FTC, DOJ call off oversight announcement

A member of the Federal Trade Commission sharply criticizes a deal between the agency and the Justice Department to reshuffle the merger-review process.

Jim Hu Staff Writer, CNET News.com
Jim Hu
covers home broadband services and the Net's portal giants.
Jim Hu
3 min read
A member of the Federal Trade Commission on Thursday sharply criticized a deal between the agency and the Justice Department to reshuffle the merger-review process.

The two regulatory bodies were expected to outline a change in the types of industries each department would handle. With the shift, the Justice Department would have sole jurisdiction over mergers in the media, entertainment, publishing, Internet and computer-software industries, according to a statement from FTC Commissioner Mozelle Thompson.

The FTC has traditionally overseen merger reviews in the entertainment and media industries. Thompson said he believed that handing these reviews to the Justice Department could undermine the FTC's expertise in these matters. The changes would also shift oversight to an executive branch-controlled department from the independent panel of the FTC.

The Justice Department, however, stood by the proposed adjustment to antitrust oversight.

"The cooperative effort between the Department and the FTC would provide greater certainty and efficiency than the current process," Justice Department spokeswoman Gina Talamona said in a statement.

A press conference to announce the deal was called off Thursday. FTC Chairman Timothy Muris and Charles James, the Justice Department's attorney general for antitrust, were scheduled to conduct the conference.

An FTC representative confirmed that Thursday's press conference was canceled but declined to elaborate on the postponement.

However, sources close to the situation said the announcement was postponed because of pressure from Capitol Hill. Legislators wanted more time to review and digest the proposal before anything was announced, the sources said.

The Justice Department said it is meeting with congressional staff to address any concerns.

Dividing the pie
In his statement, Thompson criticized the way the deal came about between the two regulators. He accused Muris and James of conducting "horse trading" behind closed doors without the input of other commissioners.

Thompson added that he feels the FTC is the more appropriate body to review media and technology mergers, given its experience with high-profile deals between companies such as America Online and Time Warner, Random House and Harper Row, and the failed merger between Time Warner and EMI Recorded Music.

"This lack of transparency makes it difficult for the other four commissioners to discharge their obligation to determine whether consumers will actually benefit from such a significant change at this agency," Thompson wrote.

In the past, the FTC and the DOJ sometimes fought about which group would oversee major acquisitions. For example, the two bodies scuffled over who would examine the AOL-Time Warner merger. The FTC prevailed and ended up slapping AOL Time Warner with regulations over its broadband services.

Consumer advocates were upset about the new proposal. Jeffrey Chester, executive director of the Center for Digital Democracy, warned that the Justice Department would continue to shy away from taking hard stances against media-industry consolidation in the same way groups have criticized the department for being too light on Microsoft.

"Certainly it is in the interest of big media companies to get this type of review switched," Chester said. "James (the attorney general for antitrust) will give them a light touch in the DOJ."

Voices from the other side of the fence also sounded off on the proposal. Wayne Crews, the director of technology studies at the Cato Institute, joked that the Justice Department and the FTC appeared to be colluding on how to divide industries for merger review. But the agencies themselves remain proponents of setting barriers for corporate deals.

"A lot of this is government reshuffling," Crews said. "But the problem is you don't want government to be more efficient in doing something it shouldn't be doing in the first place."

News.com's Alorie Gilbert contributed to this report.