The Other Trustbuster
- 12 September, 2000 12:01
SAN FRANCISCO (09/11/2000) - If America Online Inc. (AOL) and Time Warner Inc. want to merge, they'll have to get through Richard Parker first.
Parker's isn't exactly a household name, but as the Federal Trade Commission's lead examiner of the massive media merger, he has suddenly emerged as a formidable regulator on par with the Justice Department's Joel Klein.
The pairing of AOL, the nation's largest Internet service provider, with media conglomerate Time Warner, which runs cable pipes into one-fifth of the nation's homes, is raising tough issues for the FTC's antitrust enforcers - not so much for what the combined assets are, as for what they may become. Three regulatory agencies in the United States and Europe are reviewing the deal, with the FTC's verdict likely to come first.
Parker is tight-lipped about the AOL-Time Warner review. He has to be, under the law. But last week sources familiar with the review said his staff is likely to press AOL and Time Warner to open their high-speed cable lines to competing Internet service providers and entertainment companies - or else have the deal blocked. That threat is real, but neither the companies nor the government want to go that route. For the government, the case could be difficult to prove. At the same time, it could delay the merger indefinitely - something the companies want to avoid. And that makes Parker a particularly important player now.
Parker, who joined the FTC in 1998 from the Washington office of O'Melveny & Myers, is a dapper dresser whose idea of dressing down is to wear cowboy boots with his suits on casual Fridays. He tosses out baseball analogies in court and likes to relax by fly-fishing or pheasant hunting. He's a seasoned veteran of the antitrust bar, having cut his teeth in the late 1970s helping defend IBM against antitrust charges levied by Memorex. But his baby face prompted a federal judge two years ago to comment about how refreshing it was for the government to let such a young man try such an important case. Parker is 52.
In interviews, Parker declines to discuss any specific pending mergers or FTC investigations, but he does speak about the increasingly complex questions - and crowded docket - the digital age creates for trustbusters. Along with AOL-Time Warner, the FTC is investigating Covisint, the business-to-business exchange proposed by the Big Three automakers. And as the number of mergers skyrockets, regulators are forced to consider how technologies may be used in the future instead of simply assessing how they are currently deployed.
"It's fair to say the vast majority of technology mergers don't create a problem," Parker says. "They're usually in wide-open markets with lots of innovation and change."
But for other deals, Parker continues, the question is different: "Is a transaction likely to be anticompetitive? The whole idea in the antitrust laws we've had for 110 years is that Americans are best served if the competitive process is functioning."
One of Parker's skills as a career litigator is that he knows when to fold and when to up the ante, say colleagues who have worked with and against him. "He's a litigator with judgment," says William Baer, Parker's predecessor at the FTC and the man who convinced Parker to give up a private antitrust practice for public service. "He doesn't want to go to war unless he has to. But he's certainly not afraid to fight."
Take the FTC's antitrust case against Intel (INTC) , on allegations that the chipmaker used monopoly power to coerce intellectual property from competitors. Parker, then the agency's No. 2 trustbuster, had spent eight months preparing for trial when Intel agreed to give in to government demands. The FTC settled, and Parker never got to deliver his opening statement. He now says the outcome was the best thing for consumers.
Parker has maintained the aggressive posture of his predecessor, Baer, who is best remembered for challenging the proposed merger of Staples (SPLS) and Office Depot (ODP) in court and winning by an upset. Since Baer left the FTC for private practice last October, Parker has kept the once-quiet agency in the news, first by suing to block BP Amoco's $30 billion purchase of Arco (the companies agreed to sell some Arco assets and the government dropped the case). Then last year, Parker also recommended to reject the acquisition of book wholesaler Ingram by Barnes & Noble (BKS) , arguing that the deal would unfairly weigh against competitors, including Amazon.com (AMZN) . The companies walked away from the deal.
Now there's AOL-Time Warner. Antitrust experts don't expect the deal to be blocked, but they believe the government will try to wring concessions to alleviate a potential Internet bottleneck. William Kovacic, an antitrust professor at George Washington University, says the FTC will likely seek to require the merged company to live up to verbal commitments to open its high-speed cable lines to competitive ISPs and entertainment programmers.
The FTC wound up with the AOL-Time Warner review largely because it also reviewed Time Warner's merger with Turner Broadcasting in 1996. During that review, the FTC barred the company from denying competing programmers access to the public over the cable system.
"We don't want to bring cases for the sake of harassing business. And we don't particularly enjoy losing cases. You want to make the right call," says Parker's boss, FTC Chairman Robert Pitofsky. "Each case is a world of its own. I don't think he's inflexible. I don't think he's timid. He's exactly who you want in that role."
Indeed, Parker is busier than ever. The merger wave is on pace to make 2000 a record year. Last year, there were 4,700 mergers which involved combined assets of more than $1.9 trillion - 10 times what was reported in 1991. The FTC splits reviews with the Justice Department. While the exact means of deciding which agency gets what sometimes seems a crapshoot, Parker says the general idea is to have the agency with appropriate expertise handle the case. "We do drugs, and they do telephones," Parker says. "We do supermarkets; they do airlines. The other big area we do is oil."
And now the FTC does business-to-business. Parker was at a Washington-area pool recently teaching his 4-year-old daughter to swim when he ran into an antitrust lawyer who asked what Parker thought about the industry exchanges. The lawyer, Parker recounts, got a call from a client interested in setting up a b-to-b exchange. The lawyer asked the client a few questions: "Are you going to be a buyer or seller? 'I don't know.' What kind of goods will you deal in? 'I don't know.' 'Are you going to include everyone in your industry?' 'I don't know.'" Turns out the client's boss had just gotten out of a meeting with analysts who told him he had to do a b-to-b. And that's all they said.
What does Parker make of the anecdote?
"B-to-bs, in my view, present a huge opportunity to save a lot of money, but many of them seem to be in the early, formative stages," Parker says.
At that, Parker turns to his deputy, Molly Boast, and asks what is likely to happen when b-to-bs begin to merge. "I can just see some law professor asking a question like that on an exam," Parker says, shaking his head.