In dual hearings today on Capitol Hill, lawmakers expressed some concern about the proposed merger between Comcast Corporation and NBC Universal, arguing that the deal, unless the two parties agree to make some changes, could hurt competition and raise prices for consumers.
Chief executives from both companies appeared before a House Energy and Commerce panel in the morning and a Senate Judiciary subcommittee in the afternoon, responding to questions that grew tougher as the day wore on.
The most dramatic point of the afternoon hearing in the Senate — as dramatic as a Congressional antitrust panel can get — was when Sen. Al Franken (D-Minn.), who was a star on NBC’s Saturday Night Live for many years, said his former bosses at NBC couldn’t be trusted to keep their word.
In order to win public and regulatory approval of the joint venture when it was announced in early December, Comcast outlined a set of public commitments that, it said, would ameliorate any anti-competitive concerns the deal might raise. The combined firm might not take those commitments literally, Franken said, based on his prior experience with the network.
“It’s really hard to trust you guys, from my point of view,” Franken said, describing instances in which NBC would demand to take a stake in an independent producer’s show in order to run it, after previously pledging not to do that.
NBC’s Jeff Zucker did not respond directly to the allegations, simply noting that it was a long time ago.
The deal, which would give Comcast a 51 percent stake in NBC, would bring together one of the largest cable providers with one of the top media companies. Because the transaction would combine both the programming and the pipes that move that programming into homes, it has the potential to reshape the media landscape.
Comcast chief Brian Roberts, laid out a case similar to the one the company made in its public interest filing to the FCC last week. The transaction posed few so-called horizontal concerns, he said, because the combined firm would still rank only fourth in terms of national cable revenue. And the vertical concerns were overblown, he said, because neither company had enough market share to muscle out rivals.
Lawmakers in both houses expressed concerns the deal might pose on the future of television online, and extracted promises from Roberts to provide content to rival online video distributors.
Zucker said the deal was good for NBC because the combined firm would invest in and expand NBC programming, and provide technological expertise to find a sustainable business model for media in the new digital age.
House members took a more sympathetic view of the transaction, urging the Justice Department and the Federal Communications Commission to conduct quick reviews of the deal, and raising localized concerns about network affiliates in their districts, the interests of minority programmers, and intellectual property issues about online content.
“I’m not saying they shouldn’t impose conditions, but the companies deserve an answer in a timely manner” said Rep. Rick Boucher (D-Va.), who chairs the House Energy and Commerce Subcommittee on Communications, Technology and the Internet.
Senators, by contrast, took a tougher line. “Should the agencies decide to allow this merger,” said Sen. Herb Kohl (D-Wis.) who chairs the Judiciary panel’s Antitrust subcommittee, “we believe it is essential they insist on strong conditions to protect consumers.”
The panel’s ranking Republican, Orrin Hatch of Utah, also said that the deal could result in “a significant foreclosure of competition,” he said. And, Hatch warned, there was a possibility that Comcast could “use NBC’s content as a weapon” against rivals.
Critics of the deal, including media watchdog groups and smaller cable providers who were both represented at the hearing, argue that the combined firm would have an incentive to raise NBC prices or cut off access to “must have” NBC programming to rivals.
“When your competitor also is a major vendor, supplying video content essential or important for any competitive provider to access, problems currently arise,” said Colleen Abdoulah, president of a small cable provider called WOW! at the morning hearing. ”Comcast will have so much power that it can create its own economic reality and make one plus one equal five.”
Critics also expressed concern about the access independent programmers might have to Comcast distribution. ”Cable networks are not coming forward because they are afraid of retaliation,” said Andrew Jay Schwartzman, president of the Media Access Project, at the afternoon session.
The Justice Department is reviewing the deal for antitrust concerns, and The Federal Communications Commission, which needs to approve a license transfer for the transaction to go through, will determine if it is in the public interest.
While lawmakers play no direct role in the review process, their views can have some impact on regulators. If Congress takes a tough line on a merger, observers say, it can provide some political cover for Justice or the FCC to do so as well.
Two more congressional panels — Senate Commerce and House Judiciary — will likely hold hearings on the deal, and the review could take up to one year.
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As Comcast Corp. gears up for a trip through the Washington regulatory maze over its proposed purchase of NBC, it is still unclear which route that trip will take.
The deal, which was announced last week and valued NBC Universal at $30 billion, would give Comcast a 51 percent stake in NBC Universal. NBC’s current owner, General Electric Co., would hold the remaining 49 percent.
