PUBLIC NOTICE FEDERAL COMMUNICATIONS COMMISSION 1919 M STREET N.W. WASHINGTON, D.C. 20554 News media information 202/418-0500 Recorded listing of releases and texts 202/418-2222. October 26, 1995 DA 95-2244 Wireless Telecommunications Bureau Clarifies Spectrum Aucti on Anti-Collusion Rules The Wireless Telecommunications Bureau has received numerous inquiries concerning the Commission's auction rules and eligibility requirements for the various spectrum auctions. This Public Notice, in which the Bureau provides guidance regarding the Commission's anti-collusion rules, is meant to serve as a guideline for all auctions. The Commission established its anti-collusion rules in order to enhance the competitiveness of the auction process and of the post-auction market structure. See Second Report and Order in PP Docket No. 93-252, 9 FCC Rcd 2348, 2387 (1994) ("Second R&O"). The Commission's anti-collusion rules require an applicant to identify on its short- form application all parties with whom it has entered into a bidding consortium or other joint bidding arrangement. After the short-form filing deadline, applicants may not discuss the substance of their bids or bidding strategies with bidders, other than those identified on the short-form application, that are bidding in the same geographic license areas. 47 C.F.R.  1.2105(c)(1); Fourth Memorandum Opinion & Order in PP Docket No. 93-253, 9 FCC Rcd 6858, 6868 (1994) ("Fourth MO&O"). The post-deadline prohibition on discussions extends to providing indirect information that affects bids or bidding strategy. Letter to R. Michael Senkowski from Rosalind K. Allen, Acting Chief, Commercial Radio Division, released Dec. 1, 1994. The geographic license area is the market designation of the particular services, e.g., MTA, BTA, and EA. For example, two applicants not listed on each other's short-form applications for the 900 MHz SMR auction may not discuss bids or bidding strategies with each other if they are bidding for licenses in any of the same MTAs, even if they are not bidding for the same frequency blocks. If an applicant has the high bid for a license, the applicant must include with its long- form application a detailed explanation of the terms and conditions and parties involved in a bidding agreement into which it has entered. 47 C.F.R.  1.2107(d). It is important to note that for purposes of the Commission's anti-collusion rules, the term applicant includes the entity submitting the application, owners of 5 percent or more of the entity, and all officers and directors of that entity. 47 C.F.R.  1.2105(c)(6)(i). If parties agree in principle on all material terms, those parties must be identified on the short-form application under Section 1.2105(c), even if the agreement has not been reduced to writing. Only at such level of agreement can it be fairly stated that the parties have entered into a bidding consortium or other joint bidding arrangement. If the parties have not agreed in principle by the filing deadline, an applicant would not include the names of those parties on its application, and may not continue negotiations with those parties. There are three exceptions to the rule prohibiting discussions with other applicants after the filing of the short-form application. First, an applicant may modify its short-form application to reflect formation of bidding agreements or changes in ownership at any time before or during the auction, as long as the changes do not result in change of control of the applicant, and the parties forming the bidding agreement have not applied for licenses in any of the same geographic license areas. 47 C.F.R.  1.2105(c)(2). Applicants may also make agreements to bid jointly for licenses, so long as the applicants have not applied for licenses in any of the same geographic license areas. 47 C.F.R.  1.2105(c)(3). Finally, a holder of a non-controlling attributable interest in an applicant may acquire an ownership interest in, or enter into a bidding agreement with other applicants in the same geographic license area, if (1) the owner of the attributable interest certifies that it has not communicated and will not communicate bids or bidding strategies of more than one of the applicants in which it holds an attributable interest or with which it has a bidding agreement; and (2) the arrangements do not result in any change of control of an applicant. 47 C.F.R.  1.2105(c)(4). Where the applicant does not meet one of these exceptions, it may not discuss matters relating to bidding with other applicants. Even when an applicant has withdrawn its application after the short-form filing deadline, the applicant may not enter into a bidding agreement with another applicant bidding on the geographic license areas from which the first applicant withdrew. Fourth MO&O, 9 FCC Rcd at 6867. In addition, once the short- form application has been filed, a party with an attributable interest in one bidder may not acquire a controlling interest in another bidder bidding for licenses in any of the same geographic license areas. Even where the applicant discloses parties with whom it has reached an agreement on the short-form application, thereby permitting discussions with those parties, the applicant is nevertheless subject to existing antitrust laws. Fourth MO&O, 9 FCC Rcd at 6869 n.134. As discussed in the Fourth MO&O, under the antitrust laws, the parties to an agreement may not discuss bid prices if they have applied for licenses in the same geographic market. In addition, agreements between actual or potential competitors to submit collusive, non- competitive or rigged bids are per se violations of Section One of the Sherman Antitrust Act. Id. Further, actual or potential competitors may not agree to divide territories horizontally in order to minimize competition, regardless of whether they split a market in which they both do business, or whether they merely reserve one market for one and another for the other. Id. To the extent the Commission becomes aware of specific allegations that may give rise to violations of the federal antitrust laws, the Commission may investigate and/or refer such allegations to the United States Department of Justice for investigation. Bidders who are found to have violated the antitrust laws or the Commission's anti-collusion rules in connection with participation in the auction process may, among other remedies, be subject to the loss of their down payment or their full bid amount, cancellation of their licenses, and may be prohibited from participating in future auctions. Second R&O, 9 FCC Rcd at 2388. For additional information regarding this Public Notice, please contact Aaron Goldschmidt in the Wireless Telecommunications Bureau, at (202) 418-0660, or Deborah Klein in the Office of General Counsel, at (202) 418-1880. - FCC -