FCC Rule Change Could Hurt Competition, Broadcasters Say

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By Brandon Ross

Aug. 12 — The Federal Communications Commission should seek public comment before altering its rules to allow outside parties access to confidential programming contracts with content creators provided during a merger review, a coalition of industry groups told the agency.

The National Association of Broadcasters, Motion Picture Association of America and Digital Content Next listed their concerns in a joint Aug. 12 filing. The groups claimed the FCC proposal, as part of its review of Charter Communications Inc.'s bid to buy Time Warner Cable Inc., could give industry competitors access to confidential and competitively sensitive programming contracts.

“Reviewing courts have not hesitated to overturn agency orders where the agency did not provide the requisite meaningful opportunity for comment,” the filing said. The industry groups said allowing access to the programming contracts without public comment could violate the Administrative Procedure Act, a federal law that governs agency rulemaking. “Seeking input from all interested parties also would also improve the FCC’s decision-making on these important issues,” the filing said.

A broadcast industry source told Bloomberg BNA that a lawsuit is possible if the agency presses ahead with the current proposal.

The U.S. Court of Appeals for the District of Columbia Circuit on May 8 rejected a similar FCC action in connection with the agency’s reviews of the recently approved AT&T Inc. acquisition of DirecTV and a failed bid by Comcast Corp. to purchase Time Warner Cable. Charter stepped in to acquire Time Warner Cable after the Comcast deal fell apart. The court said the FCC overstepped its authority in changing a long-standing policy restricting disclosure of confidential financial information to third parties without time for adequate review.

In the earlier cases, the FCC proposed limiting the change in procedure to those individual reviews. Now, however, the FCC seeks to alter its rules for reviewing all future proposed consolidations.

“[T]he Associations and our members oppose changes to the FCC’s policies that would reduce the protections for confidential information, including their disclosure to third parties likely to gain competitively from obtaining that information,” the filing said. “Such a result is not only unfair but also unnecessary.”

Filers: Viewing Contracts Unneeded

The groups said the FCC has shown in earlier merger reviews that it can meet its obligations while still protecting confidential proprietary information.

“The Commission clearly has been able to review major mergers, including the Comcast/NBC and the very recent AT&T/DirecTV mergers, without disclosing competitively sensitive information to third parties,” the filing said. “Specifically, in prior mergers, the Commission has successfully reviewed the most sensitive materials at the Department of Justice, rather than placing those materials in the public record where they would be made available to potentially large numbers of third parties that sign the applicable protective order acknowledgement.”

Under current procedures, the FCC's staff may view contract information, but third parties cannot.

The FCC declined to comment on the filing or the potential merger generally. The no-comment is expected, however, because the merger review is not yet official. In this case, FCC Chairman Tom Wheeler has circulated a proposed protective order to the other four commissioners for internal discussion of this matter.

The two Republicans on the commission have expressed reservations about Wheeler’s proposal to modify the access rules outside the scope of the Charter-TWC merger without a notice and comment period.

“While the Associations do not object to the Commission’s review of sensitive information, we see no persuasive reason why third parties in a highly competitive communications marketplace need access to confidential materials,” the filing said.

To contact the reporter on this story: Brandon Ross in Washington at bross@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

The full filing is available here: http://src.bna.com/bg.