An Emerging Area Of Reform
As the Enron debacle regrettably spurred Congress to pass campaign finance reform, here’s hoping that Rupert Murdoch’s outrageous campaign against the merger of satellite broadcasters Echostar and DirecTV spurs Congress to adopt some meaningful reforms in the area of corporate mergers.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Murdoch is, of course, Chairman of News Corp., parent of such properties as Fox News Channel, FX television, and the New York Post. Having failed in his own bid for DirecTV, losing out to rival Charlie Ergen’s Echostar, Murdoch publicly went negative against his erstwhile target, badmouthing DirecTV and saying "After many months of due diligence, we were shocked at some of the things we discovered" – like an alarmingly high churn rate and hefty subscriber acquisition costs. Such warts do not seem to have cooled Murdoch’s desire, however. Still enamored of the venture and its potential to increase his own power, he has embarked on an aggressive, high-profile campaign to torpedo the merger.
Murdoch clearly hopes to generate outside pressure sufficient to prompt either the Justice Department or Federal Communications Commission (FCC) to reject the merger. Such rejection would likely allow him to acquire DirecTV, at a bargain basement price.
Competition in the marketplace is a beautiful thing. Far less attractive are powerbrokers instead seeking to influence the federal government to coerce concessions, provide an otherwise unobtainable competitive advantage, or torpedo a deal altogether. But that’s precisely the path Murdoch – an alleged conservative – has chosen.
Things weren’t always as such. Recall Murdoch’s struggles against cable kingpin Ted Turner, and complaints of Mr. Turner’s influence upon the establishment to keep down the rising Australian? Well, success breeds many things, not all of them admirable. This brings to mind one so-called conservative company, Enron, exposed as actually being the force behind efforts to shutter its competition (coal) on the basis of “global warming.”
Efforts to impede the Echostar/DirecTV merger appear to have gone beyond the usual troupe of lawyers and lobbyists to hype the combination’s purported impact. Shortly after the merger was announced, the right Rev. Al Sharpton became a regular picket presence in Washington, protesting Echostar’s refusal to carry his deeply religious programming on their system. When that failed to generate much attention, Mr. Sharpton took the protests to a new level – outside of Mr. Ergen’s home in suburban Denver.
That is going too far. So much for the Left’s obeisance to the vaunted right of privacy.
More recently, in early April a group of eight tele-ministers – naturally having forsaken earthly wealth – somehow managed to pay for full-page advertising in the Washington Post. Their “open letter” to President Bush, FCC Chairman Powell, and John Ashcroft carried no disclaimer, but following that money trail would quite possibly prove educational.
Such events indicate that our merger review process now requires attention. Presently, this entails an extensive array of inquiries by an alphabet soup of federal regulatory bodies. Emblematically troubling is the FCC’s incredibly broad and vague quest for the “public interest,” clearly susceptible to sophisticated public relations campaigns and well-funded “grassroots” outcries. The artful advocate can in fact ensure rulings entirely inconsistent with the public’s true interest.
Congress best serves the people not by creating reams of new law, but by improving existing regimes demonstrably in need of repair. The campaign against the Echostar/DirecTV merger well illustrates this need regarding merger reviews. That system has devolved from an intellectual pursuit into a free-for-all of crude pressure campaigns. Instead of a rational exercise in antitrust review, any party among congressional hearings, the FTC, FCC, and DOJ can cripple a proposed deal for their own peculiar reasoning. Throw in Mario Monte and the Eurocrats and it’s enough to give any rational businessperson pause before deciding to improve efficiencies through merging.
The Kennard FCC particularly abused the “public interest” carte blanche to literally make up the rules as they went along, to the ultimate detriment of both the affected companies and the consuming public.
The Powell FCC fortunately promises it will proceed more rationally than in recent years. However, it shouldn’t depend on who’s in the chair. The law should be explicit and clear and limited.
Here are three ways Congress should reform the merger process:
- The Department of Justice should have clear time limits on its merger review process – like the FCC, they should be limited to a six month review, max.
- The FCC’s process should be governed by clearer language – no more vague “public interest” clauses.
- There should be the rebuttable presumption of accepting business decisions to combine.
The Rev. Sharpton’s appearance in a proposed merger illustrates how ludicrous and out-of-control the review process has become. The right to express his opinions does not ensure a right that the government take them seriously.
Allowing such antics to impact serious business and regulatory decisions would take the system to a new low. The merger process is being abused, having degenerated into a game with costly implications on both the companies involved and the general public. We need to fix it.
Christopher Horner is a Senior Fellow at the Competitive Enterprise Institute.