Will the deal go through the Federal Trade Commission, which has reviewed a slew of cable deals, or through the Justice Department, which boasts telecom and media expertise? And what roadblocks might the third agency involved, the Federal Communications Commission, throw up in the way?
Both the FTC and the Justice Department share authority in reviewing mergers for antitrust concerns and divide the work, through a process known as clearance, largely based on their expertise in dealing with certain industries.
Some merger reviews are easy to divvy up. Airlines and agriculture go to the Justice Department for example, while pharmaceuticals and grocery stories go to the FTC. The division of labor can get granular: Beer goes to DOJ, for example, while liquor goes to the FTC.
In areas where neither agency has a clear advantage in expertise, the decision goes up the chain of command and the two agency bosses — the head of the Justice Department’s Antitrust Division and the chairman of the FTC — eventually duke it out.
One of the last big clearance fights to make its way to the top for a decision on which agency should perform the review was the settlement between authors, publishers and Google over the search giant’s plan to distribute digital copies of books online, according to two people with knowledge of the process. It was an argument that Assistant Attorney General Christine Varney ultimately won, and the Justice Department is reviewing the revised settlement.
Which agency reviews the Comcast deal, according to attorneys familiar with the process, will again be determined between Varney and FTC Chairman Jon Leibowitz.
The Justice Department reviewed the merger between News Corporation and Direct TV in 2003, which raised issues that are likely to crop up in the Comcast deal. But the FTC has reviewed other cable deals, including Adelphia Communications Corp.’s sale to Comcast and Time Warner Cable Inc., which it approved in 2006.
The Comcast-GE joint venture perhaps most resembles the 2001 merger of AOL and Time Warner. The FTC reviewed that deal but, according to former FTC chairman Timothy Muris, in comments he made to a federal commission that explored updating antitrust laws, both agencies decided at the time that it wouldn’t serve as a precedent for future debates over who should conduct such clearances.
And while the Justice Department and the Federal Trade Commission debate which agency will get to review the competitive aspects of the deal, it is a third agency — the Federal Communications Commission, experts say — that might in the end play a bigger role in deciding whether the deal eventually goes through.
Comcast chief executive Brian Roberts met with FCC commissioners yesterday, according to a Bloomberg story. One commissioner, Michael Copps, already stated that the deal faced a “steep climb” in order to win approval.
The Justice Department declined to challenge the similar 2003 deal between News Corp and Direct TV, in part due to the conditions the FCC imposed in order to sign off on the transaction.
In telecom mergers, the parties have to not only clear an antitrust review but also a public interest review with the FCC, which holds the relevant licenses that need to exchange hands.
The FCC has two bits of leverage that the FTC and DOJ don’t. Antitrust regulators operate under a ticking clock once Comcast gets all its paperwork in, or “substantially complies” with the agency’s requests for information, in industry parlance. That process can take up to a year or more, but once the information is in, the agency has just 30 days to make a decision. The FCC, on the other hand, doesn’t operate under a timetable.
Also, antitrust regulators would have to take a company to court and prove their case to a judge if they want to block a deal. The FCC operates under a much broader mandate and can block a deal by essentially doing nothing; it has to actively approve a license transfer in order for the deal to go through. The merging parties have to convince the agency that the deal is in the public interest in order to get the license transfer it needs.
“The standard that the FCC applies, the public interest standard, is in some ways more flexible than the antitrust standard,” said Donald Russell, a telecom expert and partner at Robbins, Russell, Englert, Orseck, Untereiner & Sauber who spent more than two decades with the Antitrust Division. The FCC does not often block transactions, but does negotiate conditions in order to approve a deal, Russell said.
The FCC review is also inherently more susceptible to public pressure. “The FCC is a more open, public process driven by public comment and overt lobbying, while the process at Justice is defined by a confidential, staff-driven investigation,” said Martin Stern, a partner at K&L Gates who spent time both at the Antitrust Division and at the FCC.
The proposed deal for Comcast to take a controlling stake in NBC has raised both antitrust and public interest concerns. Advocacy groups like Free Press and the Media Access Project have launched campaigns to stop the deal from going through.
Critics have cited questions of access both for Comcast’s rival cable providers to content owned by NBC, and for rival television channels to be included in Comcast’s programming packages. The deal has also raised questions about its impact on the future of watching television online.