Justice Department antitrust officials, who are meeting with Comcast Corp. representatives today to air their concerns about the proposed tie-up with Time Warner Cable Inc., aren’t likely to entertain promises that the merged company would change its behavior to win approval.
The leadership at the antitrust division would rather see the No. 1 U.S. cable company sell assets to keep the market competitive or will file a lawsuit to block a deal that hurts consumers, according to people familiar with the officials’ thinking. This view departs from the U.S. antitrust division’s position in a 2011 accord that allowed Comcast to agree to a string of so-called behavioral remedies to buy NBCUniversal.
Now, antitrust lawyers reviewing the proposed $45.2 billion deal to buy Time Warner Cable are looking at whether Comcast complied with terms of the NBCUniversal agreement. In particular, the officials are looking at whether Comcast honored a promise not to interfere with management of online video service Hulu, people familiar with the matter have said. Hulu is one-third owned by the cable company.
As Comcast executives and Justice Department officials meet, a day after a group of U.S. senators asked the department to block the merger, saying it would harm consumers, the question is: What it will take for Comcast to secure approval?
With this meeting, the review process enters a new phase: a dance where each side seeks to bolster its negotiating position to get the best deal. The Justice Department has filed antitrust lawsuits that ultimately were resolved with settlements, including Anheuser-Busch InBev NV’s purchase of Grupo Modelo SAB and American Airlines Group Inc.’s merger with US Airways in
Comcast and Time Warner Cable, who have already agreed to abide by the conditions set out for the purchase of NBCUniversal, plan to listen to lawyers from the department’s antitrust division, and won’t offer concessions aimed at getting the deal approved, people familiar with the matter said. They want to hear the official concerns before putting offers on the table, said one of the people, who asked not to be identified because the matter is private.
Among the issues likely to be discussed are the combined companies’ control over nationwide broadband Internet service and its potential to influence the development of online video streaming services. One possibility is selling additional subscribers to reduce Philadelphia-based Comcast’s expected 57 percent share of the broadband market, said Jennifer Rie, a Bloomberg Intelligence litigation analyst.
Antitrust officials will want the companies to offer remedies, rather than outlining their own views on how the deal can be fixed, a person familiar with the matter said. Comcast, which doesn’t have to pay a breakup fee if the merger falls apart, could walk away from the deal if it determines the conditions are onerous, one person said.
Sena Fitzmaurice, a spokeswoman for Comcast, and Bobby Amirshahi, with New York-based Time Warner Cable, declined to comment on the meeting. Peter Carr, a Justice Department spokesman, also declined to comment.
Lawyers at Justice Department’s antitrust division were leaning against the deal and preparing arguments that could be used in a lawsuit to block it, Bloomberg News reported on April 17, citing people familiar with the situation.
Comcast and Time Warner Cable are seeking approval for the deal from the Justice Department and the Federal Communications Commission, and have been meeting regularly with government officials, said one person. Wednesday’s meeting had been previously scheduled.
Aides to FCC Chairman Tom Wheeler, who have led the agency’s review of the merger, are slated to brief commission staff Wednesday, said two officials familiar with the plan who requested anonymity because the event isn’t public.
The FCC can approve the deal or send it to a hearing that can take months, and can effectively kill a merger if companies decide not to wait out the process. In 2011, AT&T Inc. abandoned its bid for T-Mobile US Inc. after the FCC proposed designating that merger for a hearing.
Neil Grace, an FCC spokesman, declined to comment.
U.S. Senator Al Franken, a Minnesota Democrat who signed Tuesday’s letter, said he thinks the U.S. will reject the deal.
“When it started and I was the only senator opposing it, this was considered a fait accompli,” Franken, a member of the Senate’s antitrust panel, said in a CBS interview Wednesday. “I think now the odds are it will be rejected.”
Delara Derakhshani, policy counsel for Consumers Union, said in a statement Wednesday, “The size and influence of Comcast would be so huge that no amount of promises or commitments could outweigh the harm to consumers.”
A rejection would be a blow to Comcast, which has sought to expand in major U.S. cities where Time Warner Cable is dominant, including New York and Los Angeles.
The enlarged company would serve about 29 million residential video customers, about 29 percent of the home pay-TV market, following divestitures unveiled after the merger was announced in February 2014. Comcast would also have most of U.S. Internet subscribers with fixed broadband capable of the 25 megabits-per-second speed standard that the FCC adopted in January, according to a company filing.
The Justice Department’s scrutiny of Hulu stems from Comcast’s promise not to take an active role in the video streaming service under the deal with regulators that allowed it to buy NBCUniversal in 2011.
Executives at Comcast communicated their views about a proposed 2013 sale of Hulu by its co-owners, 21st Century Fox Inc. and Walt Disney Co., according to people with knowledge of the matter who asked not to be named because they weren’t authorized to speak publicly.
Comcast also offered to help Disney and Fox convince other cable and satellite operators to adopt Hulu as the solution for what the industry calls “TV Everywhere.” The industry has struggled to develop a simple, convenient way to offer shows online after they appear on live television.
Fox and Disney were eager to have cable and satellite services provide Hulu as part of their pay-TV packages, which would eliminate the need for an array of competing apps.
Comcast offered to help while Fox and Disney were still weighing a sale, and never followed through after the sale was called off, according to the people.
Fitzmaurice said Comcast has “no role in making, evaluating or reconsidering any management decisions at Hulu.” She didn’t respond to a request for comment about “TV Everywhere.”
“All strategic decisions at Hulu are made by the other partners and not by Comcast,” she said.