Commissioner Says FCC Extorts Companies with Non-existent Merger Review Authority

(July 23, 1999) The FCC is using non-existent merger review authority to extort companies, said Commissioner Harold Furchtgott-Roth at a Federalist Society event on Thursday, July 22.

See, transcript of address by Harold Furchtgott-Roth, 7/22/99.

This was not the first time that Commissioner Harold Furchtgott-Roth has criticized the Federal Communications Commission for using its authority to approve of transfers of FCC licenses to conduct broad antitrust merger reviews. He stated so much in his testimony to the House Judiciary Committee's Subcommittee on Commercial and Administrative Law on May 25, 1999. He has written dissents to FCC decisions on license transfers. And, he has spoken at public events. However, his comments at this Federalist Society event in the Capitol Building were particularly direct and blunt.


According to Furchtgott-Roth, the FCC has been acting as though it has a statutory authority to conduct antitrust merger reviews. The FCC "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," said Furchtgott-Roth, "then the world believes you have antitrust authority."

"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," said Furchtgott-Roth.

"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."

Assistant Attorney General Joel Klein, and some Members of Congress, have stated that the Justice Department has more expertise in antitrust matters than the FCC. "I don't care," Furchtgott-Roth retorted. "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."

During the question and answer session, members of the audience asked why companies do not challenge the FCC's merger review activities in court.

Furchtgott-Roth suggested that if the FCC tried to exert merger review authority over oil companies which hold FCC licenses they would say "this agency is so far outside the law, we can't even see where they are" and take the FCC to court.

"When we do it to telecom companies, they don't do anything. And the answer is patently obvious: that they are repeat customers. They are inside that agency every day of the year, and they know that they would pay a very heavy price. And, it is a problem. This is not just in license transfers. And it goes on not just at the FCC. But, when a government has an ongoing relationship with a business, and the business perceives that its continued prosperity depends upon a favorable view from that government agency on an ongoing basis, then that business would be very reluctant to take that agency to court."

In contrast, said Furchtgott-Roth, if the FCC tried to exert antitrust authority over Exxon and Mobil, they would say, "We are going to close tomorrow. You can take your silly licenses. And, we are going to court to get them back." He added, that "it is a little bit harder for broadcasters, or wireless companies, to do that."

Another member of the panel, Louis Dupart, also pointed out that "mergers are so time sensitive, that you can't possibly count on getting review in a way that would help you."

Another panelist, James Rill, an antitrust lawyer with the huge Washington DC firm of Collier, Shannon, Rill and Scott, also criticized the FCC's standard of review in merger review. "The purported authority of the Commission, not merely to see whether a merger is not anti-competitive, which is after all, the role that the Department of Justice ..." said Rill, "but to say affirmatively that the merger must be pro-competitive, if that is the standard, it is a lousy standard, and almost unconstitutionally vague, and invites social engineering, with a vengeance." Rill was the Assistant Attorney General for the Antitrust Division during the Bush administration. The post is now held by Joel Klein.

There are several bills pending in the Congress that would affect reviews of mergers and acquisitions involving telecommunications and similar companies.

Dupart, who until recently was Chief Counsel to the Senate Antitrust Subcommittee, predicted that S 467 may be enacted into law, but that neither S 1125 nor HR 2533 would.

One member of the audience asked what is the significance of the FCC not publicly opposing these bills. Furchtgott-Roth said that it would be "improper, for me as a government official, to be lobbying Congress on changing the law." Then he added: "This one really makes my head spin: to lobby Congress not to change a law, to prohibit me from doing something that I am unlawfully doing today."