Federal Judge to Examine Internal FCC Documents Regarding SBC/AT&T and Verizon/MCI Mergers

On July 14, a federal judge said he wants to examine internal FCC documents regarding two large recent telephone company mergers to see if the Justice Department protected market competition in approving the buyouts. U.S. District Court Judge Emmet G. Sullivan’s review concerns the now-completed mergers of SBC Communications Inc. (“SBC”) with AT&T Corp. (“AT&T”) and Verizon Communications Inc. (“Verizon”) with MCI Inc. (“MCI”).
The court’s opinion could possibly establish tougher obstacles for future mergers such as the proposed $67 billion buyout of BellSouth Corp. by AT&T Inc. – the name SBC adopted after completing the purchase of AT&T. Required by Congress, the court review calls for a judge to approve any agreement reached between the government and a company allowing a merger to proceed. The judge needs to decide if agreed-upon conditions such as selling certain assets adequately address concerns about lost competition.

In the order signed on July 14, Sullivan wrote that the Federal Communications Commission had agreed to provide unedited versions of the agency’s merger orders and opinions. The order also said the FCC’s deputy general counsel, P. Michele Ellison, was seeking consent from all individuals and entities who provided confidential information contained in the FCC documents. The FCC and the DOJ approved the two deals late last year, requiring modest divestitures of certain overlapping assets and market commitments such as not requiring customers to buy phone service in order to get high-speed Internet access.

Some consumer advocates cried foul, charging that the DOJ had rubber-stamped the deals with little concern for the competition that might be lost with the disappearance of the two biggest independent providers of long-distance calling. Proponents of the deals argued that market competition was as fierce as ever with rival options for phone service from cable TV companies, Internet-based calling and unlimited cellular plans.

At an earlier hearing, Judge Sullivan expressed some doubt about whether the DOJ review and the resulting settlement were adequate in terms of addressing antitrust concerns. At the same time, he made it clear his review would be more limited in scope than a full-blown re-examination of the mergers.

For more information contact:

Olev Jaakson at ojaakson@dbmlawgroup.com.