Long Odds Seen for Comcast/NBCU Conditions Extension, Breakup
Comcast/NBCUniversal likely doesn't have much to fear about the looming expiration of conditions on that 2010 deal, with it being unlikely either the DOJ or FCC will seek behavioral or structural conditions beyond that time, experts told us. But there's disagreement whether Justice's bid to block AT&T's buy of Time Warner (TW) (see 1711210005) indicates the agency should be doing something on Comcast/NBCU. The FCC conditions expire Jan. 20, and DOJ conditions expire in September. Public Knowledge (PK) on Friday became the latest party to call for Justice action on the expiring conditions.
DOJ would need to be able to point to a substantial violation on Comcast's part to make the argument extended conditions are needed, said Boies Schiller telecom and antitrust lawyer Travis LeBlanc. He said the FCC, if it were going to do something, likely would have started an investigation some time in advance and there likely would have been indications the agency was looking at some failure to comply. He said it's also unlikely the FCC is pursuing anything since the current FCC isn't a big fan of behavioral conditions. The odds of DOJ pursuing structural conditions are also very slim, LeBlanc said, since Comcast/NBCU has already been operating for years.
It's not clear if there's a mechanism for the FCC to continue its conditions, a cable industry lawyer said. But Comcast does have a legitimate worry about DOJ positioning on AT&T/TW and calls from Congress, the lawyer said. Sen. Richard Blumenthal, D-Conn., asked the DOJ's antitrust division to investigate possible anticompetitive threats from Comcast/NBCU (see 1712130058). And he told us last week he now hopes DOJ “asks the court to extend the merger conditions.” An extension or modification of the consent decree at this point is the “most realistic outcome” rather than seeking to break up the company, Blumenthal said.
PK released a letter to DOJ antitrust head Makan Delrahim Friday saying it agreed with Blumenthal's worries and asking that the agency investigate Comcast compliance with the consent decree conditions and that those conditions remain in force in the meantime. Even if the DOJ finds the consent decree was effective, "it is likely [Justice] can best continue to protect competition by renewing or strengthening it," PK said, saying the conditions should be renewed if the competitive harms remain. If the consent decree conditions weren't effective, PK said, the agency should reopen the decree and pursue structural remedies such as divestitures. Comcast/NBCU asserted it has met or exceeded all conditions and calls for further conditions are baseless. DOJ didn't comment.
DOJ action on Comcast/NBCU conditions would be consistent with the agency's lawsuit to stop AT&T's buy of Time Warner, said several parties that originally challenged Comcast/NBCU. PK Senior Vice President Harold Feld said DOJ action would require the same burden if it were prosecuting an action -- show by a preponderance of evidence that without conditions competition would be lessened. It would help DOJ that Judge Richard Leon of U.S. District Court for the District of Columbia, who imposed tougher conditions than the original DOJ consent decree (see 1109020064), likely would be receptive to Justice arguments the agency hadn't gone far enough in 2010, Feld said. The anxiety that has been expressed as conditions come to a close would also help, Feld said, citing RCN lobbying for program access rules changes (see 1712120047) and Wave's regional sports network complaint against Comcast (see 1712190041).
A cable industry lawyer said because of the problems DOJ has with AT&T/TW it's not impossible that the agency could open an investigation and find evidence of harm. The lawyer said the DOJ -- with its particular concerns about vertical integration -- is more likely than the FCC to take action.
One big difference between Comcast/NBCU and AT&T/TW is AT&T's 150 million wireless subscribers, making the two "fundamentally different deals," LeBlanc said. But a cable industry lawyer said the DOJ complaint involves concerns about reduced competition among traditional video distributors and slowed emerging online competition, not wireless issues.
DOJ might argue it's taking extraordinary action to stop a deal -- AT&T/TW -- on a theory of harm that would also apply to Comcast/NBCU, but a different administration let Comcast/NBCU go through and it's now too late to sue to unwind that merger, said Cleveland State University law professor Chris Sagers. DOJ might also argue that behavioral remedies don't work and are disfavored, so there's no use in continuing them. DOJ and FCC didn't comment.
Comcast cited its annual compliance reports (for example, see here) with the FCC "setting forth ... our exemplary compliance track record," saying none received any objections or challenges and the DOJ has never pursued any enforcement action. It also said the FCC-mandated arbitration mechanism was used only once by an MVPD since the 2010 deal.
The traditional Republican antitrust approach is about increasing supply and encouraging entry, which the FCC is doing under Chairman Ajit Pai for spectrum through such means as pole attachment fees, said a lawyer with cable clients. The same argument could be made for the FCC addressing its program access rules, to ensure Comcast doesn't use its power post-conditions to foreclose on competitive distribution, the lawyer said. Feld said the DOJ also could feel pressured to act to show it moved on AT&T/TW based on its analysis and not politics.
The FCC could act through its open program access rules proceeding, though it's unlikely to do so in the near future, the cable lawyer said. The lawyer also said FCC action on program access rules could potentially help AT&T/TW toward approval, since it would give enforcement teeth to the licensing terms being offered to MVPDs (see 1711280063).
Some experts said the industry almost surely has others sympathetic to the need to extend the conditions but unlikely to make that case publicly because of retribution fears. Since it's unlikely conditions would be extended, a company would be using a lot of its capital with Comcast without a good chance of getting a substantial return, LeBlanc said.
Free Press, which was an original opponent of Comcast/NBCU, doesn't currently have plans to relitigate the conditions, in part because it has always been skeptical of their enforceability, said Policy Director Matt Wood. Free Press will watch what happens when the conditions do expire, which "could prove especially necessary with Comcast looking frisky and willing to test the boundaries," he said, citing what he saw as renewed interest in paid prioritization.
The agencies go to court "reasonably often" seeking extensions or modifications of existing consent decrees, Sagers said. But he said it's unlikely to happen with Comcast/NBCU because Justice is already on record in interim court filings saying the consent decree in the Comcast/NBCU deal and competition were working. Sagers also said Delrahim indicated in various speeches he doesn't like behavioral decrees, and disfavors ongoing government oversight, and that DOJ might move to end some existing, long-term decrees.
One analogy to Comcast/NBCU might be the 2001 DOJ antitrust case against Microsoft, with states trying to convince the court to extend oversight and conditions beyond the settlement terms worked out between the company and DOJ, said University of Baltimore professor of law Robert Lande. To do so in Comcast/NBCU, Justice would have to cite changed circumstances since 2010, he said. Lande also said there's precedent for consummated deals being subsequently broken up -- the 1957 Supreme Court decision on DuPont's controlling interest in General Motors, which it had held for decades.
Rather than showing circumstances have changed, DOJ would have to argue the opposite, Feld said -- that the market hasn't evolved past the point where conditions are needed. It would be arguing that expectations in 2010 were that online streaming and other competitors would be more vibrant by now and that there would be a system of net neutrality that would prevent discrimination in favor of affiliated content, Feld said.