How Compatible are the DOJ and FCC's Approaches to Identifying Harms to Telecommunications Innovation?

Abstract

The Department of Justice and Federal Trade Commission focus on innovation markets to identify and restrict transactions with potential to harm innovation within narrowly-defined R&D and intellectual property licensing markets. However, within the media and telecommunications industries, the Federal Communications Commission rarely uses this legal concept in practice. Instead, the FCC’s broader review standard protects innovation by identifying potential post-transaction reductions of the incentive to innovate, ability to innovate, or rate of innovation efforts using a broader conceptual definition of innovation. This approach often produces controversy related to its differences from the more traditional competition regulation framework. However, with the diversity of different business contexts in which these issues appear, these orders are a valuable source of insights into different possible types of harms to innovation. Drawing upon comprehensive research into the uses of innovation across the FCC’s major transaction orders between 1997 and 2015, this work seeks to: (1) identify instances where potential harms to innovation were discussed within these transactions, (2) categorize different types of harms to innovation, and (3) consider the extent to which each category corresponds with the DOJ’s approach or may benefit from more clarity and formalization.The FCC is shown to rarely give weight to concerns over harms to innovation, and if it does, such findings are generally made concurrently with a finding of market power made through more traditional means. Ultimately, the FCC’s approach offers several points of intersection with the DOJ’s approach, with a few notable examples of improved consideration.