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from: Technology Daily

Federal Judge Takes Hard Look At Telecom Mega-Mergers

By Drew Clark

(Monday, July 10) The long shadow of the Justice Department's prosecution of Microsoft could ensnare AT&T's efforts to acquire another Bell firm -- BellSouth -- as a federal judge late last week sought to aggressively investigate last year's telecommunications mega-mergers.

Judge Emmet Sullivan of the U.S. District Court in Washington, D.C. ordered a hearing -- to be held this Wednesday -- at which time AT&T and Verizon Communications will be called upon to defend their respective mergers last year with SBC Communications and MCI.

It is considered highly unlikely that Sullivan will overturn the agreements. But the spotlight that he is casting on the merger process could complicate AT&T's effort this year to merge with BellSouth.

In a series of pointed questions during a hearing last Friday, Sullivan questioned whether the court "should continue to be deferential to the government" in its review of the mergers.

Sullivan is presiding over the so-called Tunney Act hearing whereby the judiciary decides whether to sanction antitrust decisions made by the Justice Department. Under the law, the presiding judge must consider whether an antitrust settlement or merger consent decree is in the "public interest."

The Tunney Act dates to 1970s in response to controversy over the Nixon administration's decision to settle an antitrust action against ITT.

In 2002, U.S. District Judge Colleen Collar-Kotelly approved the Justice Department's settlement with Microsoft. But, in doing so, critics said she relied upon a perfunctory standard of review.

The Tunney Act was strengthened in 2004, in an amendment advocated by several members of the Senate Judiciary Committee -- including Sens. Mike DeWine, R-Ohio, Orrin Hatch, R-Utah, and Herb Kohl, D-Wis.

"This is the first major opportunity for those amendments to be heard in the Tunney Act process," said Tom Cohen, an attorney for ACTel, a group of Bell telecom competitors that challenged the SBC-AT&T and Verizon-MCI mergers. "One of the major issues before the court is going to be: what do those amendments mean?"

The 2004 changes to the law said the court "shall consider" - instead of "may consider" - the impact of the judgment on competition. It also added several phrases to the public interest determination, including "whether the consent judgment is in the public interest."

In comments during congressional passage of these changes, Kohl specifically referenced the related Microsoft hearing.

"While this legislation is not intended to require a trial de novo of the advisability of antitrust consent decrees or a lengthy and protracted review procedure, it is intended to assure that courts undertake meaningful review of antitrust consent degrees to assure that they are in the public interest and analytically sound," he said.

The Justice Department's Antitrust Division had sought dismissal of efforts to challenge the mergers by ACTel, as well as a motion to intervene by CompTel -- the latter a trade association consisting of Bell competiors.

One telecom lobbyist suggested that a failure by the Justice Department to obtain a dismissal of the pending Tunney Act case "will have a dramatic impact on the pending review of AT&T/BellSouth because Justice will be operating under the watchful eye of the court."

Sullivan has granted AT&T, Verizon, CompTel and ACTel 45 minutes each to make their case during Wednesday's scheduled hearing.