Antitrust Exemption for Satellite Carriers Opposed by AAI

Jun 24 2004
Testimony and Interventions

June 24, 2004

Hon. John Conyers, Ranking Member

House Judiciary Committee

2138 Rayburn House Office Building

Washington, DC 20515

By fax to: 202-225-7680

Re: H.R. 4518, Amendment Offered by Mr. Boucher and Mr. Goodlatte

Dear Mr. Conyers:

We write out of concern that Congress will enact legislation known as H.R. 4518, inclusive of an amendment offered by Mr. Boucher and Mr. Goodlatte to provide an antitrust exemption for certain voluntary agreements to provide satellite secondary transmissions to local markets. The American Antitrust Institute is an independent research, education, and advocacy organization, described at www.antitrustinstitute.org. We are not commenting at this time on the bill itself, but only on the wisdom of including an antitrust exemption.

Antitrust exemptions are in great demand and should not be distributed quietly and without public debate to anyone who can show that his life would be easier without having to compete under the aegis of antitrust. We predicted that passage of an exemption in the Graduate Medical Education Protection Act would make a mockery of our traditions by creating a new antitrust exemption without so much as a hearing, and would set a precedent that Congress could only regret.

Now is therefore the time to insist most strenuously that no additional exemptions be created without a complete understanding of why they are needed, how they will be used, and what effects they will have on competition and on consumers. Exactly what type of anticompetitive behavior do the satellite carriers wish to engage in and why will this be in the public interest? If they do not intend to engage in anticompetitive behavior, what is the pressing problem that requires legislation? Congress can only answer this question intelligently and persuasively if there are hearings, preferably in two parts: first, let the carriers and other advocates explain their rationale; second, let others, after an opportunity to absorb and evaluate that rationale, provide any counterarguments. All of this should be handled with complete transparency.

Commenting specifically on the proposed amendment as transmitted to me on June 16, I would question the provision that conditions application of the exemption on the filing of a notice with the federal antitrust agencies. As drafted this provision appears to be a fig leaf, giving the appearance of oversight without the reality. In contradistinction to the highly successful Premerger Notification law, this draft provides no affirmative role for the government other than to publish a notice that identifies the parties to an agreement and describes generally the area of planned activity of such agreement.

So what? The agreement may still be anticompetitive, yet it will be exempt from antitrust scrutiny, unless it invites conduct which “relates to or has the effect of – (1) price fixing; (2) allocating a market between or among competitors; or (3) boycotting any person.” Thus, if two or more satellite carriers come together to provide secondary transmission to a local market, any conduct that involves tying arrangements or other vertical abuses, monopolization, attempted monopolization, agreement on important terms other than prices, and mergers and joint ventures will all escape both federal and state antitrust scrutiny. In effect, activity that would have been subject to a Rule of Reason analysis will be legal, even if an antitrust review might have found that the anticompetitive effects outweigh the positive benefits. Perhaps this result might be justified after a full public record is established, but it represents too much of the national (and state) regulatory machinery for Congress to give away in darkness.

Sincerely,

Albert A. Foer

President

American Antitrust Institute