July 11 (Bloomberg) -- Walt Disney Co., Discovery Communications Inc. and CBS Corp. are being asked for information by U.S. antitrust officials probing Comcast Corp.’s planned purchase of Time Warner Cable Inc., according to three people familiar with the matter.
The Justice Department has reached out to the companies as it investigates whether the cable-industry merger is anticompetitive, said the people, who asked not to be named because the review isn’t public.
While none of the companies has publicly opposed the acquisition, some have said they want the U.S. to ensure that Comcast won’t favor its own programming over their content if the merger is approved. Other media companies have also been approached, one of the people said.
Among other issues, the antitrust division is asking about most-favored-nation clauses, one of the people said. The contracts are used by Philadelphia-based Comcast and other pay-TV providers to ensure competitors can’t get better content-licensing deals with programmers.
Media companies can help inform the Justice Department’s assessment of whether the Comcast-Time Warner Cable combination risks hurting competition, said Amanda Wait, an antitrust attorney at Hunton & Williams LLP in Washington.
“One of the big questions in the Comcast-Time Warner deal is how the expanded footprint of the cable company is going to affect its ability to deal with these content providers,” Wait said.
The Justice Department has been looking at most-favored-nation clauses, which stipulate that pay-TV operators such as Comcast can match subsequent deals networks get for their programming, for at least two years. In 2012, the antitrust division sent civil investigative demands, similar to subpoenas, to DirecTV and Dish Network Corp. about the agreements as part of a broader probe into whether pay-TV companies were squeezing out Internet-video competitors, people with knowledge of the matter told Bloomberg News at the time.
Most-favored-nation contracts were also targeted in the Justice Department’s 2012 lawsuit against Apple Inc. and five publishers over prices of digital books.
Lions Gate Entertainment Corp. Vice Chairman Michael Burns criticized most-favored-nation clauses in April, saying contracts originally created to help smaller cable-TV companies compete now benefit larger players. The agreements prevent Lions Gate from doing individual deals, such as a promotion with one distributor, he said. That means consumers pay more, according to Burns.
Comcast, the largest U.S. cable company, said in February it would spend $45.2 billion for No. 2 Time Warner Cable. In addition to the Justice Department, the Federal Communications Commission is also reviewing the deal. The FCC yesterday started its nonbinding 180-day clock for finishing the review. The Justice Department, which considers the effects on competition, could sue to block the acquisition, approve it with conditions or clear it without requiring changes.
“We’re all trying to figure out consolidation, what does it mean for all of us in the industry,” Discovery Chief Executive Officer David Zaslav said at Allen & Co.’s media retreat in Sun Valley, Idaho, this week.
Netflix Inc. and Dish, the second-largest U.S. satellite TV provider, oppose the deal. Netflix, the video-streaming service, has said Comcast is already dominant enough to capture “unprecedented fees,” and would gain more leverage combining with Time Warner Cable. Dish argues Comcast will extract lower prices from programmers, leading to higher rates for smaller competitors.
Comcast already won approval for its acquisition of NBCUniversal from the Justice Department in 2011. The company agreed to certain conditions as part of the deal, including making sure NBC’s shows would be available on fair terms to pay-TV rivals such as Dish and DirecTV. Abiding by net neutrality rules were also a condition of the agreement.
The Justice Department could extend those same terms as part of any approval for Comcast’s purchase of Time Warner Cable, one of the people said.
Officials with Comcast, Disney, CBS, Discovery and the Justice Department declined to comment.
CBS Chief Executive Officer Les Moonves told Bloomberg in May that equal access for his broadcast and cable channels on Comcast systems was an issue the company was studying.
“I am sure the DOJ will prevent NBC from getting any advantage or at least we assume so,” Moonves said on Bloomberg TV on May 15. “We will be equally competitive with them on that basis.”
21st Century Fox Inc. Chief Operating Officer Chase Carey told Bloomberg News in May his company wants to make sure its online programs could be viewed on an equal footing with those of other services.
The Justice Department is using the interviews with the media companies to understand the issues in the merger and guide the investigation, said one of the people. Discussions with the companies will probably be ongoing, the person said.
The Justice Department typically has informal talks with third parties and then later can gather testimony under oath, according to Wait, the antitrust lawyer.
“They have a very complicated industry they’re trying to understand,” Wait said. “They’re seeing a deal they may want to challenge in the future, so they’re starting to put their ducks in a row in the event they decide to do that.”
To contact the reporters on this story: David McLaughlin in Washington at firstname.lastname@example.org; Christopher Palmeri in Los Angeles at email@example.com; Edmund Lee in New York at firstname.lastname@example.org