Disney-Fox Deal ‘Carved Out Surgically’ to Pass: Antitrust Cop

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By Victoria Graham

Makan Delrahim, the top antitrust official at the Justice Department, said June 7 that parameters of Walt Disney Co.’s bid to acquire Twenty-First Century Fox Inc.'s film and TV studios and cable channels were based on “good advice.”

The deal was “carved out surgically” in order to pass antitrust muster. It’s likely “doable” now, Delrahim said at TheDeal’s corporate governance conference in New York.

For example, Delrahim said, Disney isn’t trying to buy Fox’s sports channels and combine them with its own, Bloomberg reported. Dominance in live sports programming is one of the areas that DOJ enforcers are concerned about in the pending merger between AT&T Inc. and Time Warner Inc.

Wireless Carriers

Delrahim also said he doesn’t refute an Obama Administration principle that at least four wireless carriers are needed in the U.S. market to ensure competitiveness.

“I have no prejudgment of any pending transaction,” Delrahim said in reference to a question on Sprint Inc.'s $26 billion pending merger with T-Mobile Inc.

Delrahim said that previous reports mischaracterize his views saying that he doesn’t believe that four U.S. wireless carriers are needed to maintain competition. “I’m not smart enough to figure out any magical number,” Delrahim said. “I can’t predict any transaction.”

T-Mobile and Sprint are the No. 3 and No. 4 wireless carriers in the U.S., respectively, after Verizon Communications Inc. and AT&T. Opponents of the merger say reducing four big carriers to three would hurt competition. Justice Department officials in the previous administration agreed with that argument, causing merger talks between T-Mobile and AT&T to dissolve.

Vertical Mergers

Delrahim also said the DOJ’s suit to block AT&T’s $85 billion acquisition of Time Warner Inc. shouldn’t be viewed as a “bellwether to new vertical merger views.” The DOJ has always recognized that some vertical mergers — i.e., between companies that don’t directly compete — can be beneficial to consumers, he said.

“There is concern that the antitrust division no longer believes vertical mergers can be beneficial,” he said. “These concerns are misplaced.”

U.S. District Court for the District of Columbia Judge Richard Leon is expected to hand down a decision June 12 on the AT&T-Time Warner case. The DOJ filed a civil antitrust suit in November to block the AT&T-Time Warner merger on the grounds that the vertical deal would make it easier for the merged entity to control licenses to must-have programming like HBO or certain sports channels, thus raising prices for consumers.

To contact the reporter on this story: Victoria Graham in Washington at vgraham@bloomberglaw.com

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

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