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 agencies, including 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 raising competition concerns and the FCC considering
whether the tie-up was in the public interest.
FCC staff put up stiff resistance to the deal, a factor that
played a key role in its demise.
"When you've got a deal that faces multiple regulators like
this, in a regime where enforcement has been a priority, the
regulators have more tools at their disposal," said antitrust
lawyer Amanda Wait of Hunton & Williams LLP.
The withering of the transaction is the latest example of a
large, ambitious telecommunications merger to falter under scrutiny
by the Obama administration, which has promised to evaluate deals
vigorously for possible consumer harm.
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. He also said the Comcast
episode demonstrated how negative public opinion about a merger can
matter during reviews.
When the deal was announced, some observers had questioned
whether the Justice 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., which until
2013 was part of the same company as Wall Street Journal owner News
Corp, privately raised concerns about the deal to regulators.
Write to Brent Kendall at brent.kendall@wsj.com
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