The Federal Trade Commission pressured two merging companies into making concessions to protect competition in a market that doesn't even currently exist, alleged Commissioner Joshua Wright, who penned a stinging dissent to the agency's consent decree with media researchers Nielsen Holdings N.V. and Arbitron Inc.
Nielsen, represented by Paul, Weiss, Rifkind, Wharton & Garrison partner Aidan Synnott, and Arbitron, which tapped Roxann Henry of Morrison & Foerster, agreed to divest and license assets and intellectual property to win FTC approval for their $1.26 billion combination, the agency announced September 20.
But Wright, a Republican, said the concessions were inappropriate, citing "the absence of answers to key questions that are necessary to draw reliable conclusions about the merger’s likely competitive effects."
The FTC's concerns centered around the development of ways for advertisers and media companies to measure audiences across platforms, such as television, personal computers, smartphones and tablets, and to provide individual-level demographic data.
Such a service does not currently exist, but demand for it is increasing rapidly, the FTC said. Both Nielsen and Arbitron are working on systems. "Other firms working to develop cross-platform audience measurement services are not as well positioned to compete with Nielsen and Arbitron," according to the FTC, since the two companies already measure television and radio audiences.
"The elimination of future competition between Nielsen and Arbitron would likely cause U.S. customers to pay higher prices for national syndicated cross-platform audience measurement services and result in less innovation for cross platform measurement services," the FTC found. As a remedy, the FTC required Nielsen to sell and license, for at least eight years, certain assets related to Arbitron’s cross-platform audience measurement services to an FTC-approved buyer within three months.
Wright's problem is with the notion of future competition. The FTC "challenges the proposed transaction based upon what must be acknowledged as a novel theory—that is, that the merger will substantially lessen competition in a market that does not today exist," he wrote. "When the Commission’s antitrust analysis comes unmoored from such fact-based inquiry, tethered tightly to robust economic theory, there is a more significant risk that non-economic considerations, intuition, and policy preferences influence the outcome of cases."
He also speculated why Nielsen and Arbitron agreed to the conditions "despite the lack of evidence."
"The Commission’s ability to obtain concessions...reflects the weighing by the parties of the private costs and private benefits of delaying the transaction and potentially litigating the merger against the private costs and private benefits of acquiescing to the proposed terms," he wrote. "Indeed, one can imagine that where, as here, the alleged relevant product market is small relative to the overall deal size, the parties would be happy to agree to concessions that cost very little and finally permit the deal to close."
To Wright, a former professor at George Mason University School of Law who in January replaced Commissioner J. Thomas Rosch, that's bad public policy. "Entering into such agreements subtly, and in my view harmfully, shifts the Commission’s mission from that of antitrust enforcer to a much broader mandate of 'fixing' a variety of perceived economic welfare-reducing arrangements," he wrote. "Because there is no judicial approval of Commission settlements, it is especially important that the Commission take care to ensure its consents are in the public interest."
The FTC vote to accept the consent agreement was 2 to 1, with Republican Commissioner Maureen Ohlhausen recused.