Netflix, Charter Said to Get U.S. Demand in Comcast Probe

Netflix Inc. and Time Warner Inc. are among at least four companies to receive demands for information from the U.S. Justice Department in its review of Comcast Corp.’s bid for Time Warner Cable Inc., people familiar with the matter said.

The requests advance the government’s review to a new stage and will provide information to the department’s antitrust division about whether the $45.2 billion acquisition is anticompetitive.

A civil investigative demand -- similar to a subpoena -- also was received by cable company Charter Communications Inc., one person said. Cogent Communications Holdings Inc., a business Internet provider, said it received one, too. Discovery Communications Inc. was asked informally for information, another person said.

“These are clear signs of a very serious investigation,” said Gene Kimmelman, president of the policy group Public Knowledge that opposes the merger, and former chief counsel for competition policy at the Justice Department’s antitrust division.

“It means that the competitive concerns that have been raised are viewed as credible and worthy of serious consideration,” Kimmelman said.

The Justice Department, which is jointly investigating the acquisition with the Federal Communications Commission, is seeking information about Comcast’s ability after the merger to gain leverage in negotiating program distribution deals, according to one person. The department also is looking into the potential that Comcast could interfere with Internet traffic, according to Cogent.

‘Market Picture’

“They’re trying to understand what effect the proposed merger of these two companies will have on the market,” said Amanda Wait, an antitrust attorney at Hunton & Williams LLP in Washington, who isn’t involved in the deal. “They want to have a full picture of the market.”

A spokeswoman for the Justice Department, Emily Pierce, didn’t respond to an e-mail seeking comment.

Cogent Chief Executive Officer David Schaeffer said the Washington-based company received a request from the Justice Department about six to eight weeks ago.

The department asked for engineering data, Schaeffer said. He said the information shows “that Comcast is blocking traffic entering its network.” By not improving connections, Comcast forces companies including Netflix to pay the cable company for direct connections, he said.

“That’s clearly an abuse of monopoly power and illegal,” Schaeffer said.

Comcast Filing

Comcast in a regulatory filing Sept. 23 said it dealt “responsibly and in good faith” with Internet-traffic carriers including Cogent. It said Cogent last year increased traffic into Comcast’s network by almost 500 percent, disrupting traffic for Netflix and other applications. Today traffic is back in balance, Comcast said.

A Comcast spokeswoman, Sena Fitzmaurice, declined to comment about the civil investigative demands.

The government is also scrutinizing agreements, known as most-favored-nation clauses, used by Comcast and other pay-TV providers to ensure competitors can’t get better content-licensing deals with programmers, one of the people said.

Set-Top Boxes

Another area of government interest is the ability of Comcast to thwart competition from technology companies like Apple Inc. that sell equipment that can replace Comcast’s set-top boxes, the person said.

Data and documents gathered by Justice Department lawyers can be used by the government if it decides to sue to block the acquisition, Wait said. Regulators can also set conditions on the merger or approve it without changes.

In the Justice Department investigation of Comcast’s purchase of NBC Universal, approved by regulators in 2011, the agency’s antitrust division interviewed more than 125 companies and individuals involved in the industry and reviewed tens of thousands of third-party documents, it said.

Comcast, based in Philadelphia, is defending its proposed purchase of Time Warner Cable against opposition from Netflix, Discovery Communications and Dish Network Corp. Netflix has opposed the deal unless regulators prevent Comcast from charging to smoothly handle the video streamer’s Web traffic.

‘Shift Costs’

Comcast, the largest U.S. cable provider, told the FCC that opponents are improperly using the regulatory review of the deal to press individual business interests.

“Netflix will use any proceeding, in any context, to try to shift the costs for carrying its content onto the backs of others -– a great business result for Netflix, but one that would increase prices to consumers and disserve the public interest,” Comcast said in a filing made public this week.

Information provided by third parties can be used to vet what Comcast and Time Warner Cable are telling regulators, Wait said.

“They’re getting documents from Comcast, for example, about negotiations with content providers, and they want to see the content providers’ side of the story, too,” she said.

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