Antitrust & Competition Policy

An interesting ethical dilemma confronts FCC Commissioner Robert M. McDowell, who could decide the fate of the AT&T/BellSouth merger.

It may not entirely be McDowell’s fault that the merger is languishing at the FCC despite the fact the Antitrust Division of the Department of Justice has already concluded it poses no significant threat to competition. After all, as McDowell pointed out in a recent statement, his four colleagues managed to approve the recent SBC/AT&T merger without him. But the analogy isn’t useful. Back then, many in Washington thought telecommunications legislation appeared to be moving through Congress and all sides had high hopes for their agendas. Everyone realizes the legislation is now dead, and this merger is the only opportunity on the horizon to enact a net neutrality nondiscrimination principle and prop up the unsustainable CLEC business model. Indications are McDowell doesn’t want to participate; the question is, should he anway?

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Be sure to read “Dairy Industry Crushed Innovator Who Bested Price-Control System” By Dan Morgan, Sarah Cohen and Gilbert M. Gaul, Washington Post Staff Writers Sunday, December 10, 2006; Page A01.

The dairyman’s final comments are particularly worthwhile, when asked if he was bitter.

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Eight months. That’s how long it has been since AT&T and BellSouth asked the FCC for permission to merge. Although the merger has since been OK’d by the Department of Justice, and by 18 state regulatory commissions, the Commission has yet to act. It’s not that Chairman Kevin Martin hasn’t tried to get this issue decided: three times in the past two months a vote has been scheduled, only to be put off. (The last delay being just a few days before the mid-term election).

The problem is that the Commission is deadlocked–two members supporting the merger, and two opposing it, reportedly insisting that net neutrality and other conditions be imposed.

Putting two and two together, you get four. But wait–the FCC has five members. The fifth, as it turns out is Robert McDowell, the newest member of the commission. McDowell, however, has been recused from the issue, since he previously worked for CompTel, a trade group that opposed the merger.

In an unusual move, Chairman Kevin Martin has asked the FCC’s general counsel to allow McDowell to vote anyway. Such a step would be unusual, but not unprecedented–for instance Democratic chairman Bill Kennard was allowed to vote on an issue in 2000 on which he was otherwise recused. This request isn’t unprecedented–Democratic chairman Bill Kennard, for instance, was allowed to vote in 2000 on a media issue despite the fact that he previously represented broadcasters. Martin argues that, given the stalemate on the merger, McDowell’s vote is necessary to break the logjam.

Conflict of interest rules, of course, shouldn’t be tossed away lightly. Commissioners after all may be prejudiced in favor of the side they used to work for. But this case has an unusual twist: All indications are that despite his previous employers’ position, McDowell would support the merger. Rather than vote with his old employers, McDowell would likely vote against them. There’s little chance that McDowell would be motivated to vote against the merger because of a salary he drew from folks on the other side.

Martin’s request is both bold and sensible. Hopefully, the GC will approve it, and the FCC will finally vote on this long-pending merger.

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Joe at Techdirt makes an excellent point about government and monopolies:

Here’s a story that hits on some of today’s themes of monopolistic behavior and keeping stuff off the internet. The Department of Justice has been given the go ahead to proceed with a lawsuit against the National Association of Realtors, alleging that the group colluded to prevent listings from appearing online, in a bid to give established brokers an advantage. Now, we’d be tempted to say that however backwards the organization’s thinking is, they have the right to distribute their data to whomever they want. But we should take a step back and ask why the NAR is in the position to monopolize this information in the first place. That fault rests with the government, which has put the NAR in charge of regulating its industry, and deciding who can and can’t be a broker. In other words, its monopoly has official legal blessing. Without this, anyone could go out and get listings, and abide by whatever rules they wanted to, offerings to broker home sales as efficiently as possible. So instead of suing the NAR, for doing what it’s intended to do (maximize profits for its members) why not get at the root of the problem and take away its monopoly status?

Quite so. We just published an article by my colleague Sarah Brodsky describing how the realtors’ lobby recently got a euphemistically named “Homeowners’ Bill of Rights” passed in Missouri that limits competition by outlawing discount real estate brokers. If you want to pay someone to list your house but do the rest of the legwork of selling the house yourself, that’s too bad. You have to go with a full-service real estate agent.

The state has a split personality when it comes to monopolies and cartels. Most of the time, our elected officials vigorously denounce them and take action to (supposedly) increase competition. However, if they’re created by the government, that’s a whole other ball game. In that case, only crazy right-wingers would suggest that more competition would be beneficial. And sometimes, the state does both at the same time: creating a cartel with its right hand, while its left hand simultaneously investigates the cartel for being anti-competitive. It’s very strange.

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