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Amazon.com Inc.'s bid to acquire Twenty-First Century Fox Inc.'s regional sports networks may be a slam dunk as a matter of antitrust law, but politics could prove a potential wildcard.
The acquisition wouldn’t remove a direct Amazon competitor, and, as was the case in its purchase of Whole Foods Market Inc., is a “vertical” deal, in which a content platform is buying a supplier.
The bid doesn’t raise traditional antitrust issues and will likely be cleared by the Justice Department “fairly easily,” said Jennifer Rie, a Bloomberg Intelligence antitrust litigation analyst.
The deal will still attract complaints from critics who fear Amazon’s dominance in other tech and media areas could spill over into the lucrative local sports team programming market in which it’s a relative newcomer.
Then there’s Amazon’s critic-in-chief inside the White House, who could further complicate the bid. President Donald Trump has criticized the company’s U.S. Postal Service shipping rates, tax payments, e-commerce dominance as well as the journalism produced by Amazon Chairman Jeff Bezos’ newspaper, the Washington Post.
“It is well known how the Trump administration feels about Amazon,” Paul Verna, principle analyst at eMarketer, a digital market research firm, told Bloomberg Law. “The administration could make all sorts of arguments for why to try to block this and make it difficult.”
Antitrust critics will likely raise concerns about consumer data should Amazon win the bidding. Adding sports programming would arm the company with more data on consumer media consumption habits, a precious asset in the era of sophisticated algorithms.
Amazon already faces criticism and antitrust investigations in Europe that its dominant e-commerce business and related consumer data have harmed competitors. Antitrust regulators at the Federal Trade Commission are also reviewing how data control impacts competition.
“Amazon, with as much as they know about the customer and all the fingers they have as a different business, there could be a potential antitrust problem there,” Michael Smith, information technology professor at Carnegie Mellon University, told Bloomberg Law. “Accruing 20 or so regional networks enhances that threat all that much.”
Fox put up its 22 regional sports networks for bids after the Justice Department ordered the sale as a condition to approve ESPN parent Walt Disney Co.'s acquisition of Fox’s entertainment programming assets. The channels up for grabs include the YES Network, which shows New York Yankees games, and regional networks that locally broadcast National Basketball Association, National Hockey League, and Major League Baseball games.
Amazon’s bid, first reported by CNBC on Nov. 20, has competitors, including bids from Apollo Global Management, KKR & Co., Blackstone Group, Sinclair Broadcast Group, and Tegna Inc. The sports networks could fetch between $15 billion to 20 billion, according to Bloomberg Intelligence analysts Paul Sweeney and Geetha Ranganathan.
Amazon, despite its dominance in a range of industries, could be a favorable acquirer from an antitrust perspective, Michael Carrier, professor at Rutgers Law School who specializes in antitrust issues, told Bloomberg Law. Other bidders, such as Sinclair, already have sports content business in their portfolio, he noted. “DOJ could view Amazon as presenting fewer competitive concerns,” he said.
Amazon owns some sports streaming rights, including the NFL’s Thursday night games and some English Premier League matches. But those assets may not be enough to trigger antitrust concerns, eMarketer’s Verna said. Fox’s assets “don’t strike me as overlapping with their own media interests, and that’s what it would have to do to cause antitrust concerns,” he said.
To be sure, the Justice Department’s interest goes beyond horizontal, asset-overlapping mergers, and it has occasionally cracked down vertical deals involving acquisitions of suppliers. The department’s is still in the midst of a legal battle to undo much of AT&T Inc.'s completed $85 billion acquisition of Time Warner.
Amazon’s pursuit of the regional networks is a much smaller deal. Moreover, antitrust enforcers see emerging video service providers, such as Amazon’s streaming service, as competitors to mature pay-TV providers like AT&T, analysts said.
“Amazon is entirely different and it will be a competitor to AT&T, Time Warner,” Verna said. “Amazon has “enough of a cash reserve and valuation to go after much bigger and better things than they have.”
Antitrust regulators were concerned about AT&T’s deal because consumers may pay more if other cable providers had to pay more to get Time Warner channels like CNN and TNT. “The DOJ’s concerns in the AT&T, Time Warner deal is that consumers wanting to switch from one cable provider to another is very difficult,” Smith said. “But unsubscribing from Amazon prime video and switching to another platforms — the costs are much lower.”
Enforcers seem “pretty hands off on the new video providers because they are looking at them as new competitors,” he said.
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