The Department of Justice review of Comcast's proposed acquisition of Time Warner Cable is examining whether Comcast lived up to promises it made the government when it purchased NBCUniversal in 2011.
To gain government approval for the NBC merger, Comcast agreed to relinquish any control over the management of Hulu, an online video streaming service co-owned by NBC, Fox, and the Disney-ABC Television Group. Yet in 2013, "executives from Walt Disney Co., 21st Century Fox and Comcast Corp. met to discuss the future of Hulu, the online video service the media companies co-own that was up for sale," a Wall Street Journal story on the merger review said last night.
Although Comcast was not supposed to influence or participate in the governance or management of Hulu, "Comcast’s assurances at the Sun Valley meeting played a significant role in how its co-owners evaluated the sale process, people familiar with the other owners’ thinking said," the Journal reported. "Comcast told its partners it would help make Hulu the nationwide streaming video platform for the cable TV industry, which would boost the site’s growth and make it a stronger rival to Netflix. That influenced Disney and Fox’s decision to call off the sale when the conference was ending, people familiar with those companies’ thinking said. Among the top bidders for Hulu were Comcast rivals DirecTV and AT&T Inc."
The decision not to sell Hulu "is among the issues that have captured the interest of the Justice Department in recent weeks," the Journal wrote.
Comcast denied playing any role in calling off the Hulu sale, saying, “Comcast has no role in making, evaluating or reconsidering any management decisions at Hulu. Pursuant to the NBCUniversal Consent Decree, Comcast is essentially a passive investor in Hulu. All strategic decisions at Hulu are made by the other partners and not by Comcast.”
In another article last night, the Journal wrote that the Justice Department's antitrust enforcers are skeptical that any conditions could make the merger worth approving. DOJ antitrust lawyers are reportedly close to recommending that the government block the deal.
Comcast is scheduled to meet with DOJ antitrust officials today in what could be the first of numerous meetings about the merger. The Federal Communications Commission is also reviewing the deal.
The merger has numerous potential competitive effects that the DOJ could be examining, according to a Capitol Forum report yesterday by Sally Hubbard, a former antitrust enforcer with the New York attorney general's office. These include "an increased incentive and ability to refuse to carry rival cable content"; incentive to hinder competition "by restricting access to Comcast-owned content," by raising interconnection costs, and imposing data caps; and anticompetitive effects in pricing of regional sports networks.
The report detailed numerous concessions Comcast could make, such as divestiture of content holdings, regional sports networks, and subscribers in key markets. There could also be behavioral conditions including "ethical walls" separating Comcast's programming, broadband, and pay-TV functions, as well as net neutrality commitments.
But if the conditions are too onerous for Comcast, the company could abandon the merger without paying Time Warner Cable a breakup fee.
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