By Brent Kendall
WASHINGTON-- Comcast Corp.'s soon-to-be abandoned plan to
acquire Time Warner Cable Inc. ran up against the challenge of
overcoming scrutiny by two federal regulators and a Justice
Department antitrust review that was more skeptical than some
expected.
Both the department and the Federal Communications Commission
conducted exhaustive reviews of the $45.2 billion deal, with
Justice focusing on antitrust concerns and the FCC considering
whether the tie-up was in the public interest.
When the deal was announced, some observers had questioned
whether the department would be able to make much of an antitrust
case against it, given that the two companies didn't compete
head-to-head in the same geographic markets. But the department
focused on concerns the deal could cause competitive harm by giving
the merged firm too much power over broadband, TV channel owners
and the future development of the online video marketplace.
Gene Kimmelman, a former top Justice antitrust official in the
current administration, said the government's approach to the
Comcast- Time Warner Cable deal "sets a new high bar for antitrust
enforcement and regulatory oversight" and would open the door for
content providers and technology companies to provide new broadband
video offerings.
Mr. Kimmelman, now president of the public interest group Public
Knowledge, which opposed the deal, said the department evaluated
the deal with a forward looking approach that took into account
future dynamics of the marketplace. He said antitrust officials
were intimately familiar with Comcast and its place in the market
because the Time Warner Cable deal marked the third time in recent
years that Comcast had sought Justice approval for a
transaction.
Media companies lobbied aggressively to kill it, including
Discovery Communications Inc. Other programmers including Time
Warner Inc., Walt Disney Co. and 21st Century Fox Inc. privately
raised concerns about the deal to regulators.
In the current regime, Justice Department antitrust enforcers
"are not going to shy away from the hard cases, and this is an
example of that," said antitrust lawyer Amanda Wait of Hunton &
Williams LLP.
Comcast's decision to abandon its planned acquisition of Time
Warner Cable comes as the companies were facing roadblocks at both
the FCC and Justice Department, a reality that became clear in
crucial meetings on Wednesday with government enforcers from both
agencies.
The challenge of prevailing on two regulatory fronts proved too
much for Comcast, just as it did for AT&T Inc. in 2011 when it
dropped its planned acquisition of rival T-Mobile USA. There, the
Justice Department sued to block the deal and the FCC prepared to
initiate separate proceedings before an administrative law
judge.
In most industries, merging parties don't run the gantlet at two
separate agencies. The FCC process is a particular challenge if the
commission decides to send a merger for an administrative hearing,
a move that can effectively kill a deal. FCC staffers favored such
an approach for the Comcast deal, The Wall Street Journal reported
on Wednesday.
"The FCC can just put the companies in the dock and they can't
do anything about it," said Washington lawyer Michael Keeley of
Axinn, Veltrop & Harkrider LLP.
Mr. Keeley also said the Comcast episode demonstrated how
negative public opinion about a merger can matter during the review
process.
"Comcast and Time Warner seemed to have very few friends," he
said. When there's public opposition to a merger, "it can provide
cover and momentum for challenging a deal."
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