers to see if the Justice Department protected market competition in approving the buyouts. U.S. District Court Judge Emmet G. Sullivan’s review concerns the now-completed mergers of SBC Communications Inc. (“SBC”) with AT&T Corp. (“AT&T”) and Verizon Communications Inc. (“Verizon”) with MCI Inc. (“MCI”).

The court’s opinion could possibly establish tougher obstacles for future mergers such as the proposed $67 billion buyout of BellSouth Corp. by AT&T Inc. – the name SBC adopted after completing the purchase of AT&T. Required by Congress, the court review calls for a judge to approve any agreement reached between the government and a company allowing a merger to proceed. The judge needs to decide if agreed-upon conditions such as selling certain assets adequately address concerns about lost competition.

In the order signed on July 14, Sullivan wrote that the Federal Communications Commission had agreed to provide unedited versions of the agency’s merger orders and opinions. The order also said the FCC’s deputy general counsel, P. Michele Ellison, was seeking consent from all individuals and entities who provided confidential information contained in the FCC documents. The FCC and the DOJ approved the two deals late last year, requiring modest divestitures of certain overlapping assets and market commitments such as not requiring customers to buy phone service in order to get high-speed Internet access.

July 13, 2006

FCC Approves Adelphia/Time Warner/Comcast Deal With Conditions

by Doyle, Barlow & Mazard PLLC

On July 13, the FCC approved the sale of substantially all of the cable systems and assets of Adelphia Communications Corporation (“Adelphia”) to Time Warner Inc. (“Time Warner”) and Comcast Corporation (“Comcast”), the exchange of certain cable systems and assets between affiliates or subsidiaries of Time Warner and Comcast, and the redemption of Comcast's interests in Time Warner Cable and Time Warner Entertainment Company.

In reaching its decision, the FCC found that the transactions, as conditioned, serve the public interest and comply with all applicable statutes and Commission rules. The Commission also found that the potential public interest harms of the transactions, as conditioned, are outweighed by the potential public interest benefits. With respect to benefits, the Commission determined that subscribers would benefit from the resolution of the Adelphia bankruptcy proceeding in the form of new investment and upgrades to the network.

Additionally, the transactions would accelerate deployment of VoIP and other advanced video services, such as local VOD programming, to subscribers. With respect to the potential harms, the Commission found that the proposed transactions may increase the likelihood of harm in markets in which Time Warner or Comcast has, or may in the future have, an ownership interest in Regional Sports Networks (“RSNs”). The Commission imposed remedial conditions, the same as those imposed in the News Corp.-Hughes order to address its concerns.

July 13, 2006

Sony BMG recorded music merger clearance annulled by the Court of First Instance

by Doyle, Barlow & Mazard PLLC

On July 13, 2006, the European Court of First Instance (“CFI”) reversed a July 18, 2004 decision by the European Commission allowing a merger between music groups Sony and BMG.

This decision was reached in the wake of an application made by the Independent Music Publishers and Labels Association (“Impala”), an international association representing the interests of 2,500 independent music production companies, on December 3, 2004, after the Commission reversed an earlier decision stating that a combination would increase concentration and was incompatible with European Community law.

The CFI said that the Commission did not sufficiently demonstrate either the non-existence of a collective dominant position before the concentration, or the absence of a risk that such a position would be created as a result of the concentration. Furthermore, the court criticized the Commission for executing an extremely superficial investigation of whether the two companies could achieve a collective dominant position through the merger.

by Doyle, Barlow & Mazard PLLC

An operation that sold bogus college financial aid services was permanently banned on July 6 from selling academic goods or services for repeatedly violating court orders. The Federal Trade Commission (“FTC”) originally charged that the defendants promised better college financial aid packages than someone could find on their own, which they did not deliver.

Settlement of those charges barred the defendants from making deceptive claims and the defendants then violated the order by continuing their deceptive marketing practices. The judge found the defendants in contempt and ordered them to provide refunds to consumers. The FTC charged the defendants with contempt for a second time for failing to provide those refunds.

In 2003, the FTC accused Integrated Capital, Inc., doing business as National Student Financial Aid, and its owner Alan Wilson, of misrepresenting that if consumers bought certain academic goods and services that they would be more likely to get college financial aid than they would on their own. The court order to settle those charges prohibited them from misrepresenting information about academic goods or services and required the company and its officers to make certain disclosures when selling their products.