Fenwick & West antitrust co-chair Mark Ostrau talked to Law360 about the competitive and regulatory prospects for Comcast’s proposed $45 billion combination with Time Warner Cable, and how the U.S. government could address concerns about market foreclosure and net neutrality.
Ostrau cited a potential model in the Department of Justice’s handling of the Comcast-NBC merger in 2011, where the department required the companies to meet the Open Internet standards and allow their competitors to license their content.
"That transaction was purely focused on the vertical aspects, but that's a significant part of this [Comcast-Time Warner] transaction," Ostrau said. "[The Comcast-NBC settlement] has most of the pieces already in place with respect to how you approach the TV part of it, and it has the genesis of ideas for addressing the Internet aspect."
But the D.C. Circuit Court of Appeals’ January 2014 decision to overturn the Federal Communications Commission's net neutrality rules provided new concerns for antitrust regulators to consider.
"Whenever you're looking at a vertical issue, you look at both the incentives of the parties to foreclose upstream or downstream competition and their ability to do it," Ostrau said. "The added flavor here is that while most of the focus [in Comcast-NBC] was on TV, even though there was some lip service paid to the net neutrality concept ... now that [the FCC rules] are in some disarray, there's a lot more focus on that side of the content distribution question than there was at the time of NBC."
Comcast's announcement that it had signed an agreement giving Netflix direct access to its servers is another indicator that the issue of net neutrality should be explored in the merger review. "It's too coincidental and juicy to ignore," Ostrau said. "It's important for the Justice Department to understand what drove that decision and what kind of implications it has for the competitive effects of the transaction both in the near term and in the longer term."
The government might specifically look for any connection between Comcast’s merger announcement and its access agreement with Netflix, Ostrau told Law360. “If this is a predictor of future behavior, that would give them some window into the potential effects of the transaction," he added.
The full article is available through the Law360 website (subscription required).