VON.xCompetition Policy: Mergers

Ross Buntrock, PartnerWomble Carlyle Sandridge & Rice

March 17, 2008

Merger Review: Dual Authority

• Department of Justice– Reviews proposed telecommunications

purchases and combinations for antitrust implications under the Sherman and Clayton Acts.

• Federal Communications Commission– Reviews proposed telecommunications

purchased under the public interest standard

Merger Review: DOJ

• Sherman Act: section 1– bars “every contract, combination in

the form of a trust or otherwise, or conspiracy in restraint of trade or commerce.” (15 U.S.C. § 1).

• Clayton Act: section 7– bars mergers where the effect “may

be substantially to lessen competition.” (15 U.S.C. § 18).

Merger Review: FCC

• Section 214 & 310(d)• “any person or entity that provides telecommunication

services to or from the United States must receive a certificate of public convenience and necessity from the Commission before constructing, acquiring, operating or engaging in transmission over lines of communication, or before discontinuing, reducing or impairing service to a community, pursuant to section 214 of the Communications Act” (47 U.S.C. § 214)

• In considering such applications, the FCC has employed a public interest standard under section 214(a) and 310(d) that involves an examination of the potential public interest harms and benefits of a proposed transaction.

Transaction Team

• Coordinates Commission review of applications

• Ensures internal procedures are transparent and uniform across Bureaus

• Commission goal = faster and more consistent review process

• http://www.fcc.gov/transaction/welcome.html

Merger Review: Wireline Competition Bureau

• Carriers seeking to transfer direct or indirect control over certain authorizations and licenses must obtain prior approval from the Commission.

• Responsible for the review of mergers and acquisitions of domestic wireline carriers

• Under sections 214 and 310 of the Communications Act, the Commission will grant such approval only if it finds that the transfers are in the public interest.

• Rules governing merger reviews pertaining to wireline carriers can be found in 47 CFR§ 63.03 and 47 CFR§ 63.04.

Merger Analysis—Four Part Test

(1) Does the transfer violate the Act?(2) Does the transfer violate a

Commission regulation?(3) Does the transfer frustrate the

goal of creating and maintaining competitive communications markets?

(4) Does the transfer provide affirmative public benefits?

Timeline of Approval—180 Days

• Application • Public Notice (Day 0)• Public Comment Period (Days 1-30)• Oppositions (Day 45)• Replies (Day 52)• Initial Information Request (Day 90)• Analysis and Discussion with Parties

(Days 90-180)

Application

• Applicants’ Tasks—pre-Public Notice– Identify complete list of licenses, authorizations

involved– Contact relevant Bureaus– Identify appropriate application forms, appropriate

filing process (e.g., electric, paper), and related applications/requests and consolidation, in consultation with relevant FCC staff

– File necessary forms, applications, and special requests for relief

– Send Hart-Scott-Rodino waiver letter to U.S. Department of Justice or Federal Trade Commission (if required)

Public Notice

• Minimum requirements of application have been met.

• Starts 180 day clock• Commission releases Public Notice

containing:– General nature of applications and related

transaction (e.g., merger), and waivers and other rulings requested by parties

– List of licenses/authorizations to be transferred/assigned/granted/discontinued, with associated file numbers

– Outline of procedures

Public Comment Period

• 30 days unless otherwise specified in Public Notice

• Persons and entities who support or oppose the transaction file comments.

Oppositions to Petitions to Deny and Comments Filed

• 15 days after comments due

• Response to comments and oppositions

• Introduction of new arguments is highly discouraged

• Replies to Oppositions are due one week later12

Initial Information Request

• From the Commission• Usually 90 days after Public Notice

issued• Days 52-180: Commission will

review the record and meet with parties

• Parties will plead public interest, convenience and necessity arguments

Additional Consideration: “Stopping the Clock”

• The Commission may “stop the clock,” and suspend its informal calendar, when the Commission’s ability to process and review the merits of an application is impeded by justifiable delay, the parties’ actions, or external events.

• Provide a more accurate picture of the time the Commission finds necessary to process a particular transaction.

• Examples of reasons for stopping the clock:• The Commission extends the time for filing pleadings.• The Applicants do not respond to a request for information

within a stated time period.• The Commission finds it appropriate to await resolution of

issues pending before the relevant U.S. law enforcement or national security agencies.

• The Commission receives significant new information about an application, or the parties file a substantial amendment to the application.

Recent/Pending Mergers of Note

• Adelphia/Time Warner/Comcast

• AT&T/Bell South

• AT&T/Dobson

• Liberty Media/DirectTV

• XM/Sirius