WASHINGTON-The Federal Trade Commission said cost savings should be considered regularly in antitrust analysis of high-tech mergers, such as the multimillion dollar deals sweeping the telecommunications industry. But it is not clear whether the policy changes being contemplated will help or hurt consumers and business.
“It is not enough for regulatory agencies to simply enforce those laws entrusted to them,” said Robert Pitofsky, chairman of the FTC. “It is at least equally important to be alert to the question of whether the laws they are enforcing are up-to-date and continue to make sense.”
“That is particularly true,” he added, “in the commercial world where vast changes in global competition and in the pace and importance of technology rivalry has changed and will continue to change the nature of competition.”
The two-volume report prompted the agency to seek assistance from the Justice Department’s Antitrust Division to re-examine the implications of cost savings in assessing whether a merger breaks antitrust laws.
James Olson, chief of the Competition Division at the Federal Communications Commission, said the FTC staff recommendation would tend to formalize current policy. He noted the FCC considers cost savings in determining whether telecommunications mergers meet the public interest standard.
In recent years, federal regulators have been presented with a slew of telecommunications mergers that rank among the largest ever in American business. Wireless is not an exception. AT&T Corp. bought McCaw Cellular Communications Inc. for $11.5 billion two years ago.
In addition, three regional Bell telephone companies joined forces with AirTouch Communications Inc.-a spinoff of Pacific Telesis Group-to bid and acquire 11 personal communications services licenses. And Sprint Corp. partnered with several top cable TV operators to capture 29 PCS franchises. AT&T strengthened its market position by buying 29 pocket telephone permits.
The enactment of the telecommunications reform bill has led PacTel and SBC Communications Inc. to seek merger approval. Nynex Corp. and Bell Atlantic Corp. are on the same track.
Currently, according to antitrust experts, the FTC and Justice do not factor in cost savings of proposed mergers on a consistent basis and there is not universal agreement on what weight it should carry in antitrust analysis.
“It think it’s useful,” said Roger Noll, a recent fellow at the Brookings Institution. But Noll added that the FTC’s recommendations, even if implemented, will not change much. Furthermore, he pointed out, government antitrust lawyers will still have to determine whether cost savings produced by a merger would be passed on to consumers or enhance the new entity’s ability to stifle competition and innovation.
