Defining TV Market to Be Key for Comcast-NBC Approval Process

The scope of any conditions for approval of the deal may be based on how much the agency sees those outlets as competing for viewers with other kinds of media, including online content, said academic and private-practice antitrust specialists and industry and FCC officials. Because antitrust regulation is narrower than the FCC’s public interest standard that the companies must meet (CD Dec 8 p5), DOJ or FTC review is likely to be somewhat easier, some said. Antitrust regulators will study the deal long and hard but won’t try to block it, an executive from another company in the cable industry predicted.

The antitrust agencies don’t seem to have decided which will review the deal, said FCC officials and antitrust experts. Comcast and NBC executives held preliminary meetings about the matter with commissioners and their aides in the past two weeks, commission officials said. Comcast CEO Brian Roberts, NBC Universal Chairman Jeff Zucker and others discussed with the FCC officials the outlines of the deal and some of the conditions they proposed Dec. 3 when they unveiled the transaction (CD Dec 4 p1), they said. A Comcast spokeswoman declined to comment.

Some expect the DOJ to handle the antitrust review, in light of previous telecom and cable transactions the agency has taken. Whichever agency takes it will have less precedent to work with than in judging previous large cable and telecom deals because Comcast-NBC Universal is seen by experts as vertical integration of different kinds of assets, they said. Many previous large deals were horizontal, combining companies in the same business. An FTC spokesman declined to comment. A DOJ spokeswoman also declined to comment.

Opponents of the transaction and those seeking conditions on it probably will argue to the DOJ or FTC that the market for cable programming doesn’t extend much beyond subscription TV, said law professors and antitrust lawyers. “It always comes down to market definition, which is in the eye of the beholder,” said Michael Hazzard, a competition law specialist at Arent Fox. “Comcast is going to talk about FiOS, it’s going to talk about the Internet, it’s going to talk about AT&T U-verse offerings, it’s going to talk about a robust marketplace -- not just for transport but for content.”

How to define the market is the first and most important question in any merger review, said James Speta, a Northwestern University professor of antitrust and telecommunications law. “The extent to which the market includes new media is the extent to which consumers substitute between the traditional media products that the companies are offering and new media products that others are offering,” he said. “My own view is that we're in a media environment that includes in a broad sense both traditional broadcast channels, cable channels and also Internet video and other Internet services that we see consumers spending time on instead of watching TV.” Speta was one of the writers of an amicus brief in support of Comcast’s appeal of the FCC’s network management order against the cable operator.

“The big question is really, ‘is online video going to be less likely than it otherwise would have been, to become and alternative to cable'” because of the merger, another antitrust expert said. “Does NBC have different incentives post-merger as part of the Comcast family to act differently?” And if they do, will that have any affect on the way competitors like News Corp. and others approach online video, the expert said. Whichever agency handles the merger approval will have to consider those consequences broadly, the expert said: “It’s not just Hulu, it’s whatever could be created down the road. It’s easy to focus on a particular venture, but it’s the broader question.”

Meanwhile, congressional pressure could postpone the decision on which agency reviews the transaction, the expert said. The commerce committees may to want the FTC to review the deal and judiciary committees want DOJ to take it, the expert said. “If they're getting pressure from respective committees on the Hill, that could drag it out,” the expert said. “Both agencies are going to want this case … it very well may be that the commerce committee guys have an argument that the FTC is a better place for it.”

The antitrust agency will take a close look at a deal seen as “a test of their own resolve to look hard at big mergers,” said antitrust lawyer Christopher Kelly of Mayer Brown. But “I think this is one that is going to go through,” he said. Since it’s a vertical combination, the “real question that I think is on most people’s minds” -- apart from the scope of the market for viewers -- is one of geographic concentration between Comcast cable systems and TV stations owned by NBC, Kelly said. “You don’t have the pretty simple and crucial kind of market definition questions you have when two head-on competitors merge.”

The FCC does its own market analysis, under the public- interest standard, for large deals, a commission official said. Commission cable merger reviews have used a standard similar to antitrust analyses with the onus on the merging companies to show there’s some benefit to the deal, the person said. A spokeswoman for the FCC Media Bureau declined to comment and pointed to a statement made by a commission official the day the deal was announced that it would carefully examine the transaction in a fact-based review.

“Generally, there’s been very little concern about vertical issues for quite some time in antitrust law,” and those seem to be the primary issues raised by the transaction, said Law Professor Richard Pierce of George Washington University. “The more serious jeopardy to the transaction might be what the FCC does, because the FCC operates under a broader standard than just the antitrust standards.”