Disney, Viacom, Fox, and Univision Weigh In on AT&T Merger Case

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By Eleanor Tyler

Time Warner Inc.'s biggest media competitors warned the court deciding whether to block Time Warner’s merger with AT&T Corp. not to listen to a group of small competitors proposing a novel remedy in the case.

CBS Corp., 21st Century Fox, Inc., Univision Communications Inc., Viacom International Inc., and The Walt Disney Company filed a brief on May 29 saying that a proposal by small cable companies, which also asked to intervene in the case, would require the production of “highly confidential and competitively sensitive content licensing agreements” and would undermine competition in the industry.

U.S. District Court for the District of Columbia Judge Richard Leon has so far rebuffed other attempts to intervene in this rare government challenge to a proposed vertical merger. An earlier wave of “friend of the court” briefs addressed questions about whether political concerns tainted the Justice Department’s decision to challenge the proposed $85.4 billion AT&T-Time Warner merger. The earlier briefs, filed by Carter Page and former DOJ officials, came before the bench trial. Leon denied those motions to intervene.

In contrast, the latest attempts are by interested parties, which filed while Leon is mulling what he learned in six weeks of trial about whether the merger will hurt competition in the pay TV industry.

“This is certainly unusual,” Harold Feld, senior vice president at consumer watchdog Public Knowledge, told Bloomberg Law. Judges have enormous discretion on amicus filings, he said, and “nothing in the rules prohibits the court from taking and considering these briefs.”

What to consider is entirely up to Judge Leon, Feld said. But the “ad hoc scramble” to weigh in on the case illustrates the point that DOJ antitrust division chief Makan Delrahim has made about behavioral remedies being inappropriate in antitrust cases in contrast to proceedings before regulatory agencies like the Federal Communications Commission, he added. These briefs, he said, “look remarkably like FCC filings.”

Leon has said he will issue a decision in the case by June 12.

Door Number Three?

RCN Telecom Services LLC; Grande Communications Networks LLC; WaveDivision Holdings LLC; and American Cable Association (ACA) filed a brief May 14 advocating for a specific arbitration process as a remedy to any alleged competitive impacts of merging distribution giant AT&T with content behemoth Time Warner. RCN, Grande, and Wave are small cable companies and multichannel video programming distributors (MVPDs), the companies that the Justice Department alleged would be harmed by the AT&T-Time Warner merger. The ACA is an industry association for small companies like RCN.

The DOJ contends that only a divestiture of either DirecTV or Time Warner’s Turner assets can make the deal fit within the antitrust laws. AT&T has argued all along that its pledge to arbitrate any disputes with other distributors neuter any competition concerns the DOJ has expressed. The RCN brief contends that AT&T’s proposed arbitration remedy won’t protect small MVPDs from the negotiating power of a combined AT&T-Time Warner and suggests a third, different remedy than either party to the case seeks.

RCN starts by assuming that, as the government contends, the merger is anticompetitive. It instead suggests its own arbitration and standstill remedy that displeases both sides in the lawsuit. AT&T called the brief RCN’s “unsworn, untested, and unmeritorious opinions” and the DOJ has repeatedly stated that it will not accept behavioral remedies — like ongoing arbitration obligations with court oversight if necessary — in place of structural remedies for mergers like the AT&T-Time Warner deal.

CBS, Viacom, Disney, and the other big content providers are also opposed to the RCN proposal. The big content providers seek to intervene to oppose RCN’s proposal as just another attempt to get commercially sensitive pricing information out of the content providers.

CBS’s attack focuses on a “compulsory disclosure proposal” in RCN’s brief. RCN urged the court to require that both AT&T/DIRECTV and any MVPD involved in an arbitration disclose the “rates, terms, and conditions” in agreements with other programmers. “In other words,” CBS says, “RCN/ACA ask the Court to permit distribution competitors to engage in anticompetitive information sharing of prices and other competitively sensitive information about video programmers.”

“That would create more significant antitrust problems than it purports to solve” and “go beyond any regime previously adopted in any similar merger in the industry,” CBS says.

New DOJ Policy

AT&T and Time Warner have complained throughout the DOJ’s challenge that they should be permitted to merge on terms like those the DOJ allowed for Comcast Corp. when it bought NBCUniversal in 2011. At that time, antitrust enforcers were worried Comcast could use its control over NBC programming to thwart competition from online rivals like Netflix Inc. Although the government approved the NBC deal, it put conditions on Comcast’s future conduct aimed at ensuring competitors access to NBC content — including an arbitration process for disgruntled distributors.

Makan Delrahim has repeatedly said that his Justice Department won’t be in the business of regulating companies’ ongoing conduct through “behavioral” remedies like those imposed on Comcast during the Obama administration. Instead, he has said, his DOJ will demand “structural” remedies involving divestitures or will seek to block the deal if a structural fix is deemed ineffective.

The case is U.S. v. AT&T Inc. , D.D.C., 17-cv-02511, 5/29/18 .

To contact the reporter on this story: Eleanor Tyler in Washington at etyler@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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