|Speech by FCC Commissioner Harold
Re: FCC's lack of authority to conduct merger reviews.
Date: July 22, 1999.
Source: Tech Law Journal recorded and transcribed this speech.
Editor's Note: Commissioner Furchtgott-Roth was part of a panel hosted by the Federalist Society. The moderator was Edward Whelan (GTE). The other panelists were James Rill (antitrust lawyer and former Asst. Atty. General for the Antitrust Division) and Louis Dupart (antitrust lawyer and former Chief Counsel to the Senate Antitrust Subcommittee).
Thank you Ed. It is a great honor to be here today at the Federalist Society -- a bunch a left-wing radicals here. [laughter] Two hundred years ago the Federalists were, in a sense, the left-wing radicals of the day. They had the novel idea of wanting a very limited central government, which at the time was a pretty radical idea.
Imagine if you will, that you were a small entrepreneur, and you -- the eighteenth Century, the nineteenth Century, or the twentieth Century -- you wanted to go off and acquire -- let's say you were a hypothetically a law firm, and you wanted to acquire an antitrust practice. You went off and [Furchtgott-Roth turned to James Rill] "Might we acquire your practice?" He says, "Well, how much?" [laughter] And, you all negotiate a price, terms and conditions involved in the whole. Suddenly, you have acquired an antitrust practice. Nothing prevents it unless you are doing something that is outside the law. The law is a -- it is not exhaustively limit what you may not do -- may do. It simply tells what, in many cases, you may not do, in terms of mergers and acquisitions.
Now, hypothetically assume that you are not just a private party in the eighteenth or nineteenth or twentieth Century. But let's assume you are a government agency. And, you want to get into the antitrust business. Let's say you are a government agency that has absolutely no authority whatsoever to do antitrust law. [laughter] But, like your private sector counterpart, you decide you really want to do antitrust. You desperately want to do antitrust. All the fun is in antitrust, isn't it? So what you do is you go off and do a hostile acquisition. Maybe can go to Rill's firm, raid the firm, hire some of his bright young associates who are lawyers there. And then you decide you are going to go off and tell businesses that you are the new antitrust authority.
Now you have no legal basis to do it. But, as a government agency, you say, well, "Look, my private counterpart can do that. They can go off and get into the antitrust business by simply going out and acquire someone. Why can't I, as a federal agency do this?"
And I think this is the fundamental difference between -- or one of the fundamental differences -- between the private sector and the public sector. The government agencies are bound by what they may do in part -- they have to look at the statute. They have to look at the law, which specifically tells them what they may do.
That it is not something that we as private individuals in the private sector are bound by. The government doesn't say here is a list of what you may do. Don't do anything outside of that. But that is, I think, the way that we ought to look at the public sector -- our government agencies. They are bound in some sense by what the law tells them they can do. Unless you happen to be in some dictatorship. Moscow central planner says we want to get into this, and you go off and do that. Antitrust would not make any sense. [inaudible comment]
Now this little hypothetical story, frankly, sounds a little bit too familiar to me. Because I can think of at least one federal agency that has very limited antitrust authority, under the Clayton Act, but refuses to use that, and it has instead invented an antitrust authority, that the entire world now seems to believe that it now has. If you say it loudly enough. If you go off, and you hire some bright lawyers; and if you go around extorting companies; and they come in and negotiate with you in secret [inaudible phrase], then the world believes you have antitrust authority.
Now. It is not a question of relative expertise. And, Ed, I will reveal a dirty secret, which is, those topics he suggested to me, discussing whether the FCC has more or less antitrust competence than the Department of Justice. I don't care! [laughter] I mean. We can go off. We can hire Ed Whelan. We can go off, we can hire Jim Rill. We can go off and hire all of the antitrust attorneys in America. It wouldn't matter. We still don't have authority to do it under anything other than the Clayton Act. And we certainly have no authority to do antitrust under some public interest standard, which is what the FCC has convinced the whole world.
What we do have the authority to do is license transfers. Plain, simple, vanilla license transfers. We do tens of thousands of them every year. What we do is we let a lot of them through without any kind of detailed review. We hold a few up to the light of scrutiny. And a few that involve mergers, or appear to involve mergers within the telecom industry, and I can't say exactly what it is because there is no written rule. People find it in any FCC rule making, because we have no rules about how we do mergers -- about how we do license transfers. But it appears that if you are a major telecom company and you do a license transfers that you will be held up to a very high degree of scrutiny, and invited to come in and explain why these license transfers are in the public interest, and something very bad might happen to you -- you don't know exactly what that is.
We call this merger review at the FCC. Of course, no one ever applies to the FCC for approval of a merger. People go to the Department of Justice, to the Federal Trade Commission. They go to the FCC for approval of license transfers and we often put conditions on those that have nothing to do with license transfers, but have everything to do with the broader merger. And, we get away with this.
Private parties refuse to take us to court.
Reporters continue to write about the FCC's merger review, which we don't conduct. Without a merger review under the public interest standard [inaudible phrase]. And, the world keeps going. It is amazing.
So, I have probably said enough to get into a little bit of trouble.