By Brent Kendall And Shalini Ramachandran
Justice Department antitrust enforcers doubt that their concerns
about Comcast Corp.'s planned acquisition of Time Warner Cable Inc.
could be resolved by promises about how the cable giant would
conduct business after the merger, according to people familiar
with the matter.
Such commitments, known as behavioral remedies, aren't usually
the preferred approach for the Justice Department when it seeks to
address mergers it views as problematic. It has accepted them in
some circumstances, however, including when it allowed Comcast to
acquire control of NBCUniversal in 2011.
It isn't known what promises Comcast might be prepared to offer,
but when the cable giant announced the Time Warner Cable deal in
February 2014, it said it was prepared to extend certain
commitments it made in the NBCUniversal transaction to the current
deal.
To ease concerns about the NBCUniversal deal--which involved
accumulation of a copious TV and movie content--Comcast agreed to
an array of conduct conditions with the department and the Federal
Communications Commission.
Those included promises not to discriminate against online video
distributors or retaliate against other networks, cable programmers
or studios for licensing content to Comcast's competitors. The
company also agreed to follow open-Internet rules.
People familiar with the government's 14-month review of
Comcast's proposed $45 billion acquisition of Time Warner Cable say
similar types of promises would be a tougher sell with enforcers
this time around, at least in part because there are questions
about whether the earlier set of conditions have worked as
intended.
Comcast and Time Warner Cable are expected to meet with Justice
officials Wednesday. The meeting is an opportunity for them to
discuss potential remedies to address government concerns that the
deal would give Comcast too much power over Internet broadband and
too much leverage over TV channel owners and competitors who offer
video programming online.
It isn't known whether Comcast and Time Warner Cable can offer
concessions the government would find satisfactory.
The Wall Street Journal reported Saturday that the Justice
Department and the FCC also have been examining whether Comcast has
fully complied with its earlier commitments, such as whether it
observed its pledge to remain a silent owner with no sway over
management decisions at its part-owned streaming site Hulu.
Comcast spokeswoman Sena Fitzmaurice said in a written statement
that "in addition to the over 150 conditions from the FCC's
NBCUniversal Order, we've complied with the DOJ consent decree
fully." She said Comcast has exceeded some conditions, such as by
extending its low-income broadband program indefinitely.
Ms. Fitzmaurice said a Comcast-Time Warner Cable deal promises a
better video and broadband experience for customers, noting that
Comcast offers twice as much video-on-demand as Time Warner Cable
and 25% faster Internet speeds. "These benefits all come with no
reduction in competition for consumers," she said.
Antitrust officials usually favor structural deal fixes to
mergers they find problematic rather than behavioral fixes.
With structural fixes, companies pledge to sell off some of
their existing businesses or other assets to rivals to preserve
competition that might otherwise have been lost because of the
merger.
Such divestitures can be a way to address antitrust concerns
without triggering a government lawsuit to block the deal.
Comcast, however, may not have a lot of wiggle room to offer
additional divestitures before getting to the point where the Time
Warner Cable acquisition becomes less attractive.
The companies already have agreed to deals with Charter
Communications Inc. to sell or spin off systems serving 3.9 million
customers if the merger goes through.
A Justice Department spokesman declined to comment.
Remedies that focus on business conduct instead of divestitures
can be messy to enforce and require government officials to predict
how a merged company might act in future market conditions.
Behavioral remedies also may require the Justice Department to
maintain a continuing role as a watchdog, making it more of a
regulator than a law enforcement agency.
The department's current antitrust chief, Bill Baer, has a
reputation for disfavoring the use of behavioral remedies to fix
mergers when such an approach is avoidable.
Mr. Baer is recused in the Comcast matter because in private
practice he represented NBCUniversal during the earlier
transaction, but his views have set the tone for the
department.
"Remedies in our horizontal merger and Sherman Act cases should
maximize competition--existing or new--and minimize the need for
ongoing regulatory involvement," Mr. Baer said in a February
speech.
At an American Bar Association antitrust conference last week,
Deputy Assistant Attorney General David Gelfand said the department
had a "strong preference" for using structural remedies over
conduct. He didn't specifically address the department's review of
the Comcast deal.
Separately, six senators, led by Minnesota Democrat Al Franken,
sent a letter to the FCC and Justice Department calling on the
agencies to block the deal. Lawmakers have no direct say in whether
a merger receives approval. Sen. Franken has been a vocal critic of
the transaction.
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