FTC to Review AOL-Time Warner Merger
The responsibility of reviewing the merger of America Online Inc. and Time
Warner Inc. will fall to the Federal Trade Commission rather than to the
Justice Department, FTC officials said Friday.
The decision to give the FTC the job means the already-busy agency will
a large task to deal with -- a proposed mega-merger with an estimated value
of $165 billion.
FTC Competition Bureau Director Richard Parker was characteristically
tight-lipped about his new assignment. "I'm not really prepared to do
anything today other than to confirm that the FTC will be looking into the
AOL-Time Warner proposed transaction," he said.
Antitrust observers say no one outside the agency likely knows why the FTC
got the nod and not Justice. But the FTC's growing experience in Internet
issues, coupled with its traditional expertise in media mergers may have
tipped the scales.
"The FTC has shown that it has particular interest in the First Amendment
aspects of things," American Antitrust Institute President Albert Foer
Among other cases, the FTC recently took up Barnes & Noble's attempted
acquisition of Ingram publishing, the nation's largest book distributor.
The FTC never got a chance to rule on that merger, but the two sides walked
away from the deal.
"Chairman Robert Pitofsky worried lots about diversity of booksellers,"
says. "He said while the First Amendment doesn't create a separate niche
within the antitrust laws, if there's a tie...he would come down in favor
the First Amendment, all things being equal."
Since America Online and Time Warner are each the biggest players in their
respective niches, the FTC is bound to take a close look at the deal, Foer
Yet despite their size, there is little overlap between AOL, the Internet
service provider, and Time Warner, a diversified media company whose
Internet presence is relatively small.
As a result, many observers are predicting smooth sailing for the merger.
"People have identified only minor overlaps, and those they can spin off,"
says Robert Lande, professor of law at the University of Baltimore. "It's
going to be awfully hard for the FTC not to justify the merger. They will
find a few itty bitty overlaps here and there but the rest of the merger
will go through."
The Justice Department has had the right to review mergers for more than
years, ever since Congress passed its first laws forbidding monopolization
and restraint of trade in the 1880s. Those laws, including the Sherman
Antitrust Act, were passed in reaction to the first wave of so-called
barons who built the nation's first major corporations after the Civil War.
Then, as now, antitrust enforcers were expected to maintain competitive
markets so that consumers did not pay unnecessarily high prices nor suffer
from inadequate choices in the marketplace.
Modifying or blocking mergers is part of that antitrust process.
The Federal Trade Commission was established in 1915 to police "unfair and
deceptive" practices that could harm consumers' welfare, including
activities that reduced competition. From the beginning, it has also had
duty to enforce antitrust laws.
The nation's Hart-Scott-Rodino Act requires that all mergers save the
smallest be reviewed by either the FTC or Justice, but does nothing to
which agency should handle any given decision.
Reported by USA Today, http://www.usatoday.com