Regulators Bow To Senator Hollings

Dealmakers can chalk one up for the “advise and consent” branch of the government as regulators blinked in the battle between Congress and the executive branch over the merger clearance accord. In a terse, 97-word statement issued on May 20, Assistant Attorney General Charles James pulled the plug on the controversial merger accord, issued March 5, that would have allocated specific industries to the Department of Justice’s (DOJ) antitrust division and the Federal Trade Commission (FTC). “In view of the opposition expressed by Sen. Hollings, Chairman of the Commerce, Justice, and State Appropriations Subcommittee, to the agreement and the prospect of budgetary consequences for the entire Justice Department if we stood by the agreement, the Department will no longer be adhering to the agreement,” James said in a statement. James was referring to Senator Ernest F. Hollings’ threat to cut funding at the DOJ and FTC if the merger accord remained in effect. The junior senator from South Carolina objected to both the lack of consultation in the announcement of the pact and the assignment of media mergers to the DOJ. Hollings’ spokesman Andy Davis says the senator thinks that “the abandonment of the agreement was appropriate.” Davis says that Hollings felt that cutting out the FTC from media mergers was unacceptable because the American people rely on the media to get their news and information. The senator also believes that there are good reasons for the two agencies to compete to review certain deals. Davis notes that in the case of the AOL/Time Warner merger, the FTC imposed some conditions on the deal which were designed to protect consumers’ access to different sources of information. He says that a DOJ review might not have included these stipulations. Davis says that the agencies have indicated to Hollings’ staff members that they will return to the procedures that were in place before the merger clearance pact was announced. Part of this move will include both agencies competing for merger review of specific deals. “Both agencies will operate as they did before and will vie for these cases aggressively,” Davis states. Hollings’ spokesman says that this is important because some observers have speculated that with the unanimity of viewpoints between FTC Chairman Timothy Muris and James, the accord might be informally observed even if officially terminated. “Some kind of compromise in the center might have worked,” notes American University law professor Jonathan Baker, “but the DOJ was surprised by how adamant Hollings was.” Baker says he understands that James was ordered to give into Hollings’ demand by his superiors, presumably Attorney General John Ashcroft. Another antitrust specialist, Albert Foer, of the American Antitrust Association, says that the problem was that Muris and James didn’t consult with Congress or even with all the members of the FTC. “Clearance delays have been a problem, and any good faith effort to fix the process is a good government effort, but in this case that effort just created more problems than it would have solved,” Foer says.