Washington has become the merger capital of the world. With several multibillion-dollar deals in the works, the FCC, FTC and the Justice Department are today’s proving grounds. Media mega-transactions have ushered the obscure rules of mergers out of the shadows and into public view, where success is measured in more than shareholder value.
In days gone by, a corporate merger was a marriage between two companies that decided it was good to combine. But like modern-day marriage, mergers too have changed. No longer just corporate unions, mergers have become multi-stakeholder exercises with often-competing interests.
In recent years, media mergers have become the platform of choice for nascent competitors, consumer groups, community activists, elected officials and almost anyone with an angle to play or an axe to grind. Many have mastered the fine art of merger mischief, using apocryphal comments in the public record to turn the tide of opinion. Companies seeking FCC approval have been at the mercy of malcontents advancing conditions that would be otherwise laughable but for a pending merger review.
The Communications Act directs the FCC to determine whether proposed media and telecom transactions would serve the “public interest, convenience and necessity.” This amorphous standard envisions diversity, localism and innovation. While giving the FCC considerable leeway in reviewing deals, the public interest test has been the occasional source of manipulation.
Demands have grown bolder with successive deals, including cash, big-time jobs, board seats, sweetheart sales, preferential programming and vanity TV shows, to name a few. To avoid the appearance of paying ransom, companies have structured the concessions as “voluntary commitments,” ostensibly to reflect their good corporate citizenship and contribution to societal goals.
But no more. FCC chairman Ajit Pai and commissioner Michael O’Rielly have shifted the agency’s merger-review focus to the four corners of the transaction, placing the emphasis on the merits of the deal rather than its conditions.
This new reality will be welcomed by companies but winced at by consumer groups, who will have to find other ways to extract conditions from merging companies. Corporations, however, should not use the new merger approach to shun legitimate public-interest obligations simply because they will not be as central to the FCC’s review as before. Responsible companies will find a way to do the right thing before, during and after mergers, and that should make their commitments even more sustainable.
Adonis Hoffman advises investors on M&A and regulatory affairs. He is chairman of Business in the Public Interest Inc. and principal at The Advisory Counsel Inc. Hoffman is also former chief of staff and legal adviser to FCC commissioner Mignon Clyburn.