New FTC-DOJ deal makes us the losers

COMMENTARY--Something important happened in Washington this week that could potentially have a big impact on how you are affected when big companies merge. At a time when consolidation is creating ever-larger competitors, the U.S. government itself is consolidating its oversight of those mergers and placing more control of them into the hands of the president.

Now, I don't care who the president happens to be; this is a bad deal that gives politics and the executive branch too large a hand in how companies operate, all the while reducing the role of independent, bipartisan investigation. Where there used to be dual investigations, now, in many cases, there will be only one.

IN ONE OF THOSE BACKROOM DEALS that bores the public to tears, but can have a bigger impact than many higher-profile issues, the Justice Department and the Federal Trade Commission are changing how they handle merger reviews.

Previously, both the Justice Department and FTC conducted independent reviews of mergers. Now, under an agreement struck between DOJ Assistant Attorney General for Antitrust Charles James and FTC Chairman Timothy Muris, the two watchdogs will allocate responsibility along some very distinct lines. The Justice Department will assume authority over all mergers in software, telecommunications services, photography, film, and media and entertainment, and well as in the defense, insurance, and finance industries.

The FTC, meanwhile, assumes sole guard duty over the computer hardware, pharmaceutical, professional services, and satellite manufacturing industries.

THE REASON FOR THE CHANGE? In a word: efficiency. In explaining the deal, the FTC and DOJ claimed they need to make this overhaul "to arrest the trend toward more frequent and time-consuming clearance disputes that delay the initiation of investigations, and to allow the agencies to concentrate expertise and resources to investigate more effectively."

I am all for cutting red tape. But getting out the shears gets sticky when you consider that the Justice Department is an agency of the executive branch and works at the pleasure of the current administration. The Federal Trade Commission, meanwhile, is an independent, bipartisan board of commissioners.

FTC Commissioner Mozelle Thompson, a Democrat, agrees that change is needed, but says the existing process is not as troubled as the Republicans contend and their remedy is far too sweeping. (Listen to my interview with Thompson on AnchorDesk Radio.)

INDEED, THE DOJ'S PLACE in the basic infrastructure of the federal government isn't the only reason for concern. Let's consider the department's performance in a case we all know more than enough about--the historic Microsoft antitrust case. This was not a merger, of course. But the DOJ's willingness to settle with Microsoft on what critics contend are much too friendly terms calls into the question the vigor with which it would look out for our interests in the case of some big--and questionable--corporate combination.

If Microsoft were to buy, say, Dell, isn't there concern about how the DOJ would view such an acquisition? And hasn't FTC oversight been important in making sure the proposed HP-Compaq deal wouldn't adversely affect competition?

On the radio program, Commissioner Thompson explained both the work of the FTC and why maintaining dual reviews of all deals is important. He said merger reviews in the very industries to which the FTC is ceding oversight will be those most likely to affect us most profoundly. What's more, the agency has developed substantial expertise in these areas--expertise that will no longer come to bear.

BEYOND THAT, THOUGH, Thompson is challenging the way this agreement came to be. He claims that it was "executed without substantive consultation with me, without approval of the FTC's Congressional committee chairmen, and without the meaningful public dialogue that such a sweeping proposal deserves."

I always get into trouble when I bring politics into the discussion, but this is yet another case of the Republicans allowing big business to run roughshod over consumers. And the consumers just roll over and accept it.

Even before this deal--which had been attempted as a surprise move two months ago--FTC Chairman Muris ceded his agency's oversight of the AT&T-Comcast deal to Justice. Consumer groups had argued that the cable television sale was precisely the sort of acquisition that deserved the FTC's more independent oversight.

GIVEN THAT the Federal Communications Commission under Michael Powell (a Republican and the son of Secretary of State Colin Powell) has taken a hands-off attitude toward curbing any business within its jurisdiction, and Justice hasn't lately shown itself to be the people's friend, the FTC was often the last chance for consumers to be heard. And now its voice is significantly muffled.

While the merger review process could doubtless be speedier, I'm not sure that real damage is taking place now. Considering the stakes: less competition vs. more; less concern for customers vs. more; and less well-considered mergers vs. the value of oversight.

Unless you believe all government does is get in the way, I have a hard time making a case for this new arrangement. Sure it may be more efficient, but at what cost? I'm not certain where this will go, but I understand Sen. Fritz Hollings and his Senate Commerce Committee will have something to say about it.

IF YOU FEEL, as I do, that consumers need more protection rather than less, I am sure your state's two senators would appreciate your comments. Now's the time to have them hear from you

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In the past few months, many have criticized the government for being too lax in its oversight, particularly in the Microsoft case. I'd think these same people would support Commissioner Thompson and the others who don't want the FTC's wings clipped, yet so far they have been noticeably silent.

Many problems occur because we don't act early enough--and by the time we do act, the damage is done. This is a chance to get ahead of the wave--rather than to be overtaken by it.

What do you think of the deal calling for the FTC and the DOJ to split responsibility for merger reviews along industry lines? TalkBack to me below